Fuel crisis hits almost all of Russia after Ukrainian attacks

Almost all of Russia's 83 regions face gasoline shortages or supply disruptions, according to a CNN analysis. In many of them, gas stations have started to adopt rationing measures, as the Russian government races to contain an intense campaign of drone attacks from Ukraine against the country's refineries.

The fuel crisis, which initially worsened in Crimea, a territory under Russian control, and led to the declaration of a state of emergency and a total ban on the sale of fuel to individuals on June 21, is now spreading throughout Russian territory.

CNN analyzed official statements from mayors and regional governors, as well as national and local press reports, and found that more than 50 of the internationally recognized regions have officially reported supply problems.

In addition, there are unofficial reports of interruptions in almost all the others. At least three regions, including Irkutsk and Transbaikal in eastern Russia, have declared a "reinforced state of alert", a level just below a state of emergency.

"Currently, we observe a certain shortage, although it is not critical," said President Vladimir Putin during a long interview with state television on Sunday (5). The appearance appeared to be part of a hastily organized communications campaign to reassure the population and convey the message that the situation was under control.

Perhaps less reassuring was his statement that the most urgent task was to "rapidly and significantly increase the production of air defense systems", a clear sign of Russia's growing vulnerability to Ukrainian attacks.

This is not the first time that Russia has faced widespread fuel shortages. In August last year, an intensification of Ukrainian attacks affected supplies in several regions, but experts say the current situation is much more serious.

"The main difference is in the scale and persistence of the attacks," said Sumit Ritolia, chief supply and refining modeling analyst at Kpler, a company specializing in commodities market intelligence. Another factor to consider, he added, is that repair work following last year's campaign of attacks is still ongoing.

According to Ritolia, Russian gasoline production is currently about 20% below domestic demand due to the Ukrainian attacks. He also estimates that refinery processing levels, that is, the volume of refined crude oil, are at the lowest levels in recent years.

"In this race between those who do the repairs and those who carry out the attacks, the balance is tipping," said Sergey Vakulenko, who worked for 25 years in the Russian oil and gas sector and is currently a senior researcher at the Carnegie Russia Eurasia Center, a think tank based in Berlin.

Vakulenko said that Ukraine had not only increased the frequency of attacks in recent weeks, but also increased the number of drones used in offensives. "The resilience of the Russian oil industry is being pushed dangerously to the limit," he wrote in a recent article.

Source of discontent
The resilience of the Russian population is also being put to the test.

Gas stations across the country have started to impose limits on gasoline purchases, and websites have emerged that monitor fuel availability to guide drivers on the best places to fill up, according to a CNN analysis.

As the queues of vehicles grow, so does the tension.

A video posted on social media last week shows two women in Moscow exchanging insults during an argument over the order of the gas queue. "Here, service is on a first-come, first-serve basis", shouts one of them, calling the other an "idiot".

In the southern Russian city of Krasnodar, close to Crimea, another video shows a man filling a container in the back of his vehicle while two women scold him for breaking the rules.

Several Russian regions have banned the use of large-capacity jerry cans, around five gallons (approximately 19 liters), to prevent excessive fuel storage.

It is impossible to measure the extent of public discontent, but Vladimir Putin himself showed enough concern when he warned, in an interview given on Sunday (5) to state media, that the attacks were aimed at "creating uncertainty or, better still, causing a rupture in Russian society".

The authorities are also being forced to take stricter measures against those trying to profit from the crisis.

In the Siberian city of Irkutsk, police on Monday (6) fined four people accused of reselling fuel on the black market at inflated prices, according to the region's Interior Ministry.

In one case, a 20-year-old man was caught in a covert operation after anti-corruption agents posed as buyers. He allegedly sold the fuel for four times the national average.

The governor of Irkutsk, one of the most affected regions, decreed a "reinforced state of alert" to stabilize the situation and banned the sale of fuel in gallons to anyone who does not belong to the emergency services.

"It's a kind of double-edged sword: it affects both the mood of the population and inflation," said Alexander Kolyandr, senior researcher at the Center for European Policy Analysis (CEPA), commenting on the fuel shortage.

