Adding Fuel to the Fire
Ukrainian drone strikes set Russian oil facilities ablaze
Hello from the Bear Market Brief.
This week in the news:
Ukraine continues to target Russian energy infrastructure with drone strikes, hitting several oil refineries and gas facilities in southern Russia.
Former executives of the nanotechnology firm Rusnano were arrested for embezzlement in an investigation that also involves the company’s former director, Anatoly Chubais.
British media personality Piers Morgan published an interview with President Zelenskyy, during which Zelenskyy signaled Ukraine’s readiness to enter negotiations with Russia.
— Sara Ashbaugh, Editor in Chief
Successful Ukrainian attacks in Russia
Several Russian oil refineries and gas facilities were targeted by Ukrainian drone attacks over the past week in Russia’s regions. Russian authorities reported intercepting more than 70 drones on the busiest day of the week, February 3, mostly in the Rostov, Volgograd, and Astrakhan regions. However, from local reporting it appears that several facilities were damaged, potentially affecting their production capacity. Drone strikes were reported from Russia’s border regions and from a Krasnodar Territory airfield serving as a Russian drone launch site as well.
Drones struck a major oil refinery operated by the Lukoil company twice in the course of three days in the southern Volgograd Region, as well as a gas facility controlled by Gazprom in the Astrakhan Region. In the Krasnodar Territory, an oil depot belonging to the Albashneft oil company was burning after an attack on February 5. Local authorities and the affected companies tried to downplay the severity of the attacks, stressing that the fires were localized and there were no victims. The Astrakhan attack, however, led to disruptions in the work of Gazprom’s factory.
Ukraine started regularly attacking Russian energy facilities with drones last year, gradually ramping up the frequency of the attacks. New tactics have also evolved: the Volgograd refinery is the second facility this year to suffer two successful attacks in short succession, mirroring attacks on a fuel depot serving the Engels air base in the Saratov Region in January. Apart from cutting off the fuel supply of military vehicles attacking Ukraine, the purpose of these attacks is likely to create shortages in Russia's domestic fuel market and force Russia to reduce its fuel exports. The Volgograd refinery is the biggest such plant in Russia’s southern regions, amounting to 4.9% of Russia’s total refining capacity.
The drone attacks came in parallel with reports suggesting that Ukrainian soldiers have advanced up to five kilometers behind Russian defensive lines in the Kursk Region. According to the Russian Defense Ministry, Ukraine deployed troops and military equipment south-east of Sudzha, a city occupied by Ukraine since August 2024. Speaking with Kursk Governor Alexander Khinshtein, who has faced growing anger over the past week due to the unresolved housing situation of evacuated residents, Vladimir Putin called the situation in the region “very difficult.” Putin has repeatedly called on the Russian military to push Ukrainian forces out of the region, and reportedly deployed North Korean troops to strengthen defensive efforts there. Operationally, conquering territory in eastern Ukraine has been prioritized by the Russian military over the Kursk Region.
— Andras Toth-Czifra
Two paramedics were killed in a traffic accident involving Russian military personnel in the city of Belgorod on Friday. According to local Telegram channels, a BMW containing three Russian soldiers ran a red light and crashed into an ambulance in the early hours of Friday morning. Paramedics Olga Lyubimova and Marina Parovyshnik were killed, and the three men in the car—believed to be Isa Abdurashidov, Murad Musayev, and Ramazan Gadzhimuradov—were hospitalized. According to a statement by police, Abdurashidov was driving and may be charged with traffic safety violations. He faces up to seven years in prison if convicted. (photo: Russian Emergencies Ministry)
The Prosecution goes after Rusnano executives and business owners
Police reportedly arrested three former executives of the state-owned nanotechnology firm Rusnano who worked closely with Yeltsin-era Finance Minister and Deputy Prime Minister Anatoly Chubais, the company’s former director. Two of the executives were placed in pre-trial detention. All are reportedly being investigated for their role in the embezzlement of 45 billion rubles.
Chubais, an important architect of Russia’s post-Soviet economic policy, led Rusnano between 2011 and 2020 and later served as Presidential Envoy for Sustainable Development. After Russia’s full-scale invasion of Ukraine in 2022, however, he left the country and moved to Israel. When Rusnano announced that it faced bankruptcy risks in 2023, the authorities started looking into alleged corruption under Chubais’s tenure, with Vladimir Putin suggesting that Chubais fled the country to avoid prosecution rather than to protest the war in Ukraine. However, the Russian authorities have not taken serious steps to have him extradited and charged, leading commentators to suggest that Chubais still has protectors in the higher echelons of Russian politics. A key question of the current proceedings is how far the Prosecution and the Federal Security Service will go in implicating Chubais and his former allies in the government.
Along with the cases being pursued against Chubais’s former associates, the Prosecution is also continuing to drive the nationalization of major enterprises, a key component of the ongoing redistribution of assets in the domestic economy. This week, the agency initiated the nationalization of the “Borets” oilfield services group; the warehouses of the Emirati-owned “Raven Russia” group, Russia’s largest warehouse company; and the assets of “Rodnye Polya,” a major grain trader, which were taken into state property due to the foreign citizenship of their owners. Russian authorities have expropriated foreign owners of enterprises deemed to have strategic significance before, but it appears that they have switched gears over the past weeks and are more aggressively targeting the property of dual citizens, further eroding property rights.
