Droning on
Ukrainian drones strike a factory and a major oil refinery in Russia's Tatarstan
Hello from the Bear Market Brief.
This week in the news:
Ukrainian drones struck a drone manufacturing facility and an oil refinery in Tatarstan, more than 600 miles from the Ukrainian-Russian border.
The launch of the Arctic LNG 2 project has been delayed, and the project itself will likely need to be scaled down due to sanctions.
Last Friday was the anniversary of U.S. journalist Evan Gershkovich’s arrest. He has been held in pre-trial detention in Russia for over a year on espionage charges.
— Sara Ashbaugh, Editor-in-Chief
Ukrainian drones reach Tatarstan
On Tuesday, Ukrainian forces struck a drone manufacturing facility in Yelabuga and a major oil refinery in Nizhnekamsk, both located in Russia’s Tatarstan over 1,000 km (621 miles) away from the Ukrainian-Russian border. The attack on the drone factory was carried out by Ukraine’s military intelligence, while the one on the oil refinery was a joint undertaking by the military intelligence and security service. The manufacturing facility in Yelabuga produced Shahed-type attack drones, constantly used by Russian forces to attack Ukraine. While Russian authorities say that no serious damage was caused by the attack, an anonymous source told RBC-Ukraine that there was “significant destruction of production facilities.” Regional authorities denied this, instead underlining that the strike at Yelabuga injured at least 12 international (mostly African) students who worked in the facility.
Following these strikes, U.S. Secretary of State Anthony Blinken commented that the U.S. has “neither supported nor enabled strikes by Ukraine outside of its territory.” Earlier, Washington allegedly warned Kyiv to stop attacking Russian oil refineries out of concern that strikes could lead to an increase in global oil prices. Ukrainian President Volodymyr Zelenskyy responded that the U.S. cannot limit Ukraine’s deployment of weapons built in Ukraine. “We used our drones. Nobody can say to us you can’t,” said Zelenskyy. The strikes on oil refineries are Ukraine’s response to Russian attacks on critical infrastructure, according to the President. Andrii Yusov, spokesperson for the military intelligence of Ukraine, commented that the weapons used to strike the targets in Yelabuga and Nizhnekamsk were made in Ukraine.
Earlier this week, Ukraine’s Minister of Digital Transformation, Mykhailo Fedorov, said that Ukraine can now produce drones capable of flying distances over 1,000 km. Additionally, the country aims to manufacture 1 million drones this year. Despite Ukraine steadily increasing the range of its drone attacks over the past few months, Andrey Gurulyov, a prominent member of the Russian State Duma defense committee, speculated on his Telegram channel that the drones could have been launched from “Central Asia” without naming a specific country. The unsubstantiated claims were spread and amplified on Russian social media and prompted a denial from the government of Kazakhstan.
These repeated Ukrainian drone strikes have caused significant disruptions to Russia’s primary oil refining facilities over the past few months, prompting a fuel export embargo to stabilize the domestic market. Planned and unplanned maintenance work—most recently on Gazprom’s Astrakhan refinery—has further diminished refining capacity. While the Energy Ministry claims that all repairs will be finished by June, the risk of further successful Ukrainian attacks across a continuously broadening territory, as well as sanctions-related shortages of equipment and spare parts, make this pledge doubtful. Drone attacks also force energy companies to invest in proper defense. Following the attack on the refineries in Tatarstan, the region’s head, Rustam Minnikhanov, called on companies to defend themselves because “no one will defend you.” This echoes a warning from more than a year ago by Andrey Kartapolov, the head of the Duma’s defense committee.
— Lisa Noskova & Andras Toth-Czifra
A monument to Wagner PMC founders Yevgeny Prigozhin and Dmitry Utkin was unveiled in the Krasnodar region this week. The monument was erected in front of Wagner’s chapel in Goryachy Klyuch, near the group’s former training base and burial site. Following Prigozhin’s failed mutiny last year, control of Wagner forces was taken over by the Russian Ministry of Defense. Now, Wagner has resumed recruitment, advertising on Telegram for work at “long-distance destinations.” According to Verstka, new recruits will likely participate in Wagner operations in Mali. (photo: t.me/VAGNER_svodki)
Arrested development
The launch of Arctic LNG 2 in the Yamal-Nenets Autonomous District, one of Russia’s flagship energy projects, will reportedly be further postponed. Additionally, the project may be scaled down entirely due to Russia’s lack of access to foreign-made ice-class tankers. The project, which was sanctioned by the U.S. last year, was still looking to start deliveries in the first quarter of 2024. Novatek expected to complete the second gravity-based production unit of the project after Chinese-made modules arrived in the Murmansk Region port of Belokamenka this week.
