Ukraine mentioned Thursday its long-range drones had struck a significant offshore oil platform in the Caspian Sea this week, in a beforehand undisclosed mission that alerts a brand new growth of its goal record in a mounting marketing campaign to chop off the Russian energy revenues funding its war.
“This is Ukraine’s first strike on Russian infrastructure related to oil production in the Caspian Sea,” a supply with the Security Service of Ukraine instructed NCS, calling it “another reminder to Russia that all its enterprises working for the war are legitimate targets.” The Filanovsky oil platform, owned by Lukoil, claims to be the biggest oil discipline in the Russian sector of the Caspian. NCS has reached out to Lukoil and the Russian Ministry of Defense for remark.
Ukraine’s deep strike marketing campaign in opposition to Russian energy amenities started in earnest in early 2024, however for the reason that starting of August, Kyiv has escalated this effort, doubling down on what Ukraine’s sanctions commissioner Vladyslav Vlasiuk calls “long-range sanctions” focusing on Russia’s largest monetary lifeline. Ukraine is now hitting an more and more broad vary of targets together with not simply refineries however oil and fuel export infrastructure, pipelines, tankers, and now offshore drilling infrastructure.
November noticed the very best variety of assaults but in a single month, in response to information from the Armed Conflict Location & Event Data (ACLED) challenge, and NCS’s evaluation.
It comes at a essential juncture in the war. Recent US-led peace efforts solely seem to have hardened Russia’s maximalist calls for, and Moscow’s forces are creeping ahead in a number of areas of the entrance line. That, alongside with a world oil provide glut cushioning the market in opposition to potential value rises, means Ukraine’s Western allies have grown more and more supportive of this marketing campaign.
“I think the general strategy since summer is the idea that you cannot allow Russia to retain so much of its critical energy revenue that has been fuelling the massive manpower recruitment advantage that Moscow has over Ukraine,” mentioned Helima Croft, international head of commodity technique at RBC Capital Markets, referring to Russia’s skill to pay excessive salaries and sign-on bonuses to recruit troopers.
“So, I do think it’s a more systematic effort to sort of close that energy ATM.”
Between the start of August and the tip of November, Ukraine struck at the least 77 Russian energy amenities, virtually twice the whole for the primary seven months of the yr, in response to the ACLED. In November at the least 14 refinery hits and 4 assaults on Russian export terminals had been recorded.
Striking the identical amenities a number of instances is now a key a part of the technique. The Rosneft-owned Saratov refinery, for instance, has been hit at the least eight instances for the reason that starting of August, with 4 of these strikes in November.
“What used to be occasional strikes meant to cause damage has become a sustained effort to keep refineries from ever fully stabilising,” wrote Nikhil Dubey, senior refining analyst at information and analytics agency Kpler, in early December.
Dubey’s analysis reveals that repeated strikes on Russian refineries like Saratov have knocked a big quantity of capability offline and are “slowing the pace of every repair.” He additionally assesses that since August, Kyiv has been attempting to maximise the influence of its refinery strikes, by focusing on not simply “the visible parts of the refinery but the important clogs in the refining system that produce the final fuels.”
Sergey Vakulenko, a senior fellow on the Berlin-based Carnegie Russia Eurasia Center assume tank, who spent 25 years in the Russian oil and fuel business, instructed NCS he believes the up- entrance harm Ukraine has inflicted has been manageable for Moscow thus far, however that doesn’t account for the long-term harm from the large-scale fires these assaults are inclined to trigger.
“Metals are not particularly fond of that kind of treatment, and nobody really knows how many of these cycles of heating by fire and cooling down these columns could survive,” he instructed NCS.
The sample of assaults additionally suggests Ukraine is now not attempting to restrict the influence to only Russia’s home energy market. Since August, it has markedly elevated strikes on Russian oil export amenities.
The ports of Novorossiysk and Tuapse on the Black Sea and Ust-Luga on the Baltic have every been hit a number of instances. And pipelines are additionally in play. The Druzhba pipeline carrying Russian oil to the few remaining EU nations that depend on it has now been hit 5 instances since August, triggering protests from Hungary, which stays on good phrases with Moscow.
In late November, the Caspian Pipeline Consortium, which ferries 80% of all Kazakh oil provides from Kazakhstan to the Black Sea, mentioned it had been attacked twice in 4 days.
The pipeline firm, collectively owned by Russia, Kazakhstan and worldwide oil firms together with Exxon (XOM), Chevron (CVX) and Eni, mentioned the second strike had knocked out one among its three mooring factors for tankers. Ukraine by no means formally claimed accountability for the strike.
The complete terminal shut down for 2 days, in response to Homayoun Falakshahi, head of crude oil evaluation at Kpler. The Kazakh overseas minister called it “an action harming the bilateral relations of the Republic of Kazakhstan and Ukraine.”
