Ukraine has decided to set fire to a Russian refinery for every destroyed village that Russia occupies in Donbás. In this exchange game, Ukrainian drones have rendered inoperative 21 plants out of a total of 38 large existing complexes over the past two months, some located thousands of kilometers away from Ukraine. Over the weekend, the list expanded with the Yaroslavl refinery and the Sukhodolnaya pumping station in the Rostov region, attacked by at least 10 drones. On Friday, several devices hit the distillation plant —the most critical area— of the Orsk refinery.
Russia, the largest country on the planet, does not have the resources to protect all its infrastructures. With most of its anti-aircraft batteries involved in the war in Ukraine, the rest of the territory remains almost defenseless against swarms of AN-196 Liutyi drones ("Furious" in Ukrainian), a local version of the Shahed used by the Russians. They do not carry much explosive, but they target places loaded with flammable fuel, so very powerful weapons are not needed to cause a large fire.
The impact on the Russian war economy is significant: the attacks have caused the sector to lose 38% (a figure acknowledged by Moscow) of its refining capacity. Gas stations in various regions have run out of fuel, especially gasoline, leading to long lines of vehicles and intermittent supplies. In other areas, sales have been limited to 30 liters per car, a rationing reminiscent of the Soviet Union. In regions like Crimea, the scarcity is so severe that the Kremlin has had to ban gasoline exports and even order purchases from its Chinese ally.
These attacks represent a huge loss for an economy as undiversified as Russia's, dependent on gas and oil as the main financiers of its war machine. The damaged refineries will remain out of service for months due to the difficulty in obtaining spare parts, as the technology is Western and therefore subject to sanctions. Without spare parts or official service, repairs are prolonged or incomplete. Additionally, accidents are occurring because the Government has postponed scheduled maintenance, increasing operational risks and multiplying bottlenecks.
The consequences have been felt from the oil fields of North Dakota to the trading floors of Houston and London, passing through the port of Bombay and the refineries in the Chinese province of Shandong.
It is logical: Russia is the third largest oil producer in the world (almost tied with Saudi Arabia, which holds the second position) and the second-largest exporter. Its refining capacity has plummeted, so it was inevitable that the global market would be affected. Unable to transform crude oil into gasoline, diesel, or other derivatives, the situation is so extreme that the Kremlin has banned exports and limited diesel and other product exports until at least 2026, aiming to minimally supply its domestic market.
Moscow's alternative is to export unrefined oil, known as "crude" or "crude oil". According to Reuters, the bombing crisis has allowed Russia to increase crude oil exports by 25% solely from its three western ports: Ust-Luga and Primorsk in the Baltic, and Novorossíisk in the Black Sea.
The problem is that crude oil is much less profitable than refined products. In Russian refineries, the so-called "1:2:3 crack spread" —the difference between the price of a barrel of crude oil and that of gasoline, diesel, or kerosene— is high, and Ukrainian attacks have ruined this business. The winner is China, which used to buy petroleum products from Russia and now receives cheaper crude oil, processes it, and keeps the margins.
Hence, in recent weeks, there has been some hysteria on social media about massive Chinese purchases of Russian and Iranian crude oil, which some interpreted as preparations for a war over Taiwan, without considering that Beijing is simply taking advantage of the massive arrival of unrefined Russian oil. This is compounded by Donald Trump's tariff threat to India if it does not stop buying Russian oil, a measure that has already had an effect: Adani, India's largest port operator, has ceased its purchases, further increasing the supply.
Putin faces another problem: in 2025, there is an oil surplus. Middle Eastern countries have increased their production in a context of low global growth and, therefore, weak demand. Preliminary Bloomberg data indicate that there are between 6 and 12 million barrels without buyers in the Persian Gulf. With Brent at $66, Saudi Arabia is facing serious economic problems and has been forced to allow the sale of listed companies to foreigners.
Riyadh has also threatened to flood the market until the barrel drops to $50, something it can afford because it costs them barely $8.30 to produce. This would be lethal for Russia: the average extraction cost in its major fields ranges between $40 and $50, and they sell through their "ghost" fleet at around $60. With a barrel at $50, they would operate at a loss. Additionally, they cannot exploit new fields without Western technology, banned by sanctions.
Saudi Arabia is driving this price drop for three reasons. First, because many OPEC members export more than their quotas allow, and Riyadh wants to impose discipline; as the only country with surplus extraction and refining capacity, it can flood the market, as it did in 1998 and 2020.
The second reason is political: Mohammed bin Salman (MBS), the Saudi Crown Prince, maintains an excellent relationship with Jared Kushner and, through him, with his father-in-law, Donald Trump. The U.S. President does not want inflation to rise, and since his tariffs have increased domestic extraction costs, MBS has no interest in harming him.
But friendships are not absolute. Riyadh's third reason is to crush U.S. fracking, a major ally of Trump. The U.S. is the largest oil producer, but does so through an expensive and controversial technique. Although fracking has made spectacular advances, the average cost per barrel in North Dakota is around $60, and in Texas, $30. Trump has also increased sector costs by imposing tariffs on steel and iron, raising pipe and equipment prices. The result: in 2025, U.S. production will remain flat compared to 2024, and the fortunes of magnates like Harold Hamm, previously benefited, have stopped growing.
Trump is seeking outlets for U.S. oil, preferably through preferential agreements that guarantee advantageous prices for its allies. Paradoxically, he aims to replace Russian oil bought by Hungary and Slovakia, countries whose leaders are Putin's allies, with U.S. oil. He has also proposed to India to substitute Russian oil with American oil. Now, Ukrainian drones could facilitate this strategy.
The attacks reinforce a stagflation scenario —fuel shortages, high interest rates, and high military spending— and increase the risk of recession. But as long as Russia can sell crude oil, ration gasoline internally, and maintain controls, a sustained economic deterioration is more likely than a sudden collapse.