Russia's oil refining down, but shortages drive up revenues anyway

Russia spent August buying gasoline from a refinery it part-owns in India, transferring it between sanctioned tankers off Egypt and unloading it at an Arctic port, because its own refineries can no longer make enough of it, the Centre for Research on Energy and Clean Air's monthly analysis of Russian fossil fuel exports, reported on September 10.

For years the world's largest exporter of refined oil products, the trade flipped and Russia imported 172,000 tonnes instead in August - more than seven times its previous post-invasion monthly high and three times the total for the whole of 2025.

Ukrainian drones have now taken out enough refining and enough port capacity to cut Russia's seaborne oil product revenue by nearly a third in a single month, to the lowest level of the war. Total fossil fuel export revenue fell 8% month on month to €604mn a day and volumes fell 7%.

But the fall in volumes has had a muted impact on revenues. The average price of Urals crude rose 23% in the month, to $69.90 a barrel against a price cap of $44.10. European gas prices have more than doubled this year and are now €80/MWh – on their way to triple what they were a year ago. CREA's own estimate is that the energy crisis touched off by the US and Israeli strikes on Iran has added about €31bn to Russia's seaborne oil and gas earnings in six months. The campaign against the refineries is working, and it is the market paying the bill, not the Kremlin.

What the drones took away

The damage is concentrated in two places: refineries and Black Sea ports.

Revenue from seaborne oil products, measured when cargoes are unloaded at their destination, fell 32% month on month to €78mn a day, the lowest since the full-scale invasion began. Volumes fell 21%. Loadings of oil products at Russian ports have now fallen for three months running and were less than half the August 2025 level.

Tuapse, Russia's fourth-largest oil product export port before the war, did not load a single cargo of products for the third consecutive month. It has been under sustained drone attack since May.

Crude took a narrower but sharper hit. Attacks in mid-August disrupted the Sheskharis terminal at Novorossiysk and crude loadings at the port fell 58% month on month. Loadings stopped entirely for nine consecutive days, the longest break since February 2022. Seaborne crude revenue fell 13%, though pipeline crude earnings rose 14% and the crude total was down 9% to €350mn a day.

CREA expects another fall in September. Refinery throughput is still depressed, jet fuel, diesel and gasoline remain under an export ban so domestic demand takes priority, and loadings are still sliding.

Russia starts importing fuel refined from its own crude

Stuck between a rock of domestic demand and the hard place of non-stop Ukrainian drone strikes, Russia has turned to the friendly nations for help. Between 2023 and 2025 Russia imported under 5,000 tonnes of refined products a month on average, and in 13 of those 36 months no cargo arrived at all. In August it took 172,000 tonnes, worth €114mn. Gasoline was 74% of it, against 6% over the previous three years, at a time when gasoline exports are banned.

India supplied 70% of the total and 94% of the gasoline: 120,000 tonnes worth €78mn, all of it loaded at the Vadinar refinery, sold by the EU-sanctioned Nayara Energy and bought by Rosneft. Rosneft owns 49.13% of Nayara. Vadinar took 100% of its crude from Russia in the first eight months of 2026, up from 81% across 2025.

So, Russia is paying a refinery it part-owns to turn its own crude into fuel it can no longer make at home, and then shipping it back. Every cargo from Vadinar was transferred ship to ship at the Damietta lightering zone off Egypt before unloading at the Arctic port of Beloe More. Everyone moved on a sanctioned tanker, and four of the six vessels involved had flown a false flag at some point in the past two years.

Egypt sent 25,000 tonnes of diesel worth €16mn from El Dekheila to St Petersburg. South Korea, which normally ships a small steady flow of gasoil to Russia's Pacific ports, sent 18,000 tonnes in August, 41% above the record it had set the month before and eight times its three-year average. Turkey has now started too: three cargoes totalling 98,000 tonnes and worth €68mn left Mersin in August and began arriving at Russian ports in September, one of them bought by Lukoil.

The volumes are not large against Russian consumption. The cost is in the freight from western India to the White Sea, the transfers off Egypt and the insurance, none of which Russia would be paying if its own plants were running.

The price did what the drones could not

Urals averaged $69.90 a barrel in August, up 23% on July and $25.80 above the EU and UK price cap, which was cut to $44.10 on 1 February and frozen there under the 21st sanctions package. The discount to Brent held at 24%, or $22 a barrel.

The rally has continued into September. Urals was quoted above $80 a barrel at Baltic and Black Sea ports in the second week of the month, according to the Russian trade publication Neft i Kapital, which would put the discount to Brent below $20 for the first time since October 2025, when Washington sanctioned Rosneft and Lukoil directly.

