Sanctions, Drone Strikes, And Market Shifts Hit Russia’s Energy Sector

On October 24, the Russian Federation’s Ryazan oil facility was forced to halt its crude distillation after Ukraine launched a drone strike. The refinery, Russia’s fourth-largest, is a major supplier to Moscow. Other energy facilities in cities across Russia, such as Belgorod, Sochi, Volgograd, Orenburg, Samara, Dagestan, and Rostov, have also been targeted by Ukrainian drone strikes. Due to these drone attacks, it is estimated that the Russian Federation’s oil refining capacity has now been reduced by 20%.

Ukraine’s operation on Ryazan marked its twelfth strike on Russian oil refineries in October alone, where the Ukrainians are seeking to disrupt Russian fuel production and exports. Meanwhile, as the Ukrainians conducted the attack on Ryazan, the European Union, the United Kingdom, and the United States announced new sanctions packages targeting Russia’s energy industry. These events could be seen as a new set of attempts to pressure Russia to bring an end to the full-scale military incursion into Ukraine.

Western Sanctions On Russia’s Energy Sector

Throughout the Russian invasion of Ukraine, the international community has sought methods to punish the Russian Federation for starting the war. This has ranged from suspending Russia from various international organizations, such as the Parliamentary Assembly of the Council of Europe and the United Nations Human Rights Council, to freezing Russian assets and removing several Russian banks from the SWIFT international financial messaging system. Many businesses suspended their operations in Russia, and several countries around the world put a price cap on Russian oil.

These penalties, however, have not brought an end to Russia’s war in Ukraine. Instead, the Russian Federation has continued its full-scale invasion.

Members of the international community have now increased their efforts toward a different approach to pressure Russia. For example, the EU, the UK, and the U.S. have imposed sanctions on Russia’s energy industry. These countries have argued that the Russian Federation uses revenue from its energy market to purchase weapons and other equipment for the ongoing invasion of Ukraine. Additionally, sales made from Russian energy exports have helped the Russian economy remain stable, despite international sanctions imposed on Russian companies and businesses. As a result, the EU, the UK, and the U.S. are hopeful that implementing new sanctions on Russia’s energy market will force Russia to end the war in Ukraine.

To date, the EU has introduced 19 sanction packages on Russia since the start of the full-scale invasion in February 2022. The penalties target Russian energy, finance, and defense companies. Additionally, the EU has imposed sanctions on non-Russian companies operating as third-party intermediaries that purchase and sell Russian crude. Finally, the latest EU sanctions target the shadow fleet, a clandestine network of oil tankers and other vessels that help Russia evade Western sanctions by selling Russian energy. The EU’s new sanctions package on Russia’s energy sector, which was announced on October 23, targeted Russian companies such as Rosneft and Gazprom Neft, as well as third-party entities in China and the United Arab Emirates.

Similarly, the UK imposed new sanctions on Rosneft and Lukoil to put pressure on the Russian Federation’s energy industry. Additionally, the UK targeted Russia’s shadow fleet of oil tankers. The UK previously imposed sanctions on Gazprom Neft and Surgutneftegas in January.

Outside of the EU’s and the UK’s attempts to pressure Russia to end its war in Ukraine by targeting Russia’s energy sector, the U.S. has also imposed its own sanctions on Russia. On October 22, the United States announced sanctions on the Russian Federation’s two largest companies, Rosneft and Lukoil. Additionally, subsidiaries of Rosneft and Lukoil were targeted. The U.S. said that the new sanctions seek to “increase pressure on Russia’s energy sector and degrade the Kremlin’s ability to raise revenue for its war machine and support its weakened economy.” The U.S. under U.S. President Joe Biden and U.S. President Donald Trump has continued to impose sanctions on Russian energy companies, as well as third-party intermediaries, throughout the Russian invasion of Ukraine.

So far, attempts to pressure Russia to end its war have come to no avail. Russian President Vladimir Putin has also dismissed the effectiveness of these sanctions. But some energy experts believe that the latest penalties imposed on Russia’s energy sector by the EU, the UK, and the U.S. may have a new effect.

