Intensifying Ukraine Hits Take 13% Of Russian Refineries Offline, Cause Rationing

Ukraine's strategic strikes on Russian oil refineries, rail lines and airports have taken 13% of Russia's crucial oil production offline, causing prices to rise 45% and forcing rationing. 

This has been especially impactful due to the summer vacation season and the start of the harvest. Russian citizens are increasingly being negatively impacted by the war, which worries the Kremlin and is giving Ukraine more leverage in negotiations. JL

Yaroslav Trofimov reports in the Wall Street Journal:

The intensifying Ukrainian drone campaign against Russian refineries has taken some 13% of Russia’s fuel production offline. Sanctions have limited Moscow’s ability to repair infrastructure and service remaining installations. Because of the Ukrainian attacks, it must ration fuel. Where gas is available, it is much more expensive—Russian wholesale prices for 95-octane gasoline have risen 45% this year so far, even as global crude oil prices have significantly declined. At the same time, the now frequent disruptions by Ukrainian drones to Russia’s rail networks and airports have forced more Russians to travel by road during their summer holidays, just as fuel demand spiked because of the harvest season.

The late Sen. John McCain once called Russia “a gas station with nukes.” Now, because of Ukrainian attacks, it must ration fuel.

The intensifying Ukrainian drone campaign against Russian refineries has taken some 13% of Russia’s fuel production offline, according to analysts. Sanctions imposed by the West after the 2022 invasion, meanwhile, have limited Moscow’s ability to repair infrastructure and service remaining installations.

At the same time, the now frequent disruptions by Ukrainian drones to Russia’s rail networks and airports have forced more Russians to travel by road during their summer holidays, just as fuel demand spiked because of the harvest season.

As a result, several regions, including Russian-occupied Crimea and parts of Siberia, have implemented rationing at gas stations. Where gas is available, it is much more expensive—Russian wholesale prices for 95-octane gasoline have risen 45% this year so far, even as global crude oil prices have significantly declined.

“The war is not just on the front line. So any systemic hit has an asymmetric importance,” said Pavlo Klimkin, Ukraine’s former foreign minister. “These strikes don’t have a direct impact on the military activity, but they do impact the Russian economy. And the Russian economy already has problems, so even a small push can create bottlenecks and multiply problems inside that system.”

Ukraine started hitting Russian refineries in 2023 as it developed its long-range drone industry. The Biden administration opposed these strikes at the time, fearing disruptions to the global oil supply. Until recently, Ukraine had by and large refrained from hitting Moscow’s economic lifeline, its oil-and-gas export infrastructure.

Cars line up for fuel at a gas station in Vladivostok, Russia, on Friday. PHOTO: TATIANA MEEL/REUTERS

That is no longer the case. Ukrainian drones on Sunday set ablaze the strategic Ust-Luga facility on the Baltic Sea, a few days after the Druzhba pipeline that supplies Russian crude oil to Belarus, Hungary and Slovakia was disabled. More than a dozen Russian refineries have been hit over the past month, some several hundred miles from the border, as Ukrainian drones became more potent and more numerous.

“Ukraine is now able to carry out sustained attacks. Last year, it attempted that too, but the warheads were lighter and the success rate lower. What is happening now is that, once the consequences of a strike are repaired, a new strike follows suit. And if Ukraine will be able to maintain this pressure and damage refineries more frequently than Russia is able to fix them, there will be a completely different situation,” said Sergey Vakulenko, who served until 2022 as the head of strategy and innovation at Gazprom Neft, one of Russia’s main state oil companies.

The strikes also create political leverage for Kyiv as it navigates pressure from President Trump to end the war by acquiescing to at least some of Russia’s demands. Since the spring, the Pentagon has restricted Ukrainian use of U.S.-provided Atacms missiles to target Russia. Ukrainian-made weapons don’t have these limitations.

“We constantly expand the scope of the strikes and improve the tactics. This shows that yes, we depend on our partners, but we have also developed our own capabilities, our own cards and have agency,” said Mykola Bielieskov, a researcher at the National Institute of Strategic Studies, a think tank that advises the Ukrainian government, and a senior analyst at Come Back Alive, an organization that supplies the Ukrainian military.

“We are using against Russia the fact that it is so big that there will never be enough air defenses there, and unlike in previous wars, its size and strategic depth are actually becoming a disadvantage,” he said.

Russia’s war machine is powered by exports of oil, gas and fuel, which provides President Vladimir Putin with the means to recruit volunteers for the military with high sign-up bonuses despite mounting casualties.

 

Trump has imposed a 25% additional tariff on India, which purchases some 38% of exported Russian crude oil. He told Prime Minister Viktor Orban of Hungary in a letter that he is “very angry” about Ukrainian strikes on the Druzhba pipeline. The latest strike took that facility offline for days.

In addition to drones, Ukraine is developing its own missiles, including the Flamingo cruise missile. With its much bigger warhead, the missile could become a game-changer, said Fabian Hoffmann, a missile expert at the University of Oslo who closely follows the war in Ukraine.

“If you move from a long-range strike capability that is able to disrupt enemy industrial and economic targets to one that is able to comprehensively destroy them. That makes the whole thing a lot more difficult for Russia to deal with,” he said. “Russia will have to keep into account that, as long as they continue this war, Ukraine will be able to really hurt Russia.”

 

Russia’s economy has enjoyed relatively robust growth until recently, but persistent inflation, high interest rates and Western sanctions have started to take their toll. The International Monetary Fund last month cut its gross domestic product forecast for Russia this year to 0.9%, down sharply from over 4% in 2024. High interest rates are a key reason why Russian fuel traders—who usually stock up on cheaper fuel in the winter to resell during the summer—haven’t created a sufficient reserve this year.

Russian officials are now openly warning of the risks of a recession as companies from tractor producers to furniture makers reduce output. The central bank last month cut its key rate to 18% from 20% as the economy shows signs of slowing. Rising prices at the pump threaten to add to inflation, which is hovering around 9%, further complicating the bank’s task.

A satellite image of an oil-depot fire near Proletarsk, Russia. PHOTO: PLANET LABS PBC/ASSOCIATED PRESS

“Russia is highly sensitive to gasoline prices and preventing sharp spikes is important for Putin’s popularity and preventing domestic discontent,” said Clayton Seigle, senior fellow at the Center for Strategic and International Studies in Washington. At least six major Russian refineries have been hit this month, some repeatedly. Seigle said he expects some of them to be offline for at least four to six weeks.

The Russian government has said that the domestic market is fully supplied with fuel and has instructed oil companies to work on long-term measures to stabilize wholesale fuel prices. Russia introduced a ban on fuel exports last month in an effort to tame prices.

Analysts agree the fuel crunch by itself won’t move the needle on Putin’s strategic war aims in Ukraine or his domestic grip on power. “It is painful but not strategically disrupting,” said Alexandra Prokopenko, a former Russian central bank official who is now a fellow at the Carnegie Russia Eurasia Center in Berlin.

Yet, any disruption matters in the kind of war that is waged in Ukraine, said Oleksiy Reznikov, Ukraine’s former defense minister. “Modern war is a war of resources, and Ukraine is a David that tries to find Goliath’s weaknesses,” he said.