Anxiety increases in Moscow
Russian media reported that people are waiting up to 18 hours in queues for gas.

On the internet, memes have multiplied, including one that shows people setting up tables with drinks and shishas next to their parked vehicles.

Even in Moscow there are unusual scenes of cars and trucks forming queues in front of gas stations, where some drivers wait for hours with no guarantee of being able to fill their tank.

Concern in the Russian capital increased following the drone attack carried out by Ukraine on June 18, which was the largest since the start of the large-scale invasion of Russia and the second aimed at Moscow's Kapotnya refinery in less than a week.

An interception attempt generated a large explosion that ripped the roof off a fuel tank.

Over the past week, some drivers in Moscow told CNN that they spend days driving around the city looking for gasoline.

A 27-year-old driver, who preferred not to identify herself, said this Monday that she had been queuing at a gas station for two hours. She asked the employee if there was rationing in sales and received the answer that the information was confidential, although shortly afterwards the worker revealed that each station decides on its own how to manage the situation.

On June 23, an employee at a gas station in central Moscow told CNN that tankers continued to arrive and refuel as planned. She classified the commotion and queues at gas stations as "totally unnecessary", attributing the increase in waiting to panic buying.

However, Carnegie's Vakulenko believes that Moscow's supply problems are real, not just due to the June attacks but also the multiple impacts suffered by refineries in neighboring regions that supply fuel to the capital.

Ritolia, from Kpler, highlights that these interruptions "occur at the beginning of the high demand season" in the country, which normally extends until September, when children return to school.

Russia's options narrow
The governor of the Leningrad region, Alexander Drozdenko, summed up the situation accurately on his Telegram channel: "There is no reason for panic. But there is no reason for excessive optimism either."

Russia still has the tools to confront this crisis, but experts told CNN that its options are becoming increasingly limited.

On Sunday, Putin listed the measures that the government was adopting: from reducing scheduled maintenance deadlines at refineries to the possibility of banning diesel exports and increasing imports.

On Wednesday (1), Reuters reported, citing two sources, that Russia had started buying gasoline from India. This is a surprising change in an already consolidated dynamic, in which Indian refineries function as an escape valve to insert Russian oil into world markets amid international sanctions.

According to the economic newspaper Kommersant this week, Russia may also be considering allowing the sale of lower quality gasoline to increase supply, a measure that poses risks to consumers.

"New cars don't run well on low-quality gasoline," said analyst Kolyandr. "So, whatever the perspective, it is the population that ends up paying the consequences."

Communication is also crucial, given the impact caused by panic buying.

If the government can stabilize supplies and reassure the population, a "normalization" could occur in which people realize that the shortage is not as severe as they feared and reduce their purchases, said Janis Kluge, senior research associate at the German Institute for International and Security Affairs.

Deputy Prime Minister Alexander Novak said on Wednesday that the Russian market is "fully supplied" with both diesel and gasoline.

However, if Ukraine's attacks continue at their current pace, it is possible that this normalization will not happen. Furthermore, the economic risks arising from higher inflation and a reduction in consumption caused by fuel shortages arise at the worst possible time.

Oil prices, which soared during the first months of the war between the United States, Israel and Iran, are now falling, closing a window of opportunity for Russia to use increased export revenues to ease its growing budget deficit.

Meanwhile, the Russian economy is already stagnating, despite defense spending continuing to rise.

At Wednesday's interest rate meeting, Russia's Central Bank cut its extremely high rates by just a quarter of a percentage point, arguing that inflationary pressures were rising again due in part to "a temporary contraction in vehicle fuel production."

However, considering that this week Putin once again reaffirmed his claims over both the Ukrainian region of Donbass and "Novorossiya" (a term he uses to refer to the Ukrainian regions of Zaporizhzhia and Kherson), Kolyandr considers that the most likely scenario in the short term is a military escalation.

"For the Ukrainian side, it makes perfect sense to intensify actions, since the strategy is working; on the Russian side, the sooner they intensify the conflict, the sooner [...] they could resolve the situation, as money is running out and it is likely that public opinion's patience is also running out," he said.

Source: CNN