“The sanctions announced last week by the Trump Administration against Russian oil majors Rosneft and Lukoil were long overdue,” Dr. Benjamin L. Schmitt, Senior Fellow at the University of Pennsylvania’s Kleinman Center for Energy Policy and Perry World House, told me in an interview. “This was not only a welcome step by the Trump White House, but may well be the most significant set of energy sanctions imposed against the Russian Federation since the beginning of Moscow’s renewed invasion of Ukraine in 2022. By actively sanctioning these Russian energy majors, the Trump White House is signaling that it finally may be willing to take steps to cut off the spigot of oil revenues to the Putin regime. But time will tell how rigorously the Treasury Department will ultimately be able to enforce these measures, which will be challenging given their broad, global scope. As always in sanctions policy, the efficacy of these economic restrictions will stem from robust and tight enforcement of the measures, which are set to take full effect in the coming weeks after a wind down period. If the Trump Administration is willing to actively track and designate secondary offtakers of Russian oil – whether they be from the People’s Republic of China, India, or elsewhere – it will be a big step forward to leading the Transatlantic community in damaging Putin’s energy bankroll once and for all.”

On paper, the latest sanctions imposed by the EU, the UK, and the U.S. on Russia’s energy sector also appear to be significant. While I conducted an interview with Tina Dolbaia, an Associate Fellow at the Center for Strategic and International Studies, she told me that “75% of Russian oil exports are 1761735440 subject to U.S. sanctions.” She added that the “International Energy Agency [is] projecting a record oil surplus in 2026, [meaning] the risk of a global price spike appears limited. This gives the Trump Administration [as well as the EU and the UK] greater room to enforce sanctions” on the Russian Federation.

Ukrainian Drone Strikes On Russian Oil Refineries

The impact of sanctions on Russia’s energy market, however, has been slow to materialize. As a result, the Ukrainians have opted to take matters into their own hands to pressure Russia’s energy industry. They have done so by launching a campaign against Russian oil refineries.

Throughout 2025, the Ukrainians have launched attacks on key Russian energy sites. The Economist and the BBC estimate that the Ukrainians have hit and damaged nearly half of Russia’s refineries. The objective of these Ukrainian attacks on Russia’s energy industry is to create fuel shortages within Russia, where the Russians then have fewer resources to power vehicles and machinery used for the war in Ukraine. In addition, the Ukrainian attacks on Russia’s energy industry have sparked price hikes and the rationing of fuel within Russia.

To conduct these attacks, the Ukrainians have used unmanned aerial vehicles. These drones, such as the FP-1 “Fire Point” and AN-196 “Liutyi”, can travel hundreds of miles, enabling them to target Russian oil refineries deep within Russian territory. These UAVs also have sophisticated software to counter electronic warfare jamming, allowing the Ukrainians to orchestrate their attacks with precision. Finally, drones such as the Fire Point only cost $55,000, meaning it is inexpensive for the Ukrainians to carry out these attacks on Russia’s energy sector.

Ukrainian President Volodymyr Zelenskyy has welcomed the drone strikes. In his public address in September, the Ukrainian president said that the most effective sanctions against the Russian Federation are “the fires at Russia’s oil refineries, its terminals, [and] oil depots.” Zelenskyy added that restricting Russia’s oil industry “significantly restricts the war [in Ukraine].”

Now, as the EU, the UK, and the U.S. increase their sanctions efforts on Russia’s energy sector, Ukraine’s drone strikes may have a more damaging effect on Russia’s oil industry. If coupled with other measures, this could further pressure Russia to end its war in Ukraine.

“The Ukrainian military can help ramp up pressure against the Putin regime as these oil sanctions take effect by continuing its campaign of drone-based strikes against Russian oil storage and refining facilities on the territory of the Russian Federation,” Schmitt told me in an interview. “Even if Ukraine is unable to fully take these facilities offline permanently, the rotating impact of strikes against these key Russian facilities in Russia’s energy export network will go a long way to complement the restrictive economic measures the United States has finally put in place against the likes of Rosneft and Lukoil.”