Deputy Prime Minister Alexander Novak, who oversees Russia’s energy industry and announced the launch of the first stage of Arctic LNG 2 in late March, had earlier said that the project’s main issue was the unavailability of tankers. On April 2, Reuters reported that the project had suspended gas liquefaction after reducing it threefold in February. Novatek recently lost an opportunity to participate in another already functional LNG project, Sakhalin 2, when government-owned Gazprom took over Shell’s shares in the project instead.
Novatek announced another Arctic LNG project last year. It is planned to be built in the Murmansk Region, where the company has access to an ice-free port and its production units are currently assembled. However, the latest developments with the Arctic LNG 2 project show how sanctions could complicate Russia’s plans to increase its share on the global LNG market and further the industrial development of the Northern Sea Route, which is also a priority for the Russian government. LNG projects inside Russia, such as LNG factories in the Republic of Sakha, are much smaller than Novatek’s flagship projects and also face transit difficulties of their own.
— Andras Toth-Czifra
Thousands of residents are being evacuated from the city of Orsk after a dam burst and caused massive flooding. The Russian Emergencies Ministry is working to fix the dam rupture, which placed some 10,000 residents and 4,000 houses in the flood zone. Orsk is located in the Orenburg region near Russia’s border with Kazakhstan. Orenburg declared a state of emergency this week after melting ice caused the Ural River to rise dangerously. Hundreds of houses in the region’s capital also flooded. Orenburg’s mayor, Sergei Salmin, urged residents near the river to evacuate. “Don't wait for the situation to become threatening! Leave!” he said. (photo: Russian Emergencies Ministry)
Evan Gershkovich remains behind bars
U.S. journalist Evan Gershkovich has now spent more than a year in Russian prison. He was detained on March 29, 2023 in Yekaterinburg on suspicion of espionage and has remained in pre-trial detention at Moscow’s Lefortovo prison ever since. The FSB alleges that Gershkovich was “caught red handed” with “classified information.” If found guilty, he faces up to 20 years in prison. Gershkovich and his employer, The Wall Street Journal, vehemently deny any allegations of spying, as does the U.S. government. American officials have declared Gershkovich wrongfully detained and demanded his immediate release. “To date, Russia has provided no evidence of wrongdoing for a simple reason: Evan did nothing wrong. Journalism is not a crime,” U.S. Secretary of State Antony Blinken said in a statement on the anniversary of Gershkovich’s arrest.
Despite this, Moscow courts have repeatedly extended Gershkovich’s pre-trial detention and denied his appeals. Most recently during a closed door hearing last Tuesday, when Gershkovich’s detention was extended until June 30. However, President Putin has hinted at the possibility of exchanging Gershkovich in a prisoner swap. The Kremlin may want to trade him for Vadim Krasikov, an FSB security service officer currently serving a life sentence for murder in Germany. “I think it's pretty clear that [Evan] was picked up in order to be traded,” said Emma Tucker, editor-in-chief of The Wall Street Journal. Prior to the death of Alexei Navalny, Western and Russian officials were negotiating a prisoner swap that would have traded Krasikov for Gershkovich and Navalny. However, this deal fell through after Navalny’s sudden death. According to The Wall Street Journal, the U.S. is preparing a new proposal to secure the release of Gershkovich and Paul Whelan, another American in Russian prison. Kremlin spokesperson Dmitry Peskov confirmed that talks were ongoing, but refused to elaborate. “We have repeatedly said that there are certain contacts, but they must be carried out in absolute silence,” he said.
On the anniversary of his arrest, Gershkovich’s friends and family organized a gathering at Brandenburg Gate in Berlin. “We are trying to bring attention to the fact, to as many people as possible, that Evan is innocent, he's been wrongfully detained,” his father Mikhail Gershkovich said.