— Andras Toth-Czifra
A new board game based on the war in Ukraine is now for sale in Russia. The game, called “Special Operation on the Outskirts,” allows 2-6 players to act as Russian battalion commanders working to “liberate Ukraine from Nazi rule.” There are 14 Ukrainian cities and eight strategic locations in play, some of which will “welcome the liberators,” while others are “influenced by propaganda and resist,” the game’s description reads. It is advertised as “patriotic” and “a unique modern-day twist on Monopoly” on its Wildberries store page, where it is on sale for 2,520 rubles ($25.91). (photo: Wildberries.ru)
Highlights of Volodymyr Zelenskyy’s interview with Piers Morgan
On February 4, British journalist Piers Morgan released a 90-minute interview with Ukrainian President Volodymyr Zelenskyy on his YouTube channel. During the interview, Zelenskyy responded to Donald Trump’s claim that Ukraine has lost over 400,000 troops in the war. He clarified that 45,100 Ukrainian service members have been killed in combat, while an additional 390,000 have been wounded. Zelenskyy also stated that approximately 350,000 Russian troops have been killed, over 600,000 have been wounded, and between 50,000 and 70,000 remain missing.
Additionally, the Ukrainian President addressed Russia's claims about his illegitimacy, which were recently amplified by former Fox News host Tucker Carlson. At the end of January, Carlson appeared on Piers Morgan's show, where he referred to Zelenskyy as a “dictator” and repeatedly stated that Zelenskyy was not elected, questioning his legitimacy as a leader. This narrative has been widely used by Russian officials—including Putin—to discredit the Ukrainian government. Zelenskyy reminded the audience that he won the 2019 election with 73% of the vote. He added that he is open to holding new presidential elections; however, no elections can take place during martial law. “There are significant challenges, but not just legal ones; there are also very human issues: how our military will vote, how millions of people in occupied territories will vote, how they will express their choices, and how 8 million Ukrainians abroad due to the war will be able to vote,” said Zelenskyy.
When Morgan asked the Ukrainian President about the prospect of liberating territories currently illegally occupied by Russia, Zelenskyy responded that while Ukraine is not yet able to free all of its territories, it will not recognize Russia’s control. He added that, to fully liberate Ukrainian land, “unfortunately, the support currently provided by our partners is not enough.” According to Zelenskyy, moving forward, Ukraine will adopt a “combined” approach; “Some actions will take place on the battlefield, as our military is doing today, some will be diplomatic, some will take time, but in the end, we will return our land,” he said.
Regarding NATO, Zelenskyy stated that while joining the alliance would provide an important security guarantee, it should not be the only one. He emphasized that Ukraine must continue developing its military. In the event that Ukraine does not receive a NATO invitation, Zelenskyy said, “Then let’s put it this way: give us back nuclear weapons, provide us with powerful missile systems, help us finance a million-strong army, and send your contingent to those parts of our country where we seek the greatest stability and peace for our people.”
Overall, President Zelenskyy signaled Ukraine’s readiness to start negotiations with Russia and end the hot phase of the war. Meanwhile, Kremlin spokesperson Dmitry Peskov dismissed Zelenskyy’s statements as empty words and reiterated Russia’s claims about his “illegitimacy.” However, despite this, Peskov stated that Russia is still ready to negotiate with him. At the same time, Peskov pointed out that the interest in negotiations should come specifically from Kyiv, given the dynamics and progress of the “special military operation.”
— Lisa Noskova
On the podcast
Where does the U.S. stand in the world as Trump (re)assumes office? How is his approach towards Ukraine shaping up? Stephen Wertheim, Senior Fellow in the American Statecraft Program at the Carnegie Endowment for International Peace, joins Aaron Schwartzbaum to explore the broader context and drivers of how policy towards Russia will, and will not, be made.
Quickfire: Regions
Regions keep raising the signing bonuses for contract soldiers in an effort to boost military recruitment efforts. Since the beginning of the year, more than a dozen regions have announced higher payments, thus also raising budgetary expenditures. Over the past week, the Astrakhan Region raised these bonuses to 1.6 million rubles; the Voronezh Region raised them to 1 million rubles; the Saratov Region raised them to 700,000 rubles; and the Nenets Autonomous District raised them to 500,000 rubles. Following a presidential decree in January, regions across the country have also had to raise a range of social payments by 9.5% from February 1 on, to keep pace with inflation. Expenditures on social policy have grown substantially across regional budgets in 2024 already, due both to the war and to a higher federal minimum wage, all while an increasing number of regions are running growing deficits.
According to local media reports, the construction of the M-12 highway connecting Moscow and Kazan is suffering delays due to the failure of the Regional Construction Company (RSK), a subcontractor in Bashkortostan, to pay wages to its workers. The connection between the workers’ protest and the delay has not been confirmed, but the opening of the highway was recently pushed back to June 2025. Construction workers already appealed to Vladimir Putin personally in December (wage payments stopped in September), but the problem has not been fully resolved. The company claims that it has been facing rising costs due to the “economic situation,” and therefore the funds originally budgeted for the works were insufficient. This highlights the rising costs that companies are facing when purchasing or renewing equipment and hiring workers due to domestic economic constraints triggered by the war and sanctions, but also the potential effect of the situation on development projects. The construction sector is also impacted by existing and planned regional and federal restrictions regarding the employment of migrants.
In addition to the coal sector, the federal government is reportedly also preparing support plans for the metallurgical industry and the timber industry, both of which have been hit by the loss of Western export markets and the phasing out of subsidized mortgages in most Russian regions. Both industries are also important for specific regions, several of them in Russia’s northwest, where bankruptcies would increase the risk of significant social upheaval. The support measures for the timber industry may include tax breaks, mandatory federal and regional purchases of timber, and freeing up transportation capacities. Metallurgical companies also requested tax cuts from the federal government in January.
— Andras Toth-Czifra