There is a second, temporary gift in the tax code. Russia's mineral extraction tax on oil is reset monthly against the previous period, so producers selling at $76 to $80 a barrel this month are paying tax calculated on roughly $67. The treasury collects the difference in October; the companies keep it until then.

Behind all of it sits the Strait of Hormuz. Detected tanker crossings were still far below pre-strike levels in August and fell another 22% in the month. CREA puts the resulting windfall to Russia at $35.9bn, or about €31bn, in the six months since the US and Israeli strikes on Iran began.

And with the fall of the Bab al-Mandeb strait to Houthi rebel forces on September 11, the oil supply crisis is now only likely to get worse pushing prices up even further in October.

Gas is where the offset is biggest

Europe is simultaneously cutting Russian gas volumes and paying Russia more for what is left. A gas crisis is gradually unfolding in Europe after it failed to make the most of the restocking season and goes into the winter with storage tanks nearly 20pp below where they were a year ago.

EU imports of Russian LNG fell 46% month on month in August to the lowest monthly volume of the war, four months after the bloc's ban on short-term supply contracts took effect on 25 April. Belgium went to zero, having taken 100% of its LNG from Russia in July. CREA's Europe-Russia policy analyst Isaac Levi confirmed the Belgian figure with France, Spain and the Netherlands now the only importers left. French ports took 57% of the EU total. TotalEnergies' import contract runs to the end of 2026, and from January 2027 Russian LNG imports into the EU become illegal under REPowerEU.

Yet Russia's LNG export revenue rose 18% in the month to €45mn a day and pipeline gas revenue rose 25% to €68mn a day. Volumes rose 10% and 5% respectively. The rest is price.

Dutch TTF, the European benchmark, was trading around €81 per megawatt hour on September 11, up about 147% on the year, after EU storage went into August only 57.1% full, the lowest reading for that date on record against a 90% target. "Several adverse supply-side risks have materialised, and gas storage levels are historically low ahead of the heating season," Daniel Kral of Oxford Economics told Euronews last month, when the price was €65. The gap with the United States has widened to the point where European buyers are paying more than twelve times the Henry Hub price. Europe may have broken its dependence on Russian gas, but it is now paying through the nose for the privilege.

Urgewald, the sanctions monitoring group, put the uncomfortable version of this to the same outlet. "Europe says it is moving away from Russian energy. These figures show the opposite," said its campaigner Alexander Kirk, noting that the EU has imported as much Russian LNG in the first eight months of 2026 as in the whole of last year.

Who is still buying

Since December 2022 the pattern has barely moved, and CREA reads the concentration as a weakness rather than a strength, calling it Moscow's dependence on a narrow set of key customers. China has taken half of Russia's crude exports and 37% of its coal; Turkey a quarter of its oil products; the EU 49% of its LNG and 32% of its pipeline gas.

In August itself the top five importers paid Russia as follows:

China, €8.4bn, or 51% of the top-five total, of which €5.8bn was crude; its seaborne Russian crude unloadings rose 16% on the month and were 62% above August 2025, taking Russia's share of Chinese seaborne crude imports to 23% from 9% a year earlier

India, €4.8bn, 87% of it crude, with volumes down 24% after two record months

Turkey, €1.5bn, where pipeline gas at €493mn has now overtaken crude as the largest item and oil product volumes fell 37% to the lowest since mid-2022

The EU, €1.2bn, of which pipeline gas was 61% and LNG 26%, the remainder Druzhba crude to Slovakia

Egypt, €513mn of crude and products, down 29% by volume.

Inside the EU the ranking is politically awkward. Hungary was the largest buyer at €386mn, all of it pipeline gas. Slovakia was second on roughly equal parts crude and gas, France third at €190mn of LNG, Bulgaria fourth on Balkan Stream gas alone and Spain fifth at €84mn. Gas accounted for 85% of what the five paid.

Separate figures for the first eight months of the year, drawn from Ukrainian government data and circulated by the journalist Alex Raufoglu, put Russian crude at 100% of Georgia's imports and 99.8% of Syria's, with India taking 453mn barrels and China 585mn, or 38% and 25% of their total crude imports. On the same data Russian LNG was half of Belgium's imports over the eight months, 35% of France's and 27% of Spain's.

