Oil shock, sanctions and the floating-ruble pivot

Brent crude fell 48% during 2014 and the ruble depreciated by a similar 45%, a shock compounded by Western financial sanctions imposed after the annexation of Crimea. The Bank of Russia initially spent roughly $80 billion defending the currency before accelerating a long-planned transition and allowing the ruble to float freely in November 2014, a move Governor Elvira Nabiullina later said quickly normalized the financial situation and preserved gold and foreign-currency reserves rather than depleting them further. The same shift formalized inflation targeting, with a 4% goal adopted for end-2017. Inflation still reached 11.4% in 2014, well above target; Nabiullina attributed roughly one-third of that overshoot to sanctions and trade restrictions and two-thirds to ruble depreciation itself. The key rate was raised sharply to stabilize the currency and then cut in four successive steps as conditions eased, while the central bank deployed non-standard refinancing and foreign-currency lending tools to ease dollar-debt pressure on banks and companies during the adjustment.