— Sara Ashbaugh
On the Podcast
If we know how Russia's presidential election is going to turn out...why even bother holding the election? Join Aaron Schwartzbaum, András Tóth-Czifra, and Olga Khvostunova for an exploration of electoral autocracy and the political moment.
Quickfire: Regions
Migrant workers continue to suffer heightened discrimination and attention from the authorities in several regions. The government is planning to strengthen surveillance and curb the rights of migrant workers: one pending bill would create a “digital profile” of migrant workers entering Russia and allow the authorities to expel migrants without a court order. The news outlet Vyorstka reported a sharp increase in the number of administrative cases against migrants in both Moscow and St. Petersburg, and human rights campaigners have warned that the authorities are arresting Central Asian men often without a proper cause. In Yekaterinburg, migrant workers were reportedly handed draft notices when they attempted to apply for Russian driver’s licenses. In the North Caucasian cities of Makhachkala and Vladikavkaz, raids against migrant workers have not only led to arrests, but also subsequently to disruptions in the work of the regional waste management operator that relied on these workers (as do many other industries across the country). Tajikistan reported a net outflow of its citizens from Russia following the Crocus City Hall attack. Even indigenous non-Russian people have reported an uptick in racist incidents.
The owner of Pose, an LGBTQ-friendly bar in the city of Orenburg, was arrested for “extremism” this week. This comes shortly after the arrests of the bar’s administrator and artistic director, discussed in last week’s brief. All three face up to ten years in prison for “collaborating with the international LGBT movement,” a non-existent organization that the Russian Supreme Court labeled “extremist.” Following the Court’s decision last year, there were demonstrative raids against LGBTQ establishments in many cities. The Russian authorities have tacitly encouraged violence against sexual minorities for several years, but this extremism case is the first of its kind. Another bar in Krasnoyarsk called Elton was fined 450,000 rubles ($4,865) this week for “propagating non-traditional sexual relationships,” after former Senator Yelena Mizulina, known for her radical anti-LGBTQ views, denounced it. The above coincided with Kremlin spokesperson Dmitry Peskov announcing that Russia may soon remove the Taliban from the list of terrorist organizations.
On April 4, a man stabbed Andrey Chibis, the governor of the Murmansk Region, as Chibis was leaving a meeting with local residents in the town of Apatity. The governor, who suffered injuries to his stomach, was taken to the hospital in a serious, but not life-threatening, condition. The attacker, who was apprehended by security services and identified by Kremlin-adjacent media as a track fitter working for Russian Railways, later said that “voices” instructed him to stab the governor. This is the first serious attack on a regional governor in Russia for more than a decade and the first one outside of the North Caucasian regions for more than twenty years. Chibis has governed the region since 2019 and is expected to gain a second term in elections upcoming in September.
Spring flooding has caused significant damage to housing, roads, and infrastructure in 34 regions, according to official data. Several regional governments introduced a state of emergency due to the floods. The situation is the most severe in Central Russia and certain regions of Siberia. In the Altai Territory, the flood seemed to endanger the suburbs of Barnaul, the region’s capital. In the Saratov Region, more than 30 towns and villages were partially or completely cut off from the rest of the region.
— Andras Toth-Czifra
Quickfire: Ukraine
Europe’s largest nuclear power plant, located in Zaporizhzhia, is in danger of a blackout due to continuous shelling. The plant is temporarily occupied by Russia, and last summer Ukraine’s military intelligence warned that Russia was preparing to blow it up. This time, Energoatom—a Ukrainian state enterprise operating all nuclear power plants in the country—reported that the nuclear power plant is on the verge of blackout with the Ferosplavna power line disconnected. Currently, the plant is connected to the Ukrainian energy system only through the main Dniprovska power line, which was restored by Ukrainian engineers after being offline for almost five hours on March 22. The Zaporizhzhia nuclear power plant has experienced eight complete blackouts within the past 19 months, forcing it to rely on emergency diesel generators.
Inditex is gradually resuming operations in Ukraine. Zara, Bershka, Pull&Bear, and other Inditex-owned European brands reopened some of their stores in Kyiv this week. The Spanish company suspended its business in the country following the full-scale invasion in 2022.
— Lisa Noskova