Bombs Over Belgorod

Last week, the Russian Defense Ministry claimed to have “practically” decimated Ukraine’s air force and air defense systems.

“At present, the Ukrainian air force and air defense system have been almost completely destroyed,” Sergei Rudskoy told a press briefing. “The country’s naval forces have ceased to exist.”

Apparently, Rudskoy missed a couple of helicopters. On Friday, a pair of low-flying Soviet-era Mi-24s orchestrated a brazen cross-border strike on an oil depot in Belgorod. The city of 400,000 has been used as a staging area for invading Russian soldiers.

In a social media post, Belgorod Governor Vyacheslav Gladkov claimed “The fire at the oil depot happened as a result of an airstrike of two helicopters of the Armed Forces of Ukraine that entered the territory of Russia at low altitude.”

With the possible exception of ground-fired missile volleys, Friday’s attacks may have constituted the first airstrikes on Russian soil since World War II. Video depicting the strikes was verified by The New York Times, although it wasn’t possible to say, definitively, if the helicopters were in fact Ukrainian.

Russia has targeted fuel facilities in Ukraine and, according to Volodymyr Zelenskiy, is also attempting to disrupt agriculture in the country. The UN continues to lament the inability of humanitarian aid convoys to reach beleaguered Mariupol.

Sergei Lavrov was in New Delhi Friday, but ceasefire discussions continued via video conference. The Kremlin suggested (again) that Ukraine is being “more realistic” about Crimea and Donbas, but Kyiv has pushed back on that characterization. Lavrov said Moscow remained open to talks on a non-nuclear, neutral Ukraine.

On the energy front, the UK was poised to join the US in releasing additional oil from its reserves in an effort to tamp down inflation. The UK would make the announcement through the IEA which, as documented here on Thursday, is at odds with OPEC.

“Given that the Biden administration is taking a very muscular stance toward Moscow, promising further sanctions if Russia continues to wage war in Ukraine, we believe that the SPR release is being used as a tool to blunt the impact of these foreign policy decisions for US consumers,” RBC said.

The bank’s Helima Croft and Michael Tran expressed doubt about the potential for the emergency measures to bring about sustained relief at gas pumps. After walking through some logistics and technicalities, Croft and Tran noted that “Russia will likely remain the most sanctioned country on Earth for the foreseeable future given the way it has conducted the military campaign [and] barring a change at the top in Moscow.”

It’ll be interesting, they said, to “see whether this release announcement will be an effective shock and awe tactic given that Russian energy losses are likely to climb as the military campaign intensifies and the humanitarian crisis in Europe grows more dire.”

There was still quite a bit of ambiguity Friday around Vladimir Putin’s demands that “unfriendly” countries pay Russia in rubles for natural gas. The mechanism for such payments appears to respect existing contracts, and it’s not obvious the structure is a viable way for Moscow to prop up the currency, if that was indeed the plan.

Russia is expected to reap a massive windfall on energy exports in 2022. As long as hard currency is allowed to flow alongside oil and gas, Putin has a lifeline. Assuming no appetite for direct military confrontation, a full, no-carveouts embargo on Russian energy remains the only sure-fire way to decimate Russia. As long as Putin is willing to sell energy to countries seeking to impoverish his people, and as long as those countries are willing to buy energy from a man who plunged Europe into the most serious security crisis since the Third Reich, the reality is that money and fuel matter quite a bit more than principle.