Strikes on refineries more painful for Russia than Western sanctions - Foreign Affairs
Ukrainian drone strikes on Russian oil refineries have a more negative impact on Russia than Western sanctions.
That's according to a Foreign Affairs article entitled "Why Ukraine Should Keep Striking Russian Oil Refineries," Ukrinform reports.
In all, Ukraine has launched at least 20 strikes on Russian refineries since October. Ukrainian security officials have indicated that the attacks' objectives are to cut off fuel supplies to the Russian military and slash the export revenues that the Kremlin uses to fund its war effort. By the end of March, Ukraine had destroyed around 14 percent of Russia's oil-refining capacity and forced the Russian government to introduce a six-month ban on gasoline exports. One of the world's largest oil producers is now importing petrol, the article reads.
But the Biden administration has criticized the attacks out of concern that the strikes would drive up global oil prices. However, according to Foreign Affairs, "Washington's criticism is misplaced: attacks on oil refineries will not have the effect on global energy markets that U.S. officials fear."
"These strikes reduce Russia's ability to turn its oil into usable products; they do not affect the volume of oil it can extract or export," the article says.
In fact, with less domestic refining capacity, Russia will be forced to export more of its crude oil, not less, pushing global prices down rather than up. Indeed, Russian firms have already started selling more unrefined oil overseas. As long as they remain restricted to Russian refineries, the attacks are unlikely to raise the price of oil for Western consumers. Yet they can still inflict pain inside Russia, where the price of refined oil products, such as gasoline and diesel, has begun to surge.
"Kyiv must take wins where it can, and a campaign to destroy Russia's oil-refining capacity brings benefits to Ukraine with limited risk," Foreign Affairs said.
Ukraine has so far concentrated its attacks on Russian oil refineries, not oil fields or crude oil export infrastructure. The Ukrainian strikes have dealt a significant blow to Russia’s refining capacity, knocking out up to 900,000 barrels per day. Repairs will be slow and expensive, in part because refinery stacks—where oil is distilled into its constituent parts—are huge and complex pieces of equipment that take years to design and build, and in part because Western sanctions are hampering Russian firms’ access to specialized components.
The news outlet writes that Russia’s oil storage capacity is limited. When a refinery is destroyed or damaged, therefore, extracted crude oil cannot simply be stocked for later use. This leaves Russian producers with just two options: increasing exports of crude oil or shutting wells and reducing production. Both options are painful for Russia, but increasing exports is less so than scaling back extraction.
The article says that if Russia chooses to shut wells instead of increasing exports, the global oil price would indeed rise -- the outcome the Biden administration seeks to avoid. But Russia would then face an even sharper increase in the cost of refined products, only with lower export revenues to cushion the blow.
Data from recent months confirm that, as expected, Russia is exporting more crude oil at the same time that its refined fuel exports have hit near-historic lows. Western markets may not be hurting, but Russia is feeling the pinch.
The authors of the article emphasized that Ukrainian strikes on Russian oil refineries are now doing what the sanctions regime has not: "Without compromising global energy supply or driving up prices, the attacks are eating into Russian revenues and curtailing Russia’s ability to turn crude oil into the kinds of fuel that tanks and planes need to run."
At the same time, Ukrainian strikes on Russian oil refineries also seem unlikely to widen the conflict. At the very least, Russia will struggle to escalate in kind, given its long-running and far broader campaign to destroy Ukraine’s energy infrastructure. Rather than threatening escalation in response to Ukraine’s strikes, the Kremlin has tended to play down their effects to avoid embarrassment.
"Strikes on Russian refineries alone will not force Moscow to capitulate, but they do make the war more difficult and expensive for Russia -- and so, if nothing else, when the time comes for negotiations, they may push the Kremlin to make concessions," the article said.