Vakulenko believes this reveals the dangers of this increasing marketing campaign. “I guess Ukraine wants to instil fear and wants to make it expensive for any oil tankers going into the Black Sea,” he mentioned, however added: “I think with this, Ukraine doesn’t earn any sympathies and might incur some costs.”
Ukraine is undeterred. On Wednesday it carried out its third assault on one other essential hyperlink in Russia’s oil provide chain – the ships that carry it to international markets. A supply in Ukraine’s safety service claimed sea drones had been used to assault a sanctioned oil tanker in the Black Sea, heading for Novorossiysk.
The first two assaults on tankers in late November triggered a uncommon response from Putin, who known as it “piracy,” and Turkey summoned each Ukrainian and Russian ambassadors in protest.
“We have no other tool than to cut money flow to Russia to prevent this war for existence,” mentioned Oleksandr Kharchenko, director of the Energy Industry Research Centre in Kyiv. The reality these sanctioned vessels had been there in the primary place, he argued, clearly demonstrates Western sanctions are insufficient. “So guys, if you can’t deliver your sanctions, maybe someone (can) help you,” he mentioned.
Two exterior components have allowed Ukraine to ramp up its energy assaults in current months. First, a dramatic about-turn by the United States.
“It is very hard, if not impossible, to win a war without attacking an invader’s country,” wrote US President Trump on Truth Social in late August. In October, two sources instructed NCS the US had increased intelligence sharing with Ukraine after the abortive Alaska summit between Trump and Putin, with a give attention to energy-related targets inside Russia, hoping to drive Russia again to the negotiating desk.
Europe was additionally on board. “By the end of summer no one in the room would even mention that Ukraine should restrain from hitting any target,” famous Dovilė Šakalienė, a Lithuanian parliamentarian who served because the nation’s protection minister till October this yr, in written feedback to NCS. “Growing realization in the minds of Europeans that failure of Ukraine will directly affect our security within the span of one standard parliamentary term also helped,” she added.
“The US remains an active partner when it comes to Ukraine’s deep strikes on Russian energy targets, while European allies have stepped up their involvement,” a supply with Ukraine’s drone program instructed NCS.
The second huge tailwind for Ukraine has been falling oil costs pushed by a world oversupply.
Croft, from RBC Capital Markets, mentioned she “just couldn’t envision that the Trump administration, which has been so focused on lower retail gasoline prices” could be “so supportive” of Ukraine’s assaults on Russian energy if oil costs had been excessive.
A Western intelligence supply instructed NCS that Ukraine is getting additional help in this marketing campaign “as needed” and “the goal is for these attacks to have consequences.” The international oil markets can “take it,” the supply added.
How lengthy can Russia stand up to this?
While Russia stays intransigent in peace talks, its oil sector – the one largest monetary pillar of its war – is wanting a lot shakier than a yr in the past.
Russia’s oil refineries are processing about 6% much less oil than they had been this time final yr, in response to Kpler analyst Dubey. While that quantity could look small, it’s disruptive for the Russians as a result of “they usually run with only a small gasoline surplus,” Dubey mentioned.
In September and October this yr, movies of vehicles lining up outdoors fuel stations surfaced on-line and Russia’s authorities, dealing with shortages in some areas, moved to ban gasoline exports till the tip of the yr. At the tip of November, Putin signed a legislation permitting Russian firms to obtain a subsidy in the event that they refine oil at Belarusian refineries after which import it again to Russia, state media reported, a measure designed to stabilize the home market.
Ukraine’s escalating assaults have additionally coincided with the first new sanctions imposed on Russia since Trump returned to workplace in January. In October, Trump introduced full blocking sanctions on Russia’s largest oil firms – Rosneft and Lukoil.
Prices for Russian Urals crude have progressively fallen since then to round their lowest level in the war thus far, in response to information from Argus Media, serving to gasoline a drop in Russian oil export revenues to their lowest level since February 2022, in response to the International Energy Agency. In November, state media reported Russia’s oil and pure fuel revenues fell virtually 34% in contrast with the identical month final yr.
Vakulenko believes the assaults on Russian energy amenities are simply “one of the elements of the puzzle” of stress Putin to hunt peace.
“I think the amount of economic damage one has to inflict on Russia is probably more than Ukraine could create at the moment,” he mentioned. “I believe that if push comes to shove, Russia could probably survive with half of its oil and gas exports.”
For Croft, it’s a query of whether or not Ukraine and its allies can keep the course.
“The combination of infrastructure attacks focused on export targets, and the staying power of blocking sanctions, I think that could potentially drive Russia back to the table, but it has to be a longer duration event,” she mentioned.
With Trump now pressuring Ukraine to just accept concessions, this can be a take a look at of his urge for food to do each.