Ukraine's drones paralyze Russia's economy and Putin has to import fuel for the first time. Is the regime in the Ukraine war beginning to falter?
Moscow/Kyiv – The four-year stalemate in Ukraine has been abruptly broken. For the first time in modern history, Russia must import fuel to keep its economy and society afloat. The speed of events is extraordinary and indicates a significant shift in the global balance of power, dramatically improving Europe's strategic position.
Content Partnership
This article by Ambrose Evans-Pritchard was produced in cooperation with telegraph.co.uk.
The Ukrainian drone unit "Magyar's Birds" has hit 30 oil and gas tankers in the Black Sea since Wednesday. The unit claims to have attacked 147 Russia-linked ships within ten days. This has effectively blocked the Sea of Azov and further tightened the blockade of the Crimea peninsula. The Sea of Azov lies east between the Crimean Peninsula and Russia and belongs to the Black Sea.
The Russian economy is increasingly wavering under the strain of the Ukraine war. © MAXIM SHIPENKOV / POOL / AFP
Ukraine is able to attack refineries from St. Petersburg to Siberia and cripple Russia's largest plant around 2,250 kilometers inland in Omsk. The range of Ukrainian forces has increased fivefold since early last year. "Russia no longer has a secure rear area, and distance no longer provides protection," said Sergiy Makogon from the Centre for European Policy Analysis. Ukraine's counterstrike recalls the final months of World War I, when Allied tanks broke through the trenches and exploited the already far-advanced collapse of the German home front.
Russia's economy under pressure in Ukraine war – fuel export ban
"The Ukrainians have figured out how to target the cracking units of the plants," said Prof. Alan Riley, energy expert at the Atlantic Council and adviser to the Ukrainian military. "Once you disable the most complex parts of a refinery, spare parts must mostly come from China. That can take a year or 18 months. Russia's air defense is focused on Moscow and St. Petersburg and is designed to intercept missiles, not mass drone attacks. Refineries across the country are essentially unprotected," he said.
Private Russian companies are panicking and stringing wire mesh over their facilities – every man for himself. "The attacks on coastal terminals aim to cut off Russia's export revenues, the strikes against inland refineries are intended to bring the economy to a standstill and undermine Russia's ability to wage war. Vladimir Putin is in extremely serious trouble," said Prof. Riley.
Show content
S&P Global Energy estimates that 60 percent of Russia's refinery capacity may now be offline, reducing supply by four million barrels per day in the week to June 10. The volumes are enormous and have immediate consequences for the global economy. Russia was still the world's second-largest exporter of refined fuels earlier this year. Now the country has imposed an export ban and must import fuel from Kazakhstan and India on an extremely tight global market.
Crude oil prices are not the relevant indicator of stress in the international energy system today. The problem has shifted to the critical distillates – gasoline, diesel, and kerosene – that people actually consume. The diesel "crack spread" in Rotterdam is near a record high at $70 a barrel, compared to a normal $10-$20. Mykhailo Fedorov, the outgoing Ukrainian defense minister, had driven this creative drone warfare before being sacked this week in another episode of wearying cronyism in the corrupt environment of Volodymyr Zelenskyy.
Refinery subsidies sextupled: Kremlin fights public discontent
His departure will not derail the successful strategy. Russia's energy crisis is exacerbating a long-simmering economic crisis. Finance ministry data show that adjusted oil and gas budget revenues fell by 23 percent year-on-year in January-June despite the Iran war. They are now in free fall. The Kremlin has sextupled refinery subsidies to keep fuel prices low and contain already simmering public discontent. Queues at gas stations have now stretched to up to twelve hours and fuel is rationed to 20 liters per person in some cities. The Duma has suspended the legal budget code. Fiscal discipline is collapsing.
The Kremlin's liquid reserves are exhausted. The country can only borrow with difficulty on capital markets. China has refused to allow the sale of ruble-denominated government bonds on Chinese platforms. Russian banks are being pressured to finance the military-industrial complex and plug the budget deficit via short-term loans.
Secret Kremlin document warns of banking crisis in Russia in Ukraine war
Reuters reports on a leaked secret document titled "On the Probability of a Banking Crisis in Russia in 2026" that warns the banking system is buckling beneath a façade of deceptive stability. Russia's internet controls have not suppressed rumors of an impending confiscation of bank deposits – exactly what happened to Soviet Sberbank deposits in 1990. It is dangerous for a regime when such feverish suspicions take hold.
On the military level, Putin is running out of human drone fodder. He has deployed more soldiers in a nine-month battle for the small town of Kostiantynivka in Donbas than the entire British army – so far without clear success. The Center for Strategic and International Studies estimates Russia has suffered 1.4 million casualties. Putin is losing 30,000-35,000 soldiers per month in the death zone. This also strains the budget. Compensation for a fallen soldier's family is £90,000 (about €106,000), a lost leg costs £28,000 (about €33,000). Last year a wave of recruits signed up to secure the enlistment bonus – expecting comfortable barracks service – when Donald Trump still seemed eager to betray Ukraine.
"There are no more fools for money" – Recruitment for Ukraine war collapses
The online investigative portal Verstka, run by Russian exile journalists with contacts in Russia, reports that recruitment has since collapsed. "It's like we've run out of people. There are no more fools for money," said one soldier, claiming his regiment's units are at less than 40 percent of authorized strength. Another told Verstka that the 2026 cohort is "not combat-capable" and often forcibly conscripted.
"Some are taken from prison, others from the street, literally homeless people, already so old and sick they can barely stand." They receive three days of "training" and are sent straight to the death zone. The mood is rebellious. "It's already hatred, but not yet anger, and that's what it's heading toward. Honestly, I'm afraid for the country," he said.
Russian economy isolated, Trump bored: Putin's options in Ukraine war dwindle
Putin faces a choice between military failure or a general mobilization that would be politically explosive. Verstka reports the army is already preparing camps to train tens of thousands simultaneously. "Everyone knows it's a meat grinder. If Putin resorts to mobilization, half a million people could take to the streets," said Prof. Riley. "You could see a situation like 1917, when Russian troops refused to go to the front."
The status quo is equally dangerous. Putin's hopes of splitting the European NATO or seducing Trump have been dashed. The US Senate wants to impose draconian secondary sanctions on buyers of Russian hydrocarbons. Trump is bored and no longer sees Putin as a winner. The "spirit of Anchorage" is a sick joke in Moscow today. These rapidly unfolding events are pregnant with risks. Putin's reflex is to escalate when cornered. However, if he tried to launch a hybrid attack on the 60-mile (approx. 97 km) Suwałki Corridor in Lithuania, as some fear, he would today face Germany's powerful 45th Panzer Brigade.
The developments are also full of opportunities. If the Russian invasion of Ukraine ends in a pathetic whimper, it would be an unmistakable defeat for the Sino-Russian axis of autocrats and force opportunistic onlookers in the Global South to rethink their assumptions. It would be a powerful impulse for a resurgent Europe, further devalue Trump's bluster, and restore transatlantic relations to a dignified balance. The West might yet survive.
