Russia’s fossil fuel industry—the backbone of its economy for decades—is facing its most severe crisis since the Soviet collapse. Ukrainian drone strikes have crippled refining capacity, Western sanctions have cut off access to European markets, and the Kremlin has responded by shrouding its energy data in secrecy. Production of oil has fallen to a 16-year low, gas exports to Europe have collapsed by 44%, and oil and gas revenues have plunged to their lowest level in five years.
The Refining Crisis
The most immediate and visible damage is in Russia’s refining sector. Ukrainian drones have struck a Russian refinery every three days on average through the first eight months of 2026, according to industry monitoring. The results are stark: national refinery throughput fell to 3.8 million barrels per day by June, down 30% from a year earlier and the lowest level in over two decades. Gasoline output is down roughly 20%, diesel nearly 30%, and fuel shortages have been reported across 92% of Russian regions.
In response, President Putin signed a decree in late September 2026 classifying virtually all energy export data—refinery production figures, export contract details, product names, quantities, prices, buyers, sellers, payment terms, shipping routes, and vessel coordinates—as state secrets. Customs statistics and planned sales volumes on commodity exchanges fall under the same restrictions. The Kremlin’s rationale is straightforward: the less Western governments can verify independently, the harder the price cap is to police. Moscow has pointed to “unfriendly actions” by Washington and its allies as justification.
The secrecy decree follows earlier moves to conceal oil output data after the 2014 Crimea annexation and again after the 2022 invasion. Officials insist the damage is under control. Deputy Prime Minister Alexander Novak said fuel supply had improved on additional refinery deliveries, while Putin himself put the share of refineries still needing repairs at around 10%. But the data tells a different story.
Oil: Production at a 16-Year Low
Russia’s crude oil production fell to 512 million tonnes in 2025, according to Deputy Prime Minister Novak—the lowest level since 2009 and the third consecutive annual decline. For comparison, production was 535 million tonnes in 2022, 530 million in 2023, and 516 million in 2024. Even during the pandemic year of 2020, output was slightly higher at 512.7 million tonnes.
The government had initially planned to increase production to 520 million tonnes in 2025, with OPEC+ allowing Russia’s quota to rise from 8.98 to 9.57 million barrels per day. But by year-end, Russian oil companies were producing only 9.33 million barrels per day. In December, production unexpectedly dropped by 250,000 barrels per day instead of rising.
The problem is not just sanctions—it is the depletion of Soviet-era fields and the loss of access to Arctic offshore reserves due to Western technology restrictions. According to Russia’s long-term energy strategy approved last year, oil production could fall to 477 million tonnes by 2036 and 287 million tonnes by 2050 under a “normality scenario.” In a “stress scenario” involving tightened sanctions, Russia would pump just 171 million tonnes annually by 2050—one-third of current levels.
Since late November 2025, when new U.S. sanctions on Rosneft and Lukoil took effect, 35 million unsold barrels of Russian oil have been stranded in the holds of shadow fleet tankers wandering the world’s oceans.
Gas: The European Exit and the Asian Dilemma
Russia’s gas sector is undergoing its own structural collapse. Natural gas exports to Europe fell 44% in 2025 to just 18 billion cubic meters—the lowest level since the mid-1970s—following the closure of the Ukrainian transit route. At their peak in 2018-2019, Russian pipeline gas exports to Europe reached approximately 180 billion cubic meters annually. The European Union plans to halt all remaining purchases of Russian gas starting in 2027.
Russia’s Economic Ministry has now lowered its 2026 gas production and export forecasts. Natural gas production is expected to reach 683.1 billion cubic meters this year—5.3 billion cubic meters below the May projection, though still above the 662.7 billion cubic meters produced in 2025. Seaborne LNG exports are forecast to rise to 35 million tonnes from 30.3 million tonnes in 2025, but this is 5.3 million tonnes below previous expectations.
The Kremlin has attempted to pivot to Asia, but the economics are unfavorable. China has effectively become an almost unrivaled market for Russian LNG amid the loss of EU access—imports rose 18% to 9.8 million tonnes in 2025—but revenue remained practically unchanged at about $5 billion due to falling prices. This dependence on a single sales direction makes exports vulnerable to price pressure from Beijing.
