the budgetary problems was further weakened by a string of factors,
including the president’s ill health, repeated government
reshuffles, an increasingly hostile stand-off between the president
and the communist-dominated Duma, and a serious weakening of the
federal government’s enforcement power, especially with major
industrial and energy-sector taxpayers and regional governments.
In 1998 the Asian financial crisis resulted in the collapse of fuel and
energy prices and slashed Russia’s revenues from the oil and natural
gas exports. In August 1998 the rouble collapsed, ruining millions
of people including those who worked in the most promising sectors
of the “new” economy, such as the financial and services sectors,
the advertising business and the like.
The Russian banking system that had come to depend on buying and
selling the highly profitable GKOs found itself in the grip of a
severe crisis as the GKO pyramid collapsed. Russia
default on its debts, the Russian
commercial banks went broke,
rouble was devalued three-fold.
following the crisis were quite chaotic, bringing forth gloomy
predictions of an end to Russia’s great experiment with market
economics. As in the aftermath of other financial crises around the
world, economic output declined, the prices of goods, including
those of basic commodities, increased sharply, and many millions of
families, vulnerable to these changes, fell back into poverty.
crisis of August 1998 and his deteriorating health made Yeltsin
distance himself from control over socioeconomic policies. He
concentrated on overseeing the so-called power ministries (such as
Defense, Interior; and the Federal Security Service) and on key
international policy issues.