As anxiety grows surrounding Iran’s expected retaliation for Israel’s reported assassination of Hamas and Hezbollah leaders, Russia has extended gasoline export restrictions through the end of October. These unrelated events highlight the extent to which geopolitical developments — including war, sanctions and other events — are both reshaping and threatening global oil and gas markets. 

Russia’s 2022 invasion of Ukraine and the ensuing US and wider Western sanctions have ongoing consequences that will exacerbate any new disruptions. Russia’s attack and the Western response have already substantially altered Russia’s role in the global energy system and are also affecting the system itself. 

Russia successfully reoriented its oil exports from Europe to China and India, which absorbed 90-95% of Russia’s crude exports in 2023. With its surging exports to the east, Russia has surpassed Saudi Arabia to become China’s top oil supplier. Nevertheless, these exports have traded at a discount due to the combination of a Western price cap mechanism and greater bargaining power for buyers willing to take Russian oil. India’s mostly nonconvertible rupee and a swelling Indian trade deficit with Russia required creative payment arrangements that both sides seem to have worked out. 

As Russian oil companies contend with sanctions, Russia’s refineries are enduring small-scale but persistent and carefully targeted Ukrainian drone attacks. These strikes have reportedly affected 12-17% of Russia’s refining capacity and may have contributed to the Russian government’s new extension of its gasoline export limits. Russia’s official government newspaper attributed the decline in gasoline production that prompted the export ban to “planned and unplanned repairs” at key refineries, including some of the sites that Ukraine’s drones have damaged.