Ukrainian strikes on Russian oil refineries are now doing what the Western sanctions regime failed to achieve. One of the world’s largest oil producers is now importing gasoline – Foreign Affairs.
Since October, Ukraine has carried out at least 20 strikes on Russian refineries. Ukrainian security officials said that the attacks were aimed at cutting off fuel supplies to the Russian military and reducing export revenues that the Kremlin uses to finance its military operations.
By the end of March, Ukraine had destroyed about 14% of Russia’s refining capacity and forced the Russian government to impose a six-month ban on gasoline exports.
However, President Joe Biden’s administration has criticized the attacks. In February, Vice President Kamala Harris called on Ukrainian President Volodymyr Zelenskyy to refrain from attacking Russian oil refineries, fearing that these strikes would lead to an increase in world oil prices.
In mid-April, Defense Secretary Lloyd Austin warned the Senate Armed Services Committee that “the attacks could have a knock-on effect in terms of the global energy situation.”
However, Washington’s criticism is misplaced, the newspaper writes: the refinery attacks will not affect global energy markets, as US officials fear. These strikes reduce Russia’s ability to turn its oil into petroleum products; they do not affect the amount of oil the country can produce or export. In fact, with less domestic refining capacity, Russia will be forced to export more of its crude oil, not less, leading to lower, not higher, world prices.
If Russia decides to shut down wells instead of increasing exports, the global oil price will indeed rise, an outcome the Biden administration is seeking to avoid. But then Russia would face an even sharper increase in the cost of refined products, with only lower export revenues to soften the blow. It was therefore not surprising when, in March, Russian First Deputy Energy Minister Pavel Sorokin suggested that Moscow would choose the first option and redirect more crude oil for export.
Indeed, Russian companies have started selling more crude oil to foreign countries. As long as they are limited to Russian refineries, the attacks are unlikely to lead to higher oil prices for Western consumers.
However, they could still hurt in Russia, where prices for petroleum products such as gasoline and diesel have begun to rise. The strikes achieve the same goals that Ukraine’s Western partners have set out to achieve but have largely failed to do so because of sanctions and price caps on Russian oil: weakening Russia’s financial and logistical ability to wage war while limiting broader damage to the global economy.
“Kyiv should win wherever possible, and the campaign to destroy Russian refining capacity brings Ukraine benefits with limited risk,” the article says.
So far, Ukraine has focused its attacks on Russian refineries, not on oil fields or crude oil export infrastructure. This distinction is important. After oil is extracted from a well, it is transported through pipelines and other infrastructure to refineries, where it is transformed into products for distribution to end users.
In 2023, Russia will produce about 10.1 million barrels of oil per day. Of this, about 50% was exported to refineries abroad, and the remaining 50% was refined domestically to create products such as gasoline, diesel, jet fuel, and chemical raw materials. Half of these refined products were consumed domestically, and a significant portion was used to fuel the Russian war machine.
The Ukrainian strikes have dealt a significant blow to Russia’s refining capacity – up to 900,000 barrels per day. Repairs will be slow and expensive, partly because refineries, where oil is distilled into its components, are huge and complex pieces of equipment that take years to design and build, and partly because Western sanctions have made access difficult for Russian firms.
Data from recent months confirm that, as expected, Russia is exporting more crude oil, while its refined fuel exports have reached near historic lows. During the last week of April, Moscow exported just over 712 thousand tons of diesel fuel and gas oil, which is less than the more than 844 thousand tons during the same week in 2023.
The strikes did not affect international crude oil prices, which remained stable until the end of March.