How Ukrainian Attacks Hit Russia's Oil Sector – And Why Putin Is Now Taking Revenge on Germany [premium]

The ongoing conflict between Ukraine and Russia has evolved into a critical battleground over energy resources, with Kyiv strategically targeting Moscow's oil sector. As Russia benefits significantly from elevated global prices for oil and gas, Ukraine has intensified its drone strikes aimed at disrupting Russia's oil export infrastructure, particularly in key Baltic Sea ports like Primorsk and Ust-Luga.

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We are continuing this work in April.

This confrontation is a race against time, with both sides seeking to leverage the situation. Russia's state revenues are expected to surge in April, as a 73% price hike in March begins to be reflected in tax collections. These oil taxes constitute a substantial portion, roughly a quarter, of Russia's overall budget, directly funding its war efforts.

Conversely, Ukrainian President Volodymyr Zelenskyy claims that these attacks have inflicted significant financial damage on Russia, estimating revenue losses of at least $2.3 billion in March alone. Ukraine is committed to continuing these operations in April.

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The Russian state receives its revenues when the oil is extracted, not when it leaves the country.

However, the effectiveness of these attacks in crippling Russia's budget is complex due to Russia's tax system. Unlike previous systems based on export volume, the current model taxes oil based on domestic extraction and average monthly prices in export ports. This means Russia earns revenue upon extraction, not export. A study by Sergey Vakulenko, a senior fellow at the Carnegie Russia Eurasia Center and an expert on the Russian oil industry, suggests that while physical export volumes have decreased due to Ukrainian strikes, the rise in oil prices has more than offset these losses. The daily export volume shipped via Russian ports reportedly fell from 5.2 million barrels to 3.5 million barrels between late March and early April, resulting in a loss of approximately 30 million barrels in sales during that period. From a German perspective, as reported by Die Presse, the situation is viewed through the lens of geopolitical stability and economic impact. Germany, heavily reliant on energy imports and having recently transitioned away from Russian fossil fuels, closely monitors any disruption to global energy markets. The article's focus on the financial implications for Russia and Ukraine's efforts to counter them highlights the intricate connection between the war, global energy prices, and the economic policies of nations like Germany, which are seeking to navigate these turbulent times while supporting Ukraine and ensuring their own energy security.

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Although the Ukrainian attacks have led to a noticeable decline in the physical volume of Russian oil exports, this has been more than offset by the price increase.