Since the beginning of the year, Ukrainian drones have attacked over two dozen Russian oil refineries and several oil depots in the first sustained campaign against Russia’s oil product producing facilities, with half the attacks successfully causing damage and delays.

Russia still has plenty of spare capacity. Russia’s refining throughput is 5.5mn barrels per day (bpd), while domestic consumption is less than half of that. The country produces twice as much diesel as it needs and is a major exporter of the fuel, while the gasoline surplus capacity before the attacks was 20-25%.

“Even if Ukraine succeeds in completely shutting down every refinery within its reach, there will be enough capacity in the Urals and Siberia to meet Russia’s needs for diesel, marine fuel and fuel oil. In this scenario, there will be a 20-30% shortage of gasoline, which could be covered by imports from Russia’s ally and neighbour Belarus. Without those imports, a shortage of that size might have an impact on private consumers, but would still leave more than enough fuel for industry, agriculture and the armed forces,” says Sergey Vakulenko, an independent energy analyst and consultant to a number of Russian and international global oil and gas companies.

The attacks are exclusively carried out by Ukraine’s homemade new long-range unmanned aerial vehicles (UAVs) that can fly some 1,200 km from the countries’ mutual border, as part of the new drone war phase in the conflict.

As of the end of March, the attacks are estimated to have reduced Russia’s oil product production by 16%, forcing the Kremlin to reach out to partners Belarus and Kazakhstan to supplement supplies of refined products like petrol.

“If the scale of Ukrainian drone attacks is maintained at the levels of March and Russian air defences do not improve, Ukraine will be able to keep damaging Russian refineries faster than they can be fixed, slowly but steadily eroding the country’s refining capacity,” says Vakulenko.

Experts say the attacks are unlikely to affect the military campaign in Ukraine or the economy, as Russia still has sufficient refinery capacity out of reach of Ukraine’s drones to meet military and industrial demand. However, if the attacks persist then there may be shortages in the consumer market later this year.

Drone attacks hitting Russia’s industrial sector are a new development in the war.

“In the earlier stages of the war, Ukraine concentrated its military resources on military targets, such as fuel depots close to the front lines or strategic airfields, leaving its Western allies to wage economic warfare. But sanctions had only a limited impact on Russian profits and the economy. Now Ukraine is taking matters into its own hands, physically attacking Russian energy infrastructure rather than relying on Western sanctions,” said Vakulenko in a paper for the Carnegie Endowment for International Peace.

As bne IntelliNews has reported, the oil sanctions are a spent cannon and not a single barrel of Russian crude oil has been sold below the oil price cap of $60. Russia just reported its federal budget results for the first quarter one year on from the disastrous budget results at the start of 2023. Oil and gas revenues soared by 80% in the first three months of this year, thanks to surging oil prices, which are now over $90. While new smart sanctions by the US introduced in December have reduced Russia’s ability to export oil – India has begun to turn some Russian tankers away – what fall there has been in volumes has easily been offset by the rise in prices. Russia’s deficit fell as a result from RUB1.5 trillion, or 96% of the full year estimate, to RUB600bn ($6.4bn) and the current account surplus for March more than doubled to $13.5bn, putting Russia on course to earn some $120bn this year – as much as the pre-war record high for the current account surplus.

Frustrated by the West’s failure to make sanctions stick, Kyiv has decided to attack, but has already earned Washington’s ire, which has put pressure on Bankova to desist, afraid of high prices at gas pumps at home in an election year.

Will the attacks make a difference? Vakulenko argues that they will not, as most oil refineries were built in Soviet times and made proof against air attack during the Cold War tensions.

“Still, even the current wave of drone attacks will have a limited effect on the Russian industry and economy. Drone attacks do not destroy entire refineries and usually do not even destroy individual units, but only damage them, unlike World War II air raids by hundreds of bombers,” says Vakulenko, who has proved to be one of the most acute observers of the Russian oil sector.

The first refineries to be hit in February – Ust-Luga and Ryazan – were both back in operation a few weeks after being struck.

But strikes against Russian refineries do create financial losses for Russian oil companies, but do not hurt the state budget and have little impact on Russian export earnings.

Currently, the 1,200-km range of Ukraine’s drones means that 40% of Russia’s refinery capacity is beyond their reach. Ukrainian officials have repeatedly announced a major expansion of long-range UAV manufacturing, meaning the rate of attacks in the future is likely to increase. Ukraine’s Defence Ministry said this month it has new drones in development with a range as much of 3,000 km that could put many more refineries within reach.

To underscore the point, a Ukrainian drone struck Russia's third-largest oil refinery in Tatarstan on April 2, about 1,300 km from the front lines – the deepest strike into Russian territory to date – although the strike caused no critical damage, according to reports.

“The needs of the Russian armed forces and the primary needs of the Russian economy for fuel can be satisfied by factories that are out of reach of Ukrainian drones,” says Vakulenko.

What the attacks do is increase pressure on Russia’s oil sector, as the cost of repairs are tens if not hundreds of times greater than the cost of the drones. “In a war of attrition, the odds are with the drones,” says Vakulenko.

The attacks peaked just before Russia’s presidential election on March 15-17. Most likely, Ukraine had stockpiled its arsenal for a show of force and the propaganda value of spoiling Putin’s latest apparent victory. Since then, the attacks have slowed, but not stopped.

So far, only refineries have been hit by Ukraine, but next up may be Russian oil pipelines. There are two major product pipelines carrying fuel from the Urals and Siberia to the Baltics and the Black Sea that distribute fuel around European Russia and to some Central European customers. Destroying these pipelines would add to Russia’s logistical problems of supplying its domestic economy, but these would be more headaches and not crippling.

Russia has, for its part, retaliated by targeting Ukraine’s oil refineries and power plants with devastating effect. Russia launched its first missile barrage in January and intensified the attack with a bigger barrage in March. Since then it has crippled Ukraine’s power infrastructure, and on April 11 completely destroyed Kyiv’s main power plant.

“Immediately after the first attacks by Ukrainian drones, Russia used two ballistic missiles to attack the only functioning Ukrainian refinery in Kremenchug, and then switched back to major power generation assets, methodically destroying thermal and hydropower stations,” said Vakulenko.

The Ukraine drone attacks have caught most of the press’ attention, but Russia has also been developing its own drone resources and has made rapid technological advances not only in drone technology, but also in effective electronic warfare to incapacitate Ukraine’s drones. Russia sends swarms of drones to overwhelm air defence systems and then delivers main hits with heavy missiles, targeting expensive, bulky and hard-to-replace generators and control systems, according to Vakulenko.