Russia-Ukraine War Flash Report - 03 FEB 2024 - 12:15 PST - Ukraine's Devastating Strategy

Ukraine has a new drone and a new strategy, and the world needs to pay attention.

In Volgograd, at least one Ukrainian one-way drone struck the Lukoil Refinery, the largest oil refinery in Russia's Southern District.

The drone flew at least 500 kilometers before hitting the plant, striking between the oil warming and distillation units.

Wait, haven't I read that before at other refineries?

Yes. Ukrainian drones have hit seven Russian oil industry facilities in less than two months, with the distillation units hit at three. The attack that caused lighter damage in St. Petersburg earlier in the week reportedly just missed a hydrocracker.

Russia State Media is reporting that the refinery in Volgograd, which is a massive facility with multiple distillation units, will have to operate at reduced capacity.

What have we learned?

1) Ukraine has a new drone, and they haven't revealed the details. First, it has a range of at least 1,250 kilometers. Second, it has a significant warhead, at least the size of a Shahed-136 and much larger than the Beaver drones used in the summer of 2023. Third, it is extremely accurate, with an estimated CEP of 10 meters. Finally, they appear to be hard to detect/track and very resistant to electronic warfare.

2) Someone with the General Staff knows exactly what they are doing, and Ukraine is actively destroying Russia's refining capacity. Unlike Russian missile and Shahed-136 drone strikes on Ukrainian energy facilities, where hitting the area of the refinery is a great victory, Ukraine is intentionally targeting one of the most complex, expensive, and hard-to-fix/replace units. Gasoline production in Russia is already down 37%. This attack has brought it down even further. Lukoil already took the measure of canceling all exports through February before this attack and asked other Russian oil companies to increase gasoline production by 200K barrels a day to pick up the lost production.

3) If the world is going to keep buying Russian oil and refined products on the gray market and ignore Russian oil tankers sailing around the world, Ukraine has taken the initiative to enforce global sanctions. In other news, World War III has not started. Russia has not nuked the world into a cinder. London was not wiped out by 1,000-meter tidal waves. Western policy toward Russian aggression has to change.

4) Warfare is going through a violent and difficult evolution, and Ukraine is leading the way because its allies have forced them to. The tactics, strategies, and military equipment most of the world has were designed to fight on a late 20th-century battlefield - even the newest crewed systems. Cheap, easily produced, uncrewed systems in the air, on the sea, and recently on land have hit the reset button of warfare. Saint Olga of Kyiv destroyed her enemies with flaming birds. History is repeating itself.

5) If Ukraine has figured out how to launch pinpoint attacks on specific targets as far as 1,250 kilometers away with a homegrown drone, other nations already have the ability to do the same. Now, think about your own country and what that could mean in the hands of a terrorist organization.

6) The United States Congress and some of Ukraine's other allies need to figure out which side of history they want to be on. Step one: abandon Ukraine. Step two: Russia conquers Ukraine. Step three: Russia gains the knowledge and ability to build Mk.5 Sea Baby uncrewed surface vessels, plus the projects we don't know about, plus this new drone system and others. Step four: Russia shares this technology for a price with Iran, North Korea, China, and others. Step five: Iran or North Korea shares this technology with anyone who has cash. Step six: A Western warship is sent to the bottom of the ocean. The West can be the holders of the mid-21 century battlefield that is evolving before our eyes or spend a decade and ridiculous piles of money trying to catch up.

What about Russia? 

1) Game of swords and shields. Russia will eventually figure out how to respond to these drones. The clock is already running.

2) Already moved to a wartime economy, Russia will sacrifice internal needs to maintain the fuel supply to its war machine. It's unclear what the unit in Volgograd ultimately produced. This won't slow down the war effort - yet. But if this continues unabated, it has the potential to cause restrictions.

3) Ukraine is strangling Russia's economic lifeblood. Russia's energy industry is already in decline. Data from the Kremlin shows that. Natural gas and coal exports dropped sharply in 2023. India is moving away from Russian oil and recently signed major contracts with Iraq. That leaves China as Russia's single biggest customer in the year ahead, and China has its own economic problems. This will force Russia to accelerate its currency manipulation, tap its cash reserve, sell gold, and add inflationary pressure. Everything is attached to the price of motor fuel. Tomatoes don't walk to a store; they arrive in a truck.

4) Russia's 11-time zone nation is working against its own interests now. The conundrum Moscow is facing is having to place air defense systems not just at critical government buildings, military air bases, and Putin's multiple homes but at countless infrastructure facilities. Targeting refineries adds another problem. Even a successful shootdown over a refinery is fraught with the risk of causing catastrophic damage. This doesn't account for Russia's decades-long history of grossly overstating its air defense capabilities.