Negotiations for the Power of Siberia 2 pipeline have stalled because China is demanding a nearly fivefold reduction from Russia’s proposed price, seeking to pay Russia’s domestic market rate of around $50 per thousand cubic meters. Deputy Prime Minister Novak said this month that China will take more than 60% of Russia’s gas exports by 2030—a concentration that leaves Moscow with little bargaining power.
Kazakhstan has emerged as a modest alternative outlet. Russian gas deliveries to Kazakhstan will reach 11 billion cubic meters this year, up from 4 billion in 2025, with discussions underway for about 9 billion cubic meters in 2027. But this is a fraction of the lost European volumes.
Oil Exports: China Squeezes India
The export picture is equally complicated. Russia’s oil export availability has contracted sharply, notably from the Black Sea port of Novorossiysk, where shipments have fallen by roughly half as repeated drone attacks suspended loadings. In September 2026, Russian oil arrivals to India were set to fall to around 1.75 million barrels per day, the lowest since April, after already declining 16.5% in August.
The cause is not just reduced supply but intensifying competition from China. “Demand from China has been really high. They were willing to book cargoes in advance and to pay firmer prices compared to Indian refiners,” a source involved in Russian crude sales said. Chinese refiners are increasingly using the Arctic Northern Sea Route, which offers a secure and cost-effective channel, while shipments to India via the Red Sea face heightened security risks from Houthi attacks.
Indian refiners have been forced to turn to pricier alternatives—UAE Murban, Iraqi Basrah, and Angolan cargoes—as Russian supplies tighten. Turkey, the third-largest buyer of seaborne Russian crude, is also cutting imports as prices rise and Asian demand strengthens.
Coal: Resilience Through State Support
Coal has been the most resilient segment of Russia’s fossil fuel industry, though its stability is heavily dependent on government subsidies. Russia produced 440 million tonnes of coal in 2025, essentially unchanged from 2024, according to Deputy Prime Minister Novak. The government introduced a support program including deferrals of tax and insurance premium payments, targeted support measures, and partial compensation for logistics costs.
Coal exports have declined 17% since 2021, largely due to the EU ban on Russian coal imports that took effect in August 2022. Before the war, around two-thirds of Russia’s coal exports went to the EU. Since the ban, Russia has significantly increased exports to Asia and Turkey—a 73% rise to China, 40% to South Korea, a doubling to India, and a threefold increase to Turkey.
The government has approved an updated long-term coal industry development program targeting output of 662 million tonnes by 2050 and exports of 350 million tonnes. The Kuzbass region, Russia’s leading coal-producing area, produced 120.6 million tonnes in the first eight months of 2026, down 3.75% year-on-year, though rail shipments for export rose 8.1%.
The Revenue Collapse
The financial toll is severe. Russia’s oil and gas revenues fell 24% in 2025 to 8.48 trillion rubles (approximately $109 billion)—the lowest level since 2020. The Finance Ministry attributed the decline to lower oil prices and the impact of U.S. sanctions on Rosneft and Lukoil imposed in November.
This revenue collapse comes as war costs continue to mount. The oil and gas sector has historically accounted for a substantial portion of Russia’s federal budget, and its declining contribution creates a structural fiscal challenge that cannot be easily offset.
What Lies Ahead
Russia’s fossil fuel industry is navigating a convergence of pressures: military strikes on its refining infrastructure, sanctions that have severed its most profitable markets, the depletion of Soviet-era oil fields, and a buyer’s market in Asia where China holds the upper hand. The secrecy decree represents an acknowledgment that transparency now works against Moscow’s interests.
The long-term outlook is grim. Russia’s own energy strategy projects oil production falling to 287 million tonnes by 2050 under current trends. Gas exports to Europe are ending. China, the only large alternative market, is driving a hard bargain. The industry that once made Russia an energy superpower is being reduced to a regional supplier with limited leverage—and the data that would measure this decline is now classified.
