CEEMEA Economics Analyst Factoring War Related Supply Shocks Into Our Russia Forecasts

Economics Research 31 July 2026 | 11:07AM BST

Factoring War-Related Supply Shocks Into Our Russia Forecasts

n Ukraine’s drone strikes on Russia’s industrial and logistics Infrastructure have had Clemens Grafe | a meaningful impact on the economy. Quantifying this impact is naturally Goldman Sachs International imprecise since it requires a view on the intensity of the strikes in the future and the ability of Russia to offset the supply shocks through imports. We are reducing our growth forecast for 2026 from 0.9% to 0.2% and see a more drawn-out recovery, while we have raised our end-year inflation forecast from 6% to 6.5%. n The implication for the Ruble in our view depends on the need to tighten financial conditions to reduce demand sufficiently to absorb the supply shock. The Bank’s surprise 25bp cut to rates on Friday (July 24) suggests that the Bank sees the shock to confidence as sufficiently large to reduce demand on its own, while it believes the government will be able to stabilise the fuel supply. Hence, our confidence in the Ruble outperforming the forward has fallen. n While Ukraine is attacking a range of different targets, we think it is the refinery outages that can potentially constitute the most meaningful shock to supply depending on the future scale of the attacks, with the response of the economy likely very non-linear. Given the mismatch between the production and consumption of refined products in Russia, reductions in capacity smaller than 35-40% lead almost entirely to gasoline shortages, while diesel and other products are generally still easily available. Thus, for limited outages of refineries, it is mostly private transport that is hit rather than the industries that rely on the input of heavier product. We think the fact that Russia has now extended the ban on gasoline exports to diesel suggests that the refinery outages are close to the 40% level where self-sufficiency in diesel is not guaranteed. With the attacks ongoing, we suspect that sooner or later Russia will need to show that it can import diesel at scale to neutralise that choke point. n As before, Russia has the financial resources to import refined product at scale, but there are potential bottlenecks in the supply lines, as well as risks that the Western lead alliance supporting Ukraine might use sanctions to complicate that effort. On balance, we view the threat posed by the drones as a fundamentally more difficult one for Russia to absorb than the sanctions imposed in the past.

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Goldman Sachs CEEMEA Economics Analyst

Factoring War-Related Supply Shocks Into Our Russia Forecasts

Direct Economic Impact of Drone Strikes Likely Relatively Limited So Far, But That Could Change Ukraine has in recent weeks expanded its drone attacks on Russian industrial infrastructure in terms of scale, scope and territory it can reach. It appears that Ukrainian drones can now reach all of European Russia, where the bulk of Russia’s economic activity other than mining is concentrated. The immediate impact on activity depends on both the type of targets hit and the severity of the hits. Ukraine has concentrated its drone strikes in three areas so far:

n Infrastructure in occupied Ukraine, in particular in Crimea and Kherson. n Warehouses of Russia’s large online retailers. n Refineries and fuel storage, and port infrastructure.

While economic activity in Crimea and Kherson is likely severely affected by the strikes on the regions’ water, electricity and transport infrastructure, these areas are too small to have a meaningful impact on Russia’s aggregate economic dynamics. Economic data are scarce but, on our estimates, Crimea and occupied Kherson’s economies account for about 0.5% of Russian GDP. Assuming that the economy shrinks by the same margin as the Ukrainian economy has since the start of the war, this could potentially reduce Russian GDP by 0.1-0.2pp, though some of that decline will have fallen into the previous years.

The impact of the attacks on the warehouses…