ABSTRACT
The August 1998 financial crash in Russia caught the world by surprise, and caused observers to call into question the character and viability of the Russian political and economic system. The August crisis punctured the general mood of cautious optimism about the Russian economic transition that had prevailed in Western capitals. By June the total stock of GKOs was about $40 billion, of which about half were held by foreigners or by Russian banks that had borrowed from foreigners to buy the bonds. The political impact of the crisis, once the panic had subsided, was surprisingly muted. There was no significant political backlash against market reform or international integration from the Russian opposition or society at large. The August crisis exposed the deep institutional flaws of Yeltsin's Russia: its unnerving combination of disrespect for rule of law alongside the continued presence of a powerful security apparatus.
