The Kremlin is scrambling to respond to an intensifying campaign of Ukrainian drone attacks reaching ever deeper into Russia, hitting key arms production facilities, destroying an ever-greater share of oil-refining capacity, and causing fuel shortages across the country.
This week alone, swarms of Ukrainian drones hit oil facilities across Russia as well as the VZPP-S semiconductor devices plant, a major producer of components for Russian ballistic missiles in Voronezh, the Dubna Satellite Communications Center near Moscow, and a chemical plant that is key for producing Russian ammunition in Tula.
In Russia-occupied Crimea, rolling power outages were triggered across the peninsula by Ukrainian strikes, and fuel sales have been suspended, causing Russian-installed authorities there to declare a state of emergency Friday.
President Vladimir Putin’s government held an emergency meeting earlier this week on the escalating fuel crisis after gasoline production plummeted 25 percent across Russia during the week of June 15-21 and pushed dozens of regions to impose rations.
As nervousness mounts over Russia’s weakening position and an apparent shift in tone against Moscow by President Donald Trump, Russian stocks have fallen more than 13 percent since the beginning of June — the biggest market drop since September 2022, when a Ukrainian counteroffensive forced Russia to retreat from a large chunk of strategic territory in Ukraine’s northeast.
“There is a state of total uncertainty,” said one former senior Russian finance official, who like others spoke on the condition of anonymity to discuss sensitive security matters. “There is a feeling that there is no good end to this in sight.”
The latest attacks follow a dramatic onslaught on Moscow last week that spread plumes of black smoke over the capital as its main oil refinery went up in flames, halting production possibly until next year.
The mounting Ukrainian strikes and the worsening geopolitical outlook after Trump suggested he could further toughen sanctions on Moscow and praised Ukrainian President Volodymyr Zelensky are “serious alarm bells,” said a Russian academic close to senior Russian diplomats.
Trump also signed off on a declaration supporting Ukraine’s territorial integrity alongside European leaders at the Group of Seven summit in France earlier this month.
Meanwhile, a sharp drop in price for Russian oil to levels last seen before the United States and Israel’s war against Iran are adding to the jitters and “was unexpected for the Russian economy,” the academic said, especially at a time when Russian officials are urgently seeking additional sources of funding to increase military spending.
“Everything depends on the degree to which we will be able to limit Ukrainian strikes on Russian territory and how quickly we will be able to create air defense systems against the drone attacks,” the Russian academic added, noting statements by Zelensky that Ukraine intends to keep ramping up attacks to drive Moscow to the negotiating table. “People don’t feel safe anymore. … The war is knocking at our door.”
In Crimea, panic is setting in, one Moscow business executive said, also speaking on the condition of anonymity because of fear of retribution. “Everyone wants to leave by foot or by bicycle, however they can. There are going to be problems with food. No one can supply.”
Questions are also mounting about the Russian military’s apparent failure to foresee the sharp improvement in Ukraine’s drone capabilities and to develop countermeasures.
“There are not enough missile defense systems to protect our infrastructure, it’s clear,” the Moscow business executive said. “No one appears to know what to do to increase production. This is a terrible situation that Putin and his closest circle appear to not have expected. … They have not prepared for a long war nor are they ready for the drone threat.”
Tatiana Stanovaya, a senior fellow with the Carnegie Russia Eurasia Center, said that the lack of preparation was typical of an extremely fragmented system with little coordination between different branches of power despite Putin’s dominant role.
“This is the eternal problem of the Russian authorities,” Stanovaya said, adding that the situation was “a serious test for the Russian economy and the population. But the question is whether the authorities have a plan of action or understanding about how to deal with this.”
European officials said that one factor appeared to be a reluctance among senior Russian officials to share bad news with Putin. “People just missed it,” one European official said. “Even if someone warned about it, it didn’t reach people high up. It’s been the same thing since the beginning of the war, but now the pain is bigger.”
