Since Russia’s full-scale invasion of Ukraine in February 2022, the conflict has evolved beyond traditional battlefields into a protracted economic war. Ukraine, facing a numerically superior adversary, has leveraged innovative asymmetric strategies – including drone strikes, naval operations, and cyber elements – to target Russia’s economic vulnerabilities.
These efforts, amplified by Western sanctions, have inflicted measurable damage on Russia’s war-sustaining infrastructure, particularly its energy sector. While Russia’s economy has demonstrated short-term resilience through massive military spending, the cumulative pressure is mounting, revealing cracks in its long-term sustainability.
Russia’s oil and gas sector, which accounts for roughly 40% of federal budget revenues, has become a prime target for Ukrainian forces. Ukraine has intensified long-range drone attacks on refineries and terminals, disrupting operations and exposing the fragility of Russia’s energy-dependent economy.
In August 2025 alone, strikes on 10 major refineries – including Lukoil’s Volgograd plant, Rosneft’s Ryazan facility, and sites in Rostov, Samara, Saratov, and Krasnodar – knocked out approximately 20% of Russia’s refining capacity, equivalent to 1.5 million barrels per day. Additional hits on the Druzhba pipeline’s pumping station in Tambov and Novatek’s Ust-Luga export terminal have compounded the damage, halting flows to European markets and forcing Russia to reroute supplies.
These attacks have triggered widespread fuel shortages, with motorists in occupied Crimea, southern Russia, and even the Far East facing long queues and empty pumps. Gasoline prices have surged to record highs, particularly for A-95 grade fuel, amid peak seasonal demand from tourism and agriculture.
In response, Russia tightened its gasoline export ban in July 2025 to prioritize domestic needs, but the disruptions have persisted, leading to estimated economic losses of $74.1 billion from refinery damage alone. These strikes are strategically timed to undermine Putin’s war economy by raising domestic costs and straining military logistics.
From a Russian perspective, these incidents are portrayed as temporary setbacks, with state media emphasizing rapid repairs and alternative supply chains. Up to 13% of refining capacity remains offline, exacerbating inflation and consumer discontent. Ukrainian officials view this as a direct hit on Russia’s ability to fund the war, given that oil and gas exports finance a 25% increase in defense spending for 2025.
While Ukraine’s direct actions inflict immediate pain, Western sanctions – imposed by the US, EU, and allies – provide the broader framework for economic isolation. These measures target Russia’s financial system, energy exports and military-industrial complex, aiming to deprive Moscow of the resources needed to sustain aggression. By mid-2025, sanctions have deprived Russia of at least $450 billion in potential war funds since February 2022. The EU’s sanctions, in particular, have constrained Russia’s access to global markets, with oil and gas revenues declining after the 2022 price cap.
Russia’s economy has shown resilience, with GDP growth of 3.6% in 2023 and 4.1% in 2024, largely fueled by wartime fiscal stimulus and a pivot to Asian markets like China and India. High oil prices in 2022-2023 offset some losses, and capital controls prevented massive outflows. However, this growth is “of the wrong kind,” reliant on defense spending that now exceeds 6% of GDP – rivaling Soviet-era levels – and cannibalizing civilian sectors like healthcare and education.
Long-term implications are dire: sanctions have limited access to critical technologies, exacerbating labor shortages (projected at 2.4 million workers by 2030) and brain drain. Inflation remains stubborn at 9.52%, driven by rising wages and import substitution efforts. Economy’s adaptability – drawing on lessons from 2014 sanctions – has blunted immediate collapse, but highlighted a “mortgaged future,” with depleted reserves and overdependence on hydrocarbons.
Ukraine’s naval drones have transformed the Black Sea into a contested zone, eroding Russia’s maritime superiority and indirectly hampering its export economy. Unmanned surface vehicles (USVs) have sunk or damaged around 40% of the Black Sea Fleet, including high-profile losses like the cruiser “Moskva,” corvette “Ivanovets,” and landing ships “Caesar Kunikov” and “Sergey Kotov.” These operations, evolving from defensive to offensive phases, have forced Russia to relocate ships from Sevastopol to eastern ports, isolating Crimea and disrupting amphibious capabilities.
Economically, this has implications for Russia’s grain and energy exports, which rely on secure Black Sea routes. The campaign’s low-cost model – USVs at $10,000 or less – highlights Ukraine’s innovation, commoditizing naval warfare and challenging Russia’s high-value assets. Russian countermeasures, including aerial patrols and electronic warfare, have been partially effective, but Ukraine’s adaptations – such as arming drones with missiles – have maintained pressure. From Moscow’s viewpoint, the fleet remains operational for limited tasks, but there is a strategic retreat that undermines Russia’s regional influence and trade security.
The war has hollowed out Russia’s economy from within. Military spending, now over 40% of the budget, has driven growth but at the expense of productivity and civilian welfare. Labor shortages, fueled by mobilization and emigration, have pushed wages up 17.8% nominally in 2024, contributing to inflation and reduced investment in non-defense sectors. Payments to soldiers and families – equaling 1.5% of GDP – have boosted consumption in poor regions but represent “deathonomics” that could collapse post-war.
Russian analyses emphasize resilience through “authoritarian friend-shoring” with China and import substitution, claiming the economy is “advancing” despite sanctions. However, this masks stagnation, with predictions of a slowdown to below pre-war averages and potential recession if military stimulus ends.
Russia’s wartime economy is often described as a “sugar high” heading toward a hangover, with growth tied to unsustainable defense outlays. Pro-Russian viewpoints highlight diversification (43% of GDP non-energy/defense) and trade pivots, asserting sanctions have failed to collapse the system. But illusion of Russia’s strength hides deep structural weaknesses, including technological isolation and demographic decline, which will intensify post-conflict. Russia is mortgaging its future for short-term survival.
Ukraine’s multifaceted approach – combining direct strikes with sanction-enabled isolation – has effectively eroded Russia’s economic base, forcing Moscow to confront rising costs and vulnerabilities. While Russia’s resilience has prolonged the conflict, the war’s toll, estimated at billions in losses and over a million casualties, underscores the unsustainability of its strategy.
By targeting energy and naval assets, Ukraine not only disrupts military operations but also amplifies global economic pressures, potentially paving the way for negotiations on Kyiv’s terms. As the conflict enters its fourth year, these tactics highlight how a smaller nation can leverage innovation to challenge a superpower’s economic might.
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