European Security — 2026-07-22

Ukrainian Drone Strikes Push Russia Into Fuel Crisis as Refinery Output Collapses 25 Percent

BLUFSustained refinery attrition very likely locks Russia into gasoline rationing and accelerating inflation through August 2026, constraining the central bank's ability to ease monetary policy.

Sustained Ukrainian drone strikes have knocked out nearly half of Russia's 6.6 million barrel-per-day refining capacity since late February, with more than 3.1 million barrels per day still offline as of July, according to Energy Intelligence 1. Russian refining runs fell to a multidecade low of roughly 3.87 to 3.91 million barrels per day in June, a 25 percent year-on-year drop, per Energy Intelligence and Hydrocarbon Processing industry sources 12. Gasoline output fell from about 120,000 metric tons per day in March to 90,000 tons in June, leaving a shortfall against peak summer demand of at least 110,000 tons per day, Hydrocarbon Processing reported, citing industry sources who said Russia is covering the gap with 100,000 to 150,000 tons per month of imports from Belarus and new seaborne gasoline imports 2. Russia's central bank reported June inflation accelerated to a 10.6 percent seasonally adjusted annualized rate, up from 2 percent in May, and Meduza reported analysts surveyed by the bank in July raised their year-end inflation forecast to 6.2 percent and their key-rate forecast to 14.5 percent for 2026 3.

Analysis
Refining losses of this scale very likely deepen gasoline rationing and inflation pressure through the July 24 central bank meeting and into August, since Belarusian and seaborne import substitution covers only a fraction of the shortfall and repeated strikes on the same facilities constrain repairs. Moderate confidence reflects a primary trade report corroborated by three distinct secondary outlets rather than a single wire being echoed, though independent data on actual import volumes and repair timelines is unavailable. Losses have now translated into a measurable inflation shock, with the bank's own survey panel raising year-end forecasts. The shock could also reflect two years of unchecked wartime fiscal overheating rather than the drone campaign alone. The central bank remains caught between cutting rates to ease record corporate debt and holding firm against accelerating inflation expectations, a tension Putin has so far resolved by holding, and continued strike intensification would push the bank toward holding or tightening guidance on borrowing costs.

4 sources

Russia's Downstream Crisis Ripples Through Global Markets - Energy Intelligence
Russian gasoline output down 25% so far in June after drone attacks on refineries - Hydrocarbon Processing
How much damage can Russia's fuel crisis do to the economy? - Meduza
Ukrainian Drone Attacks on Oil Refineries Plunge Russia Into a Summer Fuel Crisis - Associated Press (U.S. News)