The refining loophole is still open

The EU banned imports of oil products made from Russian crude on 21 January. In August, 20 shipments from refineries that EU guidance identifies as high risk were unloaded at EU ports, up from 18 in July. Nine came from Turkish refineries, seven from Indian and four from Georgian. Italy and Cyprus took five each, Romania three, France and Spain two each, and Greece, the Netherlands and Ireland one each.

Across all sanctioning countries, refineries in India, Turkey, Brunei and Georgia running on Russian crude exported €510mn of products in August, of which CREA estimates €189mn was actually refined from Russian barrels. The EU took €333mn, the US €143mn and Australia €34mn. Australian-bound volumes fell 81% in value terms in the month, and the Australian Senate began debating tighter rules in August. EU-bound volumes rose 22%.

Two cases stand out. The Kulevi refinery in Georgia has run solely on Russian crude since it opened in October 2025 and has not taken a single non-Russian cargo, while exporting products to the EU after the ban took effect; the 21st sanctions package imposes a transaction ban on it after a six-month wind-down, and the port says it will stop accepting Russian oil, but 100% of its August crude still came from Russia. And the UK, under an exemption granted on 20 May and running to 1 January 2027, unloaded 64,000 tonnes of jet fuel worth €48mn at the Isle of Grain, refined at Jamnagar in India.

CREA's point is that the ban is written at national level, so a net crude exporter can refine Russian barrels and ship the product on. It wants the test applied at the refinery instead: no imports from any plant that has processed Russian crude in the previous six months, whatever the declared origin of the cargo.

The shadow fleet is shrinking, and ageing

Sanctioned shadow tankers carried 52% of Russia's seaborne oil in August, and 61% of the crude. Western-linked tonnage is doing more of the product trade than the crude trade: G7-plus tankers moved 72% of Russian oil products against 34% of crude, which is a point CREA presses because the product price caps have not been changed since February 2023.

The false-flag problem is receding. Forty-five shadow vessels were flying false flags at the end of August, against 138 in July 2025. The reason is Cameroon. Its registry was hijacked by another body issuing fraudulent registrations in its name; having concluded those were never valid, Cameroon struck 26 vessels off in July and 11 more in August, cutting the number in the Russian trade from 140 in February to 83, and has registered no new Russian-trade vessels since June.

Of the 45 still falsely flagged, 14 have carried both Russian and Iranian oil, which suggests one pool of vessels serving both trades. Going idle is not an exit: of the falsely flagged tankers that stopped for over a year and later resumed, 18 of 30 came back still under a false flag, mostly switching to Iranian, Venezuelan or Omani cargo, while all twelve that returned under a verified flag went straight back to Russian oil.

The fleet is also old. Of 311 vessels that exported Russian crude and products in August, 150 were shadow tankers and 73 of those were at least 20 years old. CREA puts the potential clean-up and compensation bill from a spill by a tanker with questionable insurance at over €1bn for the coastal state. Ten ship-to-ship transfers worth €98mn took place in EU waters during the month, in Spanish, Cypriot and Greek waters, all of them carried out by G7-plus tankers and all of them involving oil products.

On 30 August, forces under the EU's Operation IRINI boarded the sanctioned tanker Sun in the Mediterranean on suspicion of false flagging, the sixth such boarding by EU naval operations in recent months, according to EU High Representative Kaja Kallas.

What CREA wants done

The report's central argument is that the price cap has failed as a durable constraint. Urals has dipped below the old $60 level only briefly, ESPO grade has traded above both cap levels throughout on Chinese and Pacific demand, and the policy was designed to suppress the price Russia receives rather than the volume it ships.

Its recommendations are specific:

Cut the crude cap to $30 a barrel, still double Russia's average production cost of about $15, with product caps of $45 for premium and $25 for discounted grades; CREA calculates that would have cut seaborne crude revenue by 27% since December 2022, and by 26% or €3bn in August alone

Or, as an alternative, tax the use of Western maritime services for Russian cargoes, turning the G7's hold over shipping and insurance into revenue for Ukraine

Require insurers and traders to hold a bank statement, verified by the bank, showing the oil was traded below the cap, rather than relying on attestation documents that opaque traders in the UAE and Hong Kong can falsify

Apply the refined-products ban at refinery level rather than national level, and extend it to storage and re-export hubs that have received Russian oil in the previous six months

Ban ship-to-ship transfers of Russian oil in G7-plus territorial waters, and have the International Maritime Organization require flag states to publish insurer solvency and audited accounts.

On the current settings, CREA calculates that full enforcement of the existing $44.10 cap and the two product caps would have cut Russia's oil export revenue by 15%, or about €1.7bn, in August alone compared with zero compliance.