Another Russian Oil Refinery Hit By Ukrainian Kamikaze Drones

Ukrainian military planners have been ramping up Kamikaze drone strikes against the Russian energy industrial complex this week, including an overnight attack damaging an oil refinery as Western sanctions fail to crush Putin's oil-rich economy that funds the "special military operation" in Ukraine. This comes despite the US publicly telling the Ukrainians to stop attacking Russian refineries for fear Brent crude prices could spike and worsen the inflation storm in the US ahead of the presidential elections in the fall. 

Bloomberg reports an oil refinery in the Sloviansk-on-Kuban region was hit by a swarm of Ukranian suicide drones on Saturday morning. 

State-run news agency Tass said the refinery strike caused damage and a fire, partially suspending operations at the crude processing facility.  

"The work of the (Slavyansk) plant has been partially suspended. Exactly 10 UAVs (drones) flew directly into the plant, there was a strong fire. There may be hidden damage," Eduard Trudnev, the security director at Slavyansk ECO Group, which operates the plant, was cited as saying by TASS.

On Telegram, Roman Siniagovskyi, a local government official in Slavyansk, said drones struck a distillation tower and storage tank. 

Russia's defense ministry said 66 drones were intercepted over the Krasnodar region, located in the southern part of the country. 

Earlier this week, Ukraine began ramping up drone attacks on Russian refineries after the Biden administration signed a new military aid package worth billions of dollars. 

Ukraine's strategy in the war has shifted to attacking Moscow's oil revenues by precision-guided strikes on the country's energy infrastructure. So far, drone strikes have knocked out about 10% of Russia's oil refinery capacity. This comes as Western sanctions fail to crush Putin's oil-rich economy funding war efforts. 

Aslak Berg, Research Fellow at the Centre for European Reform, recently told Euronews:

"Since Russian import capacity for refined oil products is limited in the short run, since they're set up to export, it's actually a fairly clever way of causing disruption in the Russian market with limited impact globally." 

Berg continued, 

"The Ukrainians have been hitting refineries, not Russian crude oil production or export facilities. This causes problems for Russia's domestic market for refined products, but for the rest of the world, a decline in Russia's exports of products will be compensated for by increased exports of crude oil." 

Meanwhile, Biden's top officials have pleaded with Kyiv to stop attacks on Russia's energy infrastructure because of the fears that turmoil in crude markets would send pump prices in the US higher ahead of the presidential elections in November.

UBS Global Wealth Management Giovanni Staunovo said that if the Ukrainian drone attacks are limited to Russian oil refineries, then this won't cause great disruptions in the global market. 

However, it could only be a matter of time before Ukranians start attacking Russia's energy-exporting capabilities. If that's the case, expect an even higher war risk premium to be baked into Brent crude prices. 

The Biden administration has a colossal mess on their hands as stagflation emerges. And don't forget about the mess in the Middle East.