Russia is about to make an unexpected decision, after Ukraine's drone attacks that hit at least 10 refineries

The Russian monopoly of Transneft oil pipelines has warned the manufacturing companies that they may have to reduce their production following Ukraine Drone attacks on critical export ports and refineries, three sources in the industry on Tuesday for the Reuters news agency.

In a statement published on his website, Transneft described Reuters's news as “false” and part of the “Information War” of the West against Russia.

Since August, Kiev has intensified its attacks on Russian energy assets from, in an attempt to prevent Moscow's war efforts in Ukraine and reduce Kremlin's income, in the context of ending the conflict through peace negotiations have reached an impasse.

The main source of Russia's financing

Petroleum and natural gas revenues have been between one third and a half of the total revenues of Russia's federal budget in the last decade, making this sector the most important source of government funding.

Ukrainian drones hit at least 10 refineries-reducing Russia's refining capacity with almost a fifth at one time-and damaged the main ports in the Baltic Sea, Ust-Luga and Primorsk, Ukrainian military officials and sources of the Russian industry said.

The Russian authorities have not publicly commented on the extent of the damages or their impact on production and exports.

However, Transneoft, which manages over 80% of the total oil extracted in Russia, has restricted in recent days the ability of oil companies to store crude oil, two sources from the industry close to Russian oil companies told Reuters.

Transneft also warned the producers that they may have to accept less oil if the infrastructure suffers additional damages, the two sources said.

Attacks could force Russia, which holds a 9% quota in terms of world oil production, eventually reduces production, said the two sources and a third source familiar with oil pumping operations.

The three sources demanded the protection of anonymity, against the background of the sensitivity of the problem.

“The emergence of such false news with reference to some anonymous sources in the Russian fuel and energy complex causes damage to the Pao Transneft image,” Transneoft said in his statement.

“This can only be caused by attempts to destabilize the situation during the information war triggered by the West against the Russian Federation,” the company added.

“The sanctions that work the fastest”

The West imposed successive sanctions to Russia because of the invadiucraine, focusing in particular on the oil and natural gas sector. Moscow, however, managed to redirect most oil exports to Asia, where India and China are the main buyers.

Last week, Ukrainian drones hit, for the first time since the beginning of the war, Russia's largest oil port, Primorsk, temporarily forcing the closing of the operations there.

The Primorsk port has the ability to export over 1 million barrels of oil per day, or more than 10% of Russia's total oil production.

Ukrainian President Volodimir Zelenski said that the attacks caused significant damage and qualified attacks on Russian oil infrastructure as “fastest -working sanctions.”

Reuters mentions that he could not verify the magnitude of the damages caused by Ukrainian attacks.

Unlike Saudi Arabia, the main producer of OPEC, Russia does not have a significant oil storage capacity.

The port of Primorsk partially resumed its operations on Saturday, although it is not clear how long the repairs will last, the two sources said.

Russia had already lost some of the oil export capacity following another drone attack that targeted the UNT-Luga oil terminal in the Baltic Sea, according to industry sources.

The organization of oil exporting countries and its allies, including Russia – a group known as OPEC+ – have increased crude production since April, after years of discounts meant to support the oil market.

According to the latest OPEC+Agreement, the Russian oil production share will increase to 9.449 million barrels a day this month, from 9.344 million barrels a day in August.

“Russia's ability to increase oil production is now threatened due to the limited storage capacity,” said the American bank JP Morgan, in a note.

Meanwhile, Goldman Sachs wrote that refinery interruptions will also affect the production due to the congestion of crude storage against the background of the reduced operation.

Both banks estimate that production will only decrease in a modest manner, because Asian buyers have still appeal to Russian oil.