Russia Is Running Out of Soldiers, Oil, and Time
By Simon Watkins - Aug 03, 2026, 3:00 PM CDT
- Russia's war effort is under growing pressure, with mounting military losses, relentless Ukrainian drone strikes on refineries, and attacks damaging nearly 43% of Russia's refining capacity
- The U.S. and EU are preparing tougher sanctions, targeting Russia's oil exports, shadow fleet, and major buyers such as China and India, with tariffs and stricter enforcement aimed at squeezing Moscow's energy revenues.
- Economic strains are intensifying, as Russia faces stagnating growth, shrinking sovereign reserves, a worsening fuel crisis, and the prospect of broader conscription after September elections.
Over 1,600 days into Russian President Vladimir Putin’s 10-day special military operation and the situation for the Kremlin continues to deteriorate. Since Moscow ordered its troops illegally into Ukraine on 24 February 2022, more than 450,000 of them have been killed, with another 1 million wounded or missing. Ukraine’s extraordinary development of its own military -- including a stunning build-out of its drone capabilities -- now means Russian monthly casualties have reached the critical negative replacement rate -- meaning that there are more dead and wounded per month (over 30,000) than can be replaced through recruitment (around 27,000). And there are now 8 Russian casualties for every 1 Ukrainian casualty, up from a ratio of roughly 3:1 earlier in the conflict. Adding to its self-inflicted woes, Russia’s key oil and gas infrastructure has been under sustained attack from Ukrainian drones since early 2024, followed by an even deeper, highly concentrated blitz that began in August 2025. Since the start of 2026, Ukrainian drones have attacked Russian refineries at least 194 times, bringing total cumulative damage to nearly 43% of Russia’s entire operating refinery capacity. As bad as this is for Putin’s war, things are set to become very much worse very soon.
Aside from a further tightening of the noose held by Ukraine over Crimea (illegally seized by Russia in 2014) in what is shaping up to be a textbook operation of asymmetric isolation and siege, and a further rolling bombardment of Russia’s vital oil and gas installations, the US and Europe have plans to push its economy into an outright crisis by the end of this year through swingeing new sanctions. In Europe’s case, the European Union (EU) of 27 member countries agreed on 23 July in their 21st Sanctions Package against Russia to freeze the oil price cap at the present level of US$44.10 per barrel for at least another year. The EU cap affects Russian seaborne crude oil and petroleum products exported to third countries outside the EU, most notably China and India, as the EU has already banned all direct imports of Russian oil into its own borders. This freeze paused an expected increase of more than US$10 per barrel that was likely to have resulted in the EU’s scheduled review this month from the floating calculation mechanism adopted by the bloc last year. At the same time, the EU took further measures against Russia’s shadow fleet, and against the ecosystems that support it. For a start, it added 41 vessels to the asset freeze list and, for the first time, it expanded its authority to sanction vessels that do not directly carry Russian oil but instead provide support services to shadow fleet tankers. For example, any vessel caught refuelling, towing, or conducting ship-to-ship cargo transfers with a blacklisted shadow tanker will now automatically be designated and hit with a total maritime services ban. Another major escalation allows EU countries to confiscate and sell oil cargoes discovered on detained shadow fleet vessels. The aim of these measures was made crystal clear by President of the European Commission (the executive branch of the EU) Ursula von der Leyen: “At a time when Ukraine has built military momentum, our sanctions continue to weaken the economic foundations of Russia’s war effort.” Related: Trump's Iran Reversal Sends European Gas Prices Tumbling
This comment could have been equally applicable to the U.S.’s likely next round of sanctions, following 28 July’s overwhelming 86-12 vote of the Senate to advance the Lindsey O. Graham Sanctioning Russia and Iran Act of 2026. For Russia, this would be the most catastrophic collection of powers yet brought to bear on the country because of its 2022 invasion of Ukraine. To begin with, it would allow the U.S. to impose massive, targeted tariffs on imported goods from the leading five countries that buy Russian oil or gas and enable sanctions evasion, based on the most recent 12-month period preceding the date of the enactment of the act. As of today, the top five individual countries are: China, India, Turkey, Brazil, and Azerbaijan. Having said that, the EU as a group would feature in fourth place as a collective, as it remains the largest global buyer of Russian liquefied natural gas (LNG) at 49% of its total LNG exports and still takes 32% of its remaining pipeline gas via exemptions for countries including Hungary and Slovakia. However, the EU is committed to ending all imports of Russian LNG by January 2027, natural gas by September 2027, and crude oil by December 2027. More specifically, the bill would impose duties of up to 100% of the value of all goods from the worst five offenders, with similar taxes being applied to countries judged to have facilitated Russian oil sanctions evasion. The law would additionally prohibit any new U.S. investment in Russia’s energy sector and ban exports of U.S. energy products to Russia within 30 days of enactment. Moreover, tariffs of up to 500% would be applied to all goods imported directly from Russia, including oil, natural gas, LNG, petroleum products and coal. Echoing the EU’s ongoing moves against Russia’s shadow fleet, the Lindsey O. Graham Sanctioning Russia and Iran Act of 2026 would seek to identify foreign vessels used to transport Russian-origin crude oil, uranium, natural gas, LNG, petroleum products or coal as ‘blocked property’ (frozen assets) if they lack correct maritime insurance or evade compliance with price caps established by the Price Cap Coalition or the U.S.
At a recent Atlantic Council Eurasia Center forum, former Russian Federation officials said increased oil sanctions could tip Russia's economy into crisis. Ex-prime minister Mikhail Kasyanov added that: “Mr Putin will face a big problem by the end of this year […] This is a good period of creating, I would say, coordinated pressure on Putin on all sides: Ukraine, the West, and of course, growing problems in Russia.” Indeed, in the first few months of the war, Russia was making much more from its oil and gas exports than it had for a long time before the invasion, due to the spike in prices, analysed in full in my latest book on the new global oil market order. Even for the following two or so years, the country was benefiting from its shift into a wartime economy, but this appears finally to have hit its natural limits, triggering a dangerous spiral of severe stagflation, a collapsing sovereign safety net, and a systemic domestic fuel crisis. Back in June last year, the highly respected Governor of the Central Bank of Russia (CBR), Elvira Nabiullina, declared that Russia’s ‘free resources’ were exhausted, during an address at the St. Petersburg International Economic Forum. This assessment highlighted a critical depletion of labour, manufacturing capacity, and National Wealth Fund assets, leading to a projected economic stall. Subsequently, the CBR slashed its 2026 GDP growth forecast down to 0-1% (with the Ministry of Economic Development projecting just 0.4%). Official data from Rosstat revealed the economy contracted by 0.2% in the first part of the year, breaking a multi-quarter streak of wartime growth. Meanwhile, Russia’s National Wealth Fund (its sovereign rainy-day cushion) has seen its liquid assets plummet from 6.5% of GDP down to just 1.8%. This bleak backdrop is not an ideal one for a likely widening of conscription to be announced after the nationwide legislative and regional elections from 18 to 20 September 2026 -- the first major parliamentary vote held in Russia since the full-scale invasion of Ukraine began. “Putin will wait until after these have taken place to announce his plan to boost numbers [of soldiers] at the front, and if this does include, as many expect, a widening of conscription, then the anti-war feeling already present in the cities could spread quickly,” a senior source who works closely with the EU’s security complex exclusively told OilPrice.com last week.
By Simon Watkins for Oilprice.com
