Russia’s oil and gas sector is experiencing a historic downturn due to a combination of tightening Western sanctions, falling global crude prices, and sustained infrastructural damage due to Ukrainian drone strikes.
The crisis has led to severe budget deficits and a wave of bankruptcies across the country’s energy infrastructure.
T-14 Armata. Image Credit: Russian State Media.
In February 2026, Russia’s oil export revenues collapsed by $1.5 billion month-on-month to $9.5 billion – its lowest level since the invasion of Ukraine began in February 2022 – according to the March edition of the Russian Oil Tracker by Kyiv School of Economics Institute (KSE).
Ukraine’s Revenue War Is Crippling Russia’s War-Torn Economy
Ukraine’s “revenue war” is a dual-pronged economic strategy in which Kyiv aims to cripple Moscow’s ability to fund its invasion while simultaneously attempting to sustain its own war-torn economy.
Ukraine has increased attacks on Russian energy facilities in recent months as Moscow has refused to bargain in good faith for peace talks.
Ukraine has deliberately targeted key Russian oil refineries, processing units, and export terminals with long-range drones.
Major facilities—such as the Tuapse refinery on the Black Sea and the Bashneft-Novoil facility in Ufa (over 1,400 km from the border)—have been repeatedly struck.
The goal is to cut off Russia’s hard currency oil revenue; Ukraine aims to directly neutralize Moscow’s war funding and reduce the long-term sustainability of its military. And it is succeeding.
Su-57 Felon Fighter from Russia. Image Credit: Creative Commons.
Despite comments that Russia’s fuel supplies are secure, Moscow is implementing a comprehensive ban on diesel and aviation fuel exports following a devastating wave of Ukrainian long-range drone strikes that have knocked out 25 percent of the nation’s total oil refining capacity, effectively paralyzing critical energy infrastructure across central Russia.
Despite oil and gas prices being so high due to the war in Iran, Russia has been unable to capitalize on the market because of Ukrainian drone strikes.
This kinetic economic war against Russia’s energy sector, using long-range drones and missiles to systematically strike oil refineries, export terminals, and storage facilities, is costing the Russian economy billions of dollars.
Ukrainian Drone Strikes Have Taken A Huge Toll On Russian Oil
About half of Russian oil fields are currently operating at a loss, sparking a wave of bankruptcies among small and medium-sized energy companies. Lenders have had to restructure over $35 billion in sector loans.
Extensive and precise long-range strikes on domestic energy infrastructure—including refineries, gas processing plants, and storage hubs—have severely hindered processing and export throughput.
Among the oil refineries hit were Ryazan, Moscow, Kirishi, and Nizhny Novgorod, which process roughly 238,000 tons per day (83 million metric tons per year) and account for about 25 percent of Russia’s diesel and 30 percent of its gasoline output.
Su-34 Fullback from Russia. Image Credit: Creative Commons.
The Ukrainian military stated that the effects of previous drone strikes had confirmed the shutdown of the Syzran oil refinery in the city of Syzran (Russia’s Samara Oblast), which Ukrainian forces attacked on May 21, 2026.
As a result, Russia has been forced to offer steep discounts on Urals crude oil to a limited group of major buyers, such as India and China, thereby squeezing profit margins.
“The Ukrainian Defense Forces will continue systematically taking measures to force the Russian Federation to stop its armed aggression against Ukraine,” the General Staff said.
Russia Is Forced To Divert Oil Output To The Baltics
Ukrainian drones on Tuesday targeted Russian oil facilities in the city of Tuapse, the location of a major oil refinery and an oil and products export terminal. The Russians claimed that there were no injuries and no damage to the facilities in Tuapse.
Over the weekend, Ukrainian drone strikes also hit major oil refineries in Novorossiysk.
Due to the strikes at Novorossiysk, Russian oil refineries have been diverting their oil output to the Baltic Sea ports of Primorsk and Ust-Luga and the port of Murmansk on the Barents Sea.
“According to Moscow-based oil and gas industry monthly journal Infotek, independent assessments based on Novorossiysk tanker arrivals and departures suggest shipments via the port fell to 14.8 million barrels in April compared with 21.2 million barrels in March.”
According to the Carnegie Endowment for International Peace, Russian oil and petroleum products shipped from Russian ports fell to an average of 3.5 million barrels per day during April and May. This is a very significant decline from the average 5.2 million barrels per day shipped between January 1 and March 24 of this year.
According to OilPrice.com, Ukrainian long-range drone strikes on Russian energy infrastructure cost Russian oil companies $13 billion in 2025, with continued strikes causing Putin’s government to lose up to $100 million per day in potential earnings.
Russia’s export terminals have been hit by drones, causing production to drop by about 1.75 million barrels a day. According to estimates by OilX, Russia’s average oil refining rate in April fell to 4.69 million barrels per day, the lowest level in more than 16 years.
The ongoing attacks threaten to further reduce refining volumes as Ukrainian strikes intensify. If Moscow is forced to slow or cut oil production, it will further hurt its struggling economy.
Russia’s Depleted Wealth Funds
Energy revenues—once the Kremlin’s primary financial weapon—have dropped by a third in early 2026 compared to prior years.
To cover extensive defense expenditures for the war in Ukraine, Russia has drawn heavily on its National Wealth Fund and record sell-offs of its strategic gold reserves.
The liquid assets within this reserve fund have plummeted by 57 percent since the outbreak of the conflict. Interfax reported that the NWF declined by 90.5 billion rubles in February.
The US Pitched Venezuelan Oil To India Due to the Russian Slowdown
Since the US imposed tariffs on India in 2025 for buying Venezuelan oil, it has told the Indian government it can resume those purchases soon to help replace imports of Russian oil.
The US effort to further reduce Russian oil revenues and supply Venezuelan crude to India comes with the stipulation that Washington will also cut the 25 percent tariffs on Venezuelan oil that it initially imposed on India.
India has vowed to cut purchases of Russian oil by several hundred thousand barrels a day.
Russia’s economy relies on oil and gas taxes for 25 percent of its budget. It is already stretched tight, and this loss of revenue will stretch it to the breaking point.
Ukraine’s plan is to cripple Russia’s oil refineries and thereby its economy. And it is succeeding. Last week, President Zelenskyy said, “Overall, our long-range plan for May is being carried out largely in full. The key targets are Russian oil refineries, storage facilities, and other infrastructure tied to these oil revenues.”
Putin’s shattered war economy is running on fumes as inflation and shortages surge.
About the Author: Steve Balestrieri
Steve Balestrieri is a National Security Columnist. He served as a US Army Special Forces NCO and Warrant Officer. In addition to writing on defense, he covers the NFL for PatsFans.com and is a member of the Pro Football Writers of America (PFWA). His work was regularly featured in many military publications.
