Russia fuel crisis deepens as drone strikes knock out 28% of refining capacity

Ukrainian drone strikes have knocked out 28% of Russia's refining capacity, forcing Moscow to import fuel for the first time in decades.

Ukrainian drone attacks have crippled 28% of Russia's refining capacity as of June 20, forcing Moscow to import fuel for the first time in decades and triggering hourslong lines at gas stations across the country.

"All of this is due to the steep rise in the number of drones that Ukraine is able to fire," said Sergey Vakulenko, former head of strategy at Gazprom Neft and now a senior fellow at the Carnegie Russia Eurasia Center in Berlin. "The problem isn't in logistical difficulties or market imbalances anymore, but in the physical lack of fuel."

The crisis reached a turning point on June 18 when Ukrainian drones broke through Moscow's air defenses and destroyed the capital's main refinery. Russia has banned exports of gasoline and jet fuel, and President Vladimir Putin said he is considering a ban on diesel exports. In Crimea, where gasoline sales to civilians have been suspended, black market prices have surged to more than 500 rubles a liter, or $25 a gallon. Some regions have imposed five-gallon limits per vehicle and introduced Soviet-style rationing systems using QR codes and manually assembled lists.

The fuel shortages pose a political challenge for Putin ahead of September parliamentary elections, as ordinary Russians experience the war's consequences directly for the first time. Russia's budget, already strained by war spending, now faces the added cost of importing fuel from countries such as India, with shipments expected to take weeks to arrive by sea.

Drone Campaign Outpaces Russia's Ability to Repair

Ukraine has targeted Russian refineries for more than three years, but the quantity and firepower of its drones have increased sharply this year. The June 18 strike on Moscow's refinery — located more than 1,200 miles from the Ukrainian border — demonstrated Kyiv's growing reach. Attacks have also hit facilities in Tyumen, Siberia, and the Krasnodar region, where a refinery was destroyed on Sunday.

Russia's ability to repair damaged refineries has been constrained by international sanctions that ban the import of needed equipment. The country is now considering allowing refineries to produce low-grade Euro-2 standard gasoline, banned since 2013, which can damage modern engines but works in older cars.

"I have a sense that we are on the path to victory," said Iryna Terekh, CEO of Fire Point, one of the main Ukrainian producers of long-range strike drones. "We keep pecking, pecking, pecking at them, and I start to see light at the end of the tunnel."

Political Pressure Builds Ahead of September Vote

The fuel shortages have become a campaign issue as Russia prepares for parliamentary elections in September. While no one expects a free or fair vote, the ballot provides a platform for Russians to air grievances. One Moscow resident said his wife had waited in line for gasoline for more than two hours, and that it would color their views of the authorities.

"The crisis is already so widespread that it would be dangerous for Putin not to address it," said Janis Kluge, an economist at the German Institute for International and Security Affairs. Putin acknowledged the shortfall for the first time on Sunday, saying "problems for the motorists, and for the businesses, remain."

Russian authorities have responded by limiting the release of retail fuel-price statistics and rounding up alleged speculators. "When authorities react to events by hiding information, people start thinking that maybe things are more dramatic than they are being told," said Alexandra Prokopenko, a former adviser at the Russian central bank and now a fellow at the Carnegie Russia Eurasia Center.

The last time Russia faced a fuel crisis of this magnitude was more than two decades ago. The current disruption threatens not only consumers but also the agricultural sector during the summer harvest season, which Putin himself identified as a concern. "The harvest depends on this," he said.

This article is for informational purposes only and does not constitute investment advice.