How would you classify the exchange rate regime used by Russia over the 1991–2014 period?

The Russian ruble has experienced a wide range of regime shift in the economy of Russia since opening in 1991. For the period between 1991 and 1998, the exchange rates were fixed with tight capital control and were restrictive to all institution. The period was followed by another regime that ran from 1998 to 2008 where there were heavily managed floating rates. The shift from fixed restrictive capital control to managed floating rates was due to the economic crisis experienced in 1998. The regime was going well until the global crisis that originated from the U.S took place. To protect the value of her currency the Russian bank spent $200 billion which was a third of its foreign exchange reserves in 2008 and at the beginning of 2009. In 2009 the Russian bank decided to introduce a more flexible exchange rate regime which was a dual-currency floating rate band around. The regime was around a two-currency basket of the European euro and the U.S dollar. The regime was in use for the period up to 2014 (Stonehill, Moffett, and Eiteman).

What did the establishment of operational bands do to the expectations of ruble speculators? Would these expectations be stabilizing or destabilizing in your opinion?

The Ruble speculators assume that the moment the market rate nears the established operational bands the bank would intervene so that it can push the market rate to the middle of the intervention band where it is initially set to be. The intervention would be through purchasing Rubles which is the upper band or selling rubles on the lower Ruble. The goal of intervening would be to protect the currency by stabilizing its value. From this, in my opinion, the efforts were to maintain the currency and not destabilizing because it controlled the value which was obtained in late 2010 where the currency was stable enough not to need more intervention. The stability gained allowed for an expansion of the neutral zone to 3.1 rubles from 1 ruble (Stonehill, Moffett, and Eiteman).

Would Western sanctions alone been devastating to the ruble's value, or was it the plummeting price of oil that had the larger impact? 

The sanctions on Russia have a tremendous contribution to the decline in the value of Ruble. However, it is not the only factor. The fall in the oil prices happened to occur at the same time when this was going on, therefore, making the situation even worse. In response to the sanctions imposed on the country, Russia restricted importing of agricultural products and any other consumer goods. The result of the decision was an increase in the cost of local goods, causing inflation and a decrease in the quality of products available in the local markets ("Western Sanctions, Ruble Crash Hit Russians Hard").

The Russian agriculture does not have the capacity to meet its population’s needs when it comes to food. Therefore, it depends on imported food and through the decision of restricting importation the country and its people have to strain. As the number of suppliers decreased due to the sanction, Russia turned to the few available neighboring CISs (Commonwealth of Independent States) for the importation of goods. The prices of their goods are however high because they are only a few suppliers, Russia does not have a choice but to import from them even though the quality of these products is not up to the standard (Mirzayev).

From September 2014, the ruble depreciated tremendously against the major world currencies which the Euro and the U.S dollar. Due to the decline in the exports goods like oil, the flow of foreign currencies in the country decreased and falling of oil prices catalyzing the process. As a result, holders of the Ruble panic as the value of the money will continue declining and lead to selling the currency for Euros or U.S dollars before it deteriorates entirely. Therefore, the sanction had a significant contribution on the depreciation of the value of the ruble, but the decline in the oil prices was a catalyst to the problem (Mirzayev).

Work cited.

Stonehill, Arthur, Michael H Moffett, and David K Eiteman. "Fundamentals Of Multinational

Finance". Chegg.com. Web. 25 Oct. 2016.

"Western Sanctions, Ruble Crash Hit Russians Hard". Mail Online. N.p., 2014. Web. 25 Oct.

2016.

Mirzayev, Elvin. "Sanctions & Falling Oil Prices Hit Ruble Hard". Investopedia. N.p., 2015.

Web. 25 Oct. 2016.