Zelensky said on Wednesday that Russia was shifting air defense systems to prioritize protecting Moscow, Putin’s residence in Valdai and the Kerch Bridge, a key supply route connecting occupied Crimea to Russia.
It was not possible to immediately verify Zelensky’s claim. On Thursday, the Ukrainian president said he had approved “a 40-day influence operation … against the aggressor state aimed at compelling it to end the war.”
Publicly, Russian officials have tried to play down the impact of the Ukrainian strikes. At a meeting with Putin to discuss the fuel crisis earlier this week, Russia’s deputy prime minister, Alexander Novak, told the president that the situation on the domestic fuel market was “not easy, but controllable.”
Russian Finance Minister Anton Siluanov, meanwhile, denied the crisis had caused a huge spike in gasoline prices. “If they have risen at all, they have done so insignificantly,” Siluanov told reporters.
Putin claimed this week that “the entire West” was providing Ukraine with “a massive flow of drones” aimed at destabilizing society.
But he insisted that what he referred to as Ukraine’s “terrorist attacks” would not impact the situation on the front line, and he claimed that Russian troops were continuing to advance.
Behind the scenes, however, there is growing panic.
In a letter to Putin, leaked to Russian newspaper Kommersant, the head of Rosneft, Russia’s biggest oil company, Igor Sechin, called the amount of damage to Russian oil refineries “unprecedented.”
The government has been weighing a total ban on diesel exports to compensate for the shortages, tacit acknowledgment that it is not possible to increase production anywhere.
Stanovaya said Russian officials’ tendency to project nonchalance in the face of problems was exacerbating the problems. “They are always inclined to minimize problems and reduce their significance, and focus more on achievements,” she said.
“Let’s see how the government will deal with the fuel crisis,” Stanovaya added. “In some regions, it is catastrophic.”
The deteriorating financial situation is adding to the anxiety in Moscow, as finance ministry officials rush to find ways to fund ever-increasing military spending.
Last week, the government pushed through amendments to the budget code to allow the finance ministry to spend and borrow more without seeking formal parliamentary approval.
Even before prices for Russian oil — Russia’s main source of revenue — plummeted to $50 per barrel following Iran’s ceasefire agreement with the United States, Russia’s federal budget deficit had been snowballing beyond the 3.8 trillion rubles ($48 billion) intended for all of 2026.
The deficit reached 6 trillion rubles ($83 billion) by the end of May, more than double the level last year. “The budget is shaking,” one Russian official said. “The deficit is enormous, and the sovereign wealth fund is almost exhausted.”
The former senior finance official said a decision clearly had been taken to increase borrowing, including by issuing greater volumes of state bonds — a measure he said would further stoke inflation even as the central bank has sought to control rising prices with high interest rates, now at 14.25 percent.
Fears are growing in the business community that the government could seek to access the population’s savings to prop up Russia’s military machine.
“The government could try to take money by any means,” the Moscow business executive said. “Everyone is thinking about how to get their money out and leave.”
The concerns were exacerbated this week when Gennady Zyuganov, the long-standing leader of the Communist Party, openly called in parliament for some 130 trillion rubles held by businesses and individuals in bank accounts to be “mobilized” to solve Russia’s economic and budget problems.
“That money isn’t being invested in production or anything else — not even in victory,” Zyuganov said. “This problem can be solved quickly. If I were the president, I’d do it with a single decree. In wartime, he has the right to do so — he is the supreme commander in chief.”
In addition, the finance ministry is preparing legislation that would potentially allow it to access some $40 billion in pension savings held in privately managed funds.
With businesses squeezed by high interest rates, a spike in fuel prices and falling revenue as the economy stalls, the overall outlook is deteriorating. “It’s inevitable that the number of defaults will grow,” the Moscow business executive said.
For now, however, analysts and officials said Putin was unlikely to yield to the growing pressure and would instead seek to escalate Moscow’s own bombing campaign in response — a stance that is adding to the worries among the Russian elite.
“It seems that ahead of us is a new cycle of escalation,” the Russian academic said.
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