The financial turmoil that hit Russia in August 1998 was extremely confusing to many foreign observers working in Russia. It was astonishing to see a country that seemed on its way to prosperity suddenly experiencing an economic meltdown. As part of my work, I was often asked to provide explanations and guidance regarding the situation in Russia. The casual explanations were gradually transformed into a methodical presentation, which eventually became this article. Combining information and opinions from various sources, I have tried to compose a comprehensive presentation of the economic events that have taken place in Russia during the second half of 1998. It is my hope that this presentation will help other people to gain better understanding of the situation in Russia.