Ukraine Drone Strikes Hit Russian Oil Facilities and Tankers

Ukrainian drone units have struck 30 oil and gas tankers in the Black Sea region since Wednesday and claim to have hit 147 vessels linked to Russia in ten days. The strikes have effectively closed the Sea of Azov and tightened the blockade of the Crimean Peninsula.

The same units have attacked refineries across Russia from St Petersburg to Siberia. One strike hit the country's largest plant 2,250 kilometres inland at Omsk. The range of the attacks has increased fivefold since early last year.

Energy estimates that 60 per cent of Russia's refining capacity may now be offline. The reduction cuts supply by four million barrels a day in the week ending June 10. Russia has imposed an export ban and plans to import fuel from Kazakhstan and India.

The diesel crack spread in Rotterdam has reached $70 a barrel, compared with a normal range of $10 to $20. Crude prices are not the main indicator of stress in the current market; gasoline, diesel and jet fuel are the distillates in short supply.

Adjusted budget revenues from oil and gas fell 23 per cent in the January-to-June period compared with a year earlier. The finance ministry data show revenues in free fall. The Kremlin has raised refining subsidies sixfold to limit price increases at the pump.

The Centre for Strategic and International Studies estimates Russian casualties at 1.4 million, with monthly losses of 30,000 to 35,000. Recruitment has declined since last year, and some units are reported below 40 per cent strength. The Duma has suspended parts of the legal budget code.

Liquid reserves in the national wealth fund are exhausted, and Russian banks face pressure to finance the military and cover the budget deficit.