The Peter Zeihan Podcast Series - Ukraine Attacks Russian Energy Terminal (Drone Strike!) || Peter Zeihan

Episode Date: January 26, 2024

Ukraine managed to sneak some drones by Russian air defenses and hit the Ust-Luga oil refinery and loading facility. The attack didn't cause significant damage, but it disrupted production and shipping operations. Ask Peter your question here: https://zeihan.com/ask-peter/ Full Newsletter: https://mailchi.mp/zeihan/ukraine-attacks-russian-energy-terminal

everybody, Peter Zion here coming to you from above the very active Kilauea volcano. That's the crater that cooked off the last year. Today we're going to talk about an assault that happened last week. The Ukrainian sent a squad of drones north out of Ukraine over Russian airspace into the Gulf of Finland to attack the Uga Oost, I hope I pronounced that right, oil refinery and loading facility. Now, normally this wouldn't really matter because normally drones, as we've seen, can't get through any sort of meaningful air defense. But the Russian air defense in this area appears to be just as crappy as it is everywhere else in the country, so a bunch of them got through. The other reason I wouldn't normally care about this is most refineries, everyone gets all ooh and on. They expect Hollywood explosions when a bomb goes off in a refinery.

You know, kind of keep in mind scale here. Most refineries are over a square mile, and this one's no exception. There's a lot of standoff distance among the different facilities. so if something does blow, it doesn't blow up the whole thing. And crude oil, at room temperature, isn't even flammable. So the warheads that these bombs can carry, which are less than 100 pounds, probably with the models that were used, probably under 20 pounds. It's, you know, you can't do damage, but you can't do real damage.

But this is not just a refinery. This is also a loading facility. And in a refinery, once you've made your fuels, fuels being more flammable than raw crude, you then put them into a truck or a pipe and send it away. with a port facility, you put into a big giant tank, and then a large vessel comes by and sucks off what it needs and goes on its merry way. And so the tanks themselves are the vulnerable points here. Now, judging from the size of the explosions and the fires that were started, the tanks were not hit. That's just something that you should have in the back of your mind when you're evaluating when somebody says a refiner, a certain piece of energy infrastructure was hit, so you know what to look for.

What's interesting here, two things. Number one, it took the Russians more than three days to put out the fire, and they put it out the wrong way, using water in, you know, the near Arctic winter, which caused a lot of water to freeze and then expand and wreck more infrastructure. Damage assessments are still underway. We don't know how bad it was, and it had this been a normal attack we would have known within 24 hours, whether or not anything substantial had been done. But here we are nearly a week out, and we still really don't have any more, but the vegas ideas, and the facility is. shut down. Now, there's a lot of reasons why this matters. Number one, while the Europeans have put sanctions on seaborne crude, seaborne oil product is in a loophole. So they were still taking stuff from this facility. And with its shutdown, all of a sudden, sanctions have gone up to a whole new level. And we're going to have a very good idea of how the Europeans can absorb or not

this newest change. Quick add on, the Ukrainian attack on Ushluga was on Sunday the 21st and less than 72 hours later the Russians were able to begin shipping out again. However, what is being shipped out is primarily, well, almost exclusively, oil and something called condensate, which is kind of a raw product somewhere between natural gas and oil. The actual refining complex remains completely offline. There's no nap that there's no fuel, there's no intermediate products that are coming out at all. And at present, the Russians are still completing their damage assessments. And at the pace they're going, we probably won't have any information on the level of damage until probably March.

And then, with their very, very thin, remaining skin of skilled labor, they can start talking about repairs. Second, this is the first significant Ukrainian attack against a significant economic asset of the Russian Federation. And at least on the surface, it looks like it was much more successful than they ever thought was possible. that means that the northern parts of the Baltic Sea in the Gulf of Finland are suddenly in a danger zone that is well within the Ukrainians' proven range of operation. Now, the Ukrainians and the Russians haven't really gone against civilian shipping right now, but I can't think of a better target than an oil loading and refining platform, such as what we've got, an Usulah. Again, apologies for the nation.

We're just going to put the spelling right here so you can see what I'm having the trouble with. Okay. So this is the sort of thing. we should now watch for in the future because this is not the only facility of this type which is within the Ukrainians reach. There are a number of facilities at Nover Rosiske on the Black Sea and Tuopsa on the Black Sea and closer to St. Petersburg also on the Gulf of Finland. And now that the Ukrainians have proven that a few things can slip through, you can bet that they're going to target all of them. And all told, if you look at all of the infrastructure combined, it's combined export and throughput capacity.

is in the vicinity of 3.5 million barrels a day, which is about 3.5% of global output. So if you put a meaningful dent in the export infrastructure, it's impossible for the Russians to shunt this stuff somewhere else. There's nowhere else to go. And so it just backs up through the system. There's also one other thing to look at. The fact that the damage control crews proved to be so incompetent is something that we're starting to see at the edges, as the Russian economic system frays. The Soviet educational system collapsed back in 1986, which which means that the youngest people who are worthy of terms like engineer turned 64 this year. And so when I think of fire suppression, I think of something that normally I could not just pick up the hose and go do it.

You want someone with specialized training. And especially if you're talking about petroleum, natural gas, a refined product fires, you definitely want someone has some idea what they're doing. Russia is running out of those people. It's not just that a million people have fled the country and a half a million have been drafted and committed to the war have been killed. They don't have much of a skilled labor pool left. and what they do have is being dedicated to the war itself, air defense and the vicinity of the war, or the military industrial conflicts to keep the war going.

So we're seeing some very serious phrase with the system. This is not the sort of thing that they should have gotten wrong. That fire should have been put out very quickly with things like foam, and it wasn't. And that suggests the Russians' ability to maintain their overall system is starting to feel the strain of all of this, and they don't have a backup plan. There isn't enough labor in the country to redirect from somewhere else, especially skilled labor. All right. That's it for me. Take care.