Russia Faces Major Gas Headache After Ukraine Strikes

Ukrainian drone attacks on Russia’s energy facilities have prompted oil companies in the country to reduce gasoline production, according to a Monday report from Russian newspaper Kommersant.

Since the start of Russian President Vladimir Putin’s full-scale invasion of Ukraine in February 2022, fuel depots and oil refineries across Russia have been repeatedly struck by drones in attacks blamed on Kyiv, which often does not claim responsibility.

These attacks, which affect fuel supplies to Russian forces of the country’s valuable export, have lately increased in frequency.

On Saturday, a drone strike on the Novokuibyshevsk Oil Refinery in the Samara region caused the shutdown of the production cycle of the plant which makes fuel for jet engines, missile carriers and cars.

Other drone strikes in recent weeks include: Ryazan and Pervyy Zavod south of Moscow, the Rostov region by the Ukrainian border, Nizhny Novgorod, 300 miles east of the capital, and Kirishi, close to St. Petersburg.

On Monday, Kommersant reported that drone strikes had affected gasoline production between March 13 and 19, causing it to drop by 3.9 percent. Planned production decreased by 5.2 percent compared with the previous week, to 779.4 thousand tons (111.3 thousand tons per day). The lowest production volume level, 104.7 thousand tons, was recorded on March 18.

The total volume of refining at Russian refineries has so far decreased by 0.5 percent compared with February although this figure has not yet taken into account the impact of the Samara site strikes, Kommersant reported.

“The Ukrainian drone strikes are having an effect and they are drawing down previous stocks,” Berlin-based energy analyst Thomas O’Donnell told Newsweek.

“The other thing that will happen in the refineries where the primary production has been halted because of the strikes, is that other parts of the plant for secondary production might continue where they’ll bring stocks from other plants in,” O’Donnell, who is also a global fellow at the Wilson Center, added. “But over time, if the Ukrainians keep this up, that will be run down.”

The Financial Times reported last week that U.S. officials had urged Ukraine to halt attacks on the Russian site because targeting oil production capacity risked driving up prices and provoking retaliation from Moscow against energy infrastructure relied by the West.

So far this year, oil prices have increased by 15 percent to around $85 a barrel, which could present a difficulty for President Joe Biden as he seeks reelection this year.

O’Donnell told Newsweek that that if Ukrainians really wanted to hit oil exports, they would go after Novorossiysk Fuel Oil Terminal in the western Black Sea and Primorsk Oil Terminal at the end of the Baltic Pipeline System.

“These are the two major exports sites for Russian oil and they are demonstrated to be within range of aerial drones and perhaps, in the case the Black Sea, their seaborne drones,” he said. “If they really want to cut Russia’s oil income, that they would go after those ports and they haven’t—that might be in deference to Americans concerns.”

Sales of Russian oil have been complicated by India’s refiners refusing to take Russian crude carried on tankers operated by the country’s biggest shipping company Sovcomflot for fear of breaching U.S. sanctions, Bloomberg reported.

Since the start of the war in Ukraine, India has benefited from getting a cheap deal for Russian oil. But last week, India’s Reliance Industries reportedly requested supplies not be shipped by tankers operated by Sovcomflot after it and 14 crude-oil tankers were sanctioned last month by the U.S. Treasury.

However, Ian Massey, Head of Corporate Intelligence, EMEA, at security intelligence firm S-RM, said the the significance of the move by Reliance is uncertain given Russia’s track record of blunting sanctions with its “shadow fleet” of vessels that have opaque ownership structures.

“Even if the reported decision by Reliance Industries materially reduces shipments made by Sovcomflot vessels to Indian ports, it is likely that Russia will find another route to market,” he told Newsweek.