Is Russia Actually Losing?

In July 2026, Russia's deputy prime minister had to announce an immediate diesel export ban and emergency gasoline imports from India—a humiliating reversal for a country that markets itself as an energy superpower. The cause is no mystery: Ukraine has used long-range drones to destroy approximately one-third of Russia's oil refining capacity, with Kiev's general staff claiming the figure is closer to 43%. Independent energy analysts confirm the number is high enough to force rationing at Russian gas stations.

The campaign has widened beyond refineries to Crimea, the peninsula Putin annexed in 2014 as a symbol of restored Russian greatness. After weeks of drone strikes on power substations and oil terminals, Russian-installed authorities declared a state of emergency, halted civilian petrol sales, and switched off air raid sirens—not because the threat had passed, but because they would otherwise sound 22 hours a day. Tourists sunbathe on Yalta beaches while mobile air defense teams fire machine guns at drones over nearby rooftops. One analysis suggests Kiev is deliberately leaving one bridge standing as an exit route.

The knock-on effects cascade across Russia. Regions routinely shut off mobile networks to blunt drone attacks, which also disables card readers and ATMs, leaving residents unable to buy coffee because of a drone alert three regions away. Moscow has been photographed lowering Pantsir missile systems by helicopter onto apartment rooftops, pulling air defense cover from other sites to do it. A country that invaded to project strength now rations air defenses between its own capital and its own refineries.

Days before the invasion, Putin and Xi Jinping signed a joint statement declaring a «no limits partnership.» Four years later, the arrangement looks increasingly lopsided. China now accounts for roughly 35% of Russia's total foreign trade, up from 16% before the war. With European markets closed, Russia has become a captive supplier: vast quantities of raw materials, one buyer able to take them at scale, and Beijing knows exactly how much leverage this gives them.

You can watch that leverage play out in real time. Putin flew to Beijing in May hoping to close a deal on the Power of Siberia 2 pipeline, meant to redirect gas that used to flow to Europe. He came home with more than 40 signed documents on everything from trade to nuclear security—and nothing at all on the pipeline. China is perfectly happy to let Russia sit there while it keeps squeezing the terms.

Meanwhile, Russia has swapped its European dependency for a Chinese one. Economist Constantine Urgarov dug through Russian customs records and found that Western microprocessors—Intel, AMD—still make up the overwhelming majority of Russia's chip imports. The only thing that's changed is the paperwork, which now routes most of them through China first. Beijing isn't replacing Western technology; it's charging a toll on it. Moscow is mortgaging its economy to the one buyer willing to keep the war machine running in exchange for discount oil.

There's a persistent optimism among certain foreign policy commentators that this can be wrapped up with one executive deal, often resting on the «cornered Putin» theory: you must never corner Russia or the nuclear-armed rat might do something drastic. The logic leans on Putin's own childhood story about chasing a rat down a hallway with a stick. The rat, cornered, turned around and lunged—and Putin ran away.

But the people citing the story as a diplomatic roadmap seem to have forgotten how it ends. The rat didn't negotiate and Putin didn't win. The rat attacked and Putin fled. Four years later, it's Putin backed against the wall, running a war of attrition that's steadily dismantling his own economy with no way out he'd care to explain on television. Ukraine's reluctance to sign a peace deal makes sense in this context: they've learned that deals with Moscow tend not to survive contact with the next Russian offensive. In 1994, Ukraine handed over the third-largest nuclear arsenal in the world in exchange for explicit security guarantees. In 2014, Russia annexed Crimea. The settlement wasn't a peace treaty—it was halftime.

This leaves Europe in an unusual position. NATO is simultaneously in the best and worst shape of its life: expanding, rearming, better funded than ever, and hollowed out by the prospect of America walking away. European planners are working out that they may need Ukraine roughly as much as Ukraine needs them. If the plan is a decentralized porcupine defense, letting Ukraine fall would mean surrendering the most combat-tested part of the whole perimeter.