Key Takeaways:
Ukrainian long-range drone strikes have shattered the Kremlin's four-year effort to shield ordinary Russians from the war, destroying warehouses of the country's largest e-commerce company and knocking out more than half of its oil refining capacity.
Ukrainian drone strikes on Russian logistics hubs destroyed $3 billion to $4.4 billion in goods at Wildberries warehouses and knocked more than 50% of the country's refining capacity offline, bringing the war's economic toll to Russia's urban middle class for the first time since the full-scale invasion began in 2022.
"For years Putin has been selling the story that the fighting is somewhere on the fringes of the empire, it's a special military operation, and everything is normal," said Maxim Mironov, a finance professor at IE Business School in Madrid. "Now, people have begun to feel it, because of the lines at gas stations, because of the fires."
The attacks on Wildberries, which hosts 81 million monthly users and hundreds of thousands of third-party vendors, killed at least nine people and destroyed inventory worth $3 billion to $4.4 billion, according to Data Insight, a Moscow-based research firm. Separately, Ukrainian drone strikes on Russian refineries have knocked more than half of the country's refining capacity offline in July, according to IIR Energy, forcing Russia to import gasoline for the first time in years and creating hours-long lines at gas stations.
The economic fallout marks a turning point in how Russians experience the war. A record 60% of Russians told Gallup between March and May that local economic conditions were worsening, the first time a majority had been negative since the pollster began asking in 2006. Moscow's stock index has lost about 25% of its value this year, and the Finance Ministry halted new bond sales this week to stabilize the market.
Wildberries Vendors Face $4B in Losses
The strikes hit four Wildberries facilities, including a vast complex outside Moscow that burned for more than two days. Most of the losses stem from destroyed goods belonging to third-party vendors rather than Wildberries' own buildings, according to Data Insight. Less than two weeks before the attacks, the company amended its vendor agreement to absolve itself of liability in the event of drone strikes. Founder Tatyana Kim said the company's insurance policy did not cover drone attacks.
Viktoria Terekhova, who sells children's clothing under the brand Fareal, lost about half her inventory — worth more than $160,000 — in the strikes on the Moscow and southern Russia warehouses. She said in an interview that the attacks put her business at risk of defaulting on its loans. "If these strikes continue, we'll have nothing left," she said.
Ukrainian President Volodymyr Zelensky justified the attacks by saying the Wildberries logistics hubs help supply the Russian military with drone components, navigation equipment and other gear. A review of the Wildberries website shows drones and body armor for sale, though the overwhelming majority of its offerings are civilian goods.
Fuel Crisis Spreads to Gas Stations
The refinery attacks have produced the most visible economic shock for ordinary Russians since the mobilization of new troops in September 2022, according to Oxford Economics. So far in July, more than half of Russian refining capacity has been knocked offline, according to IIR Energy estimates. The shortages have pushed up fuel prices, stoking inflation and forcing the Central Bank to slow the pace of interest-rate cuts — a disappointing shift for local investors and businesses.
Russia's main stock index has lost nearly one-quarter of its value so far this year, sinking last week to its lowest level since October 2022. After a selloff in government bonds, the Finance Ministry said this week it was halting new sales "to aid with stabilizing the market situation."
President Vladimir Putin dismissed the fuel crisis as "temporary" in a televised meeting with top economic policymakers Wednesday, showing no inclination to scale back military ambitions in Ukraine. Deputy Prime Minister Alexander Novak said the government would consider lifting the ban on diesel exports "as the market recovers."
The last time Russia faced comparable economic strain from external attacks was during the mobilization shock of September 2022, when the Moscow stock index fell 30% over two weeks and the ruble weakened 15% against the dollar. This time, the damage is more diffuse — hitting consumer goods, fuel supplies and financial markets simultaneously — and shows no sign of abating as Ukraine's drone campaign continues to intensify.
This article is for informational purposes only and does not constitute investment advice.