Now, as the pressure builds on Russia’s energy industry, the Ukrainians may be gaining additional firepower to use on Russian oil refineries. According to The Economist, there are reports that the Ukrainians may be starting to use FP-5 “Flamingo” cruise missiles. These long-range missiles travel faster and twice as far as the Fire Point and Liutyi drones, meaning the Ukrainians can inflict more damage to Russian oil refineries. This would put even greater pressure on Russia’s energy sector.

Global Markets Respond To Events Surrounding Russian Energy

Finally, sanctions on Russia’s energy industry and Ukrainian attacks on Russian oil refineries have impacted global markets. According to a report shared by Yahoo Finance on October 24, global energy markets are “entering a period of renewed instability” following the announcements on new Western sanctions on Russian energy companies. The sanctions could “constrain Russia’s ability to sell crude on global markets.” Furthermore, the Yahoo Finance report stated that restrictions on Russia’s energy sector would “accelerate structural changes in global energy trade.” As a result, consumers are seeking alternative options.

For example, in a report published by the Atlantic Council on October 23, countries and companies relying on Russian crude may “increasingly turn to alternative suppliers, [thus] gradually moving away” from the Russian Federation. Similarly, members of the Organization of the Petroleum Exporting Countries could seek to increase production to offset a decline in Russian crude on the global market due to international sanctions. If this were to occur, it would further reduce Russia’s role as a global energy supplier. This would hurt Russian exports, and the Russian Federation would lose billions of dollars.

In some regards, this is already happening. On October 20, the European Council announced that it would phase out the imports of Russian natural gas by January 1, 2028. In addition, the European Council stated that imports of Russian gas would be prohibited starting on January 1, 2026. The announcement is a continuation of European policies that began when Russia launched its full-scale invasion of Ukraine in February 2022. The change have seen the EU drop its share of Russian gas imports from 45% in 2021 to 19% in 2025. These policies led the Russian Federation to lose tens of billions of dollars in revenue.

Countries outside of Europe have also begun to reduce their dependence on Russian energy exports. According to The Guardian, the penalties imposed by the EU, the UK, and the U.S. on Russia’s energy sector in October resulted in the “immediate pause of Russian oil deliveries to the biggest refineries in India.” Similarly, Russian oil deliveries were also paused to “China’s biggest state-owned oil companies.” If the Indian and Chinese energy markets continue this trend, then the Russian Federation would lose significant revenue from its energy exports.

“The key question is whether [sanctions] can meaningfully reduce Russia’s oil revenues and pressure Moscow to negotiate,” Dolbaia told me in an interview. “The measures include the threat of secondary sanctions against companies that continue to trade substantial volumes with Rosneft and Lukoil. The two largest buyers of Russian crude—China and India—will be central to determining their effectiveness. In the coming weeks and months, it will become clear whether these countries curb their purchases. India may be more inclined to do so if it secures favorable terms in its ongoing trade talks with the United States, while China is far less likely to comply. More realistically, both may leverage the sanctions to demand even deeper discounts on Russian crude. Combined with higher costs for the shadow fleet transporting sanctioned oil, this could reduce Russia’s export revenues.”

Finally, there are reports that the Russian Federation may be facing a recession. Rising inflation, higher consumer costs, and the effects of international sanctions have all contributed to a shift in the Russian economy. Should there be a global decline in demand for Russian energy exports due to international sanctions, this would further hinder the Russian economy.

Overall, it appears that the latest coordinated sanctions efforts by the EU, the UK, and the U.S. on Russia’s energy industry have sparked new conversations and strategies on how to end the Russia-Ukraine war. Previous sanctions on the Russian Federation resulted in Russia losing hundreds of billions of dollars, but they did not succeed in dissuading Russia from ending its war. Instead, the Russian Federation coordinated with its partners and third-party intermediaries to undermine the full effect of penalties imposed by the international community. This allowed the Russian invasion of Ukraine to continue.

Now, it seems that the new penalties imposed by the EU, the UK, and the U.S. may have damaging effects for Russia. It remains to be seen how the Russian Federation will respond to the latest energy sanctions, and how global markets will adjust to the new penalties on Russian energy. The new pressures on Russia’s energy industry and its economy, coupled with continued Ukrainian drone strikes on oil refineries, may just be enough to force Russia to bring an end to its full-scale military incursion in Ukraine.