Impact of Ukrainian attacks on Russian refineries since start of year revealed

Ukraine has carried out more than 20 strikes on Russian oil infrastructure since the beginning of the year, targeting refineries, export terminals and pipelines, costing Russia over US$7 billion.

Source: The Washington Post

Details: A series of strikes in late March and early April on major Russian oil terminals, including Ust-Luga and Primorsk on the Baltic Sea and Novorossiysk on the Black Sea, cost Russia about US$2.2 billion in lost revenue.

This was because the attacks caused multi-week shutdowns of port facilities and a temporary reduction in export volumes, said Borys Dodonov, head of the Centre for Energy and Climate Studies at the Kyiv School of Economics.

According to Dodonov, more recent strikes on Russian refineries will further increase these losses. He added that attacks on Rosneft's plant in Tuapse caused such extensive damage that Russia may have to fully rebuild the facility, potentially costing US$5 billion.

Despite growing losses, Russia's oil export revenues still increased due to a price surge driven by the war with Iran: in March they reached US$19 billion compared to US$9.8 billion in February, Dodonov noted.

However, amid increasing sanctions pressure on Russia's budget and rising war costs for its economy, global oil prices would need to average US$115 per barrel by the end of the year for Russia to meet its 2026 budget targets without cuts, said Harvard University researcher Craig Kennedy.

Kennedy also noted that strikes on Russian oil infrastructure forced Russian oil companies to reduce production by approximately 300,000-400,000 barrels in April.

Background:

• At the end of March, it became known that the sharp rise in oil prices caused by the war with Iran allowed the Russian government to postpone plans to increase long-term budget reserves, easing short-term financial pressure.
• However, in April, the head of Sweden's intelligence service said Russia's struggling economy had still not recovered, despite higher oil prices during the Middle East war, which had replenished the Kremlin's depleted coffers.
• High global oil prices will not help accelerate Russia's economic growth this year, as Ukrainian drone strikes and new Western sanctions continue to put pressure on oil production and exports.

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