Ukraine has hit Russia's largest Baltic export oil terminal at Primorsk and set it on fire in an effort to prevent the Kremlin from capitalizing on sky high oil prices due to the war in Iran.

Primorsk and Ust-Luga, another port about 80km to the south, have both been shut down, according to local authorities, while rescue workers attempt to bring large fires under control before repair work can begin.

Russia has seen the price of its sanctioned Urals blend of oil skyrocket in the last three weeks, which currently trading at a premium to the benchmark Brent blend of oil in Asia.

As of March 25, Brent prices had fallen back from a recent peak of $113 per barrel to $99, after US President Donald Trump announced a 15-point plan was under discussion with Tehran to bring the war to an end. Urals was trading at the same $99 on the open market, but customers in Asiawere pay significantly more to secure oil supplies, as governments compete to stock up on oil in the midst of a regional deficit due to the shutdown of Gulf exports.

Russia is the world's only major oil producer that is almost entirely unaffected by the closure of the Strait of Hormuz and able to deliver oil into a market that has lost a fifth of its supply.

Oil revenue shrank to only 20% of Russian budget receipts in the run up to the war causing a major problem and fuelling the rapid rise of the budget deficit. The Kremlin is expecting a major windfall this year, due the break out of the war, depending on how long the conflict lasts.

At the same time The US Treasury Department temporarily eased sanctions on buying Russian oil, issuing a 30-day waiver for India to buy oil stored on tankers at sea. On March 24 the EU also announced that it was suspending planned twentieth sanctions package bans on buying Russian oil because of the mushrooming energy crisis.

Ukrainian President Volodymyr Zelenskiy has been calling for sanctions to be tightened, not loosened, in order to keep the pressure on the Kremlin. Now Bankova has taken matters into its own hands and struck Russia's major export facilities in an effort to prevent the Kremlin from filling an oil supply hole in the international market.

It remains to be seen how much damage has been done to Primorsk and Ust-Luga port on the Baltic sea, the main terminal for shipping Siberian oil to the international market, and if Russian exports will dip. In the last two weeks orders have been flooding in and the Ministry of Finance estimated to be earning $150mn a day from increased exports.

Ukraine launched a campaign to damage Russian refineries last summer to reduce its oil earnings, but these strikes on Primorsk appear to be the most serious yet. According to reports posted on social media, a fire at the Transneft oil terminal has been blazing at the facility for two days and is too big for local emergency services to put out.

The Bashneft-Ufaneftekhim refinery in Ufa, Bashkortostan, has also been hit, one of the largest refineries in Russia with a capacity of 6-8mn tonnes a year of oil products, which is also reportedly on fire.

Primorsk handles around 60mn tonnes of oil annually and is Russia's biggest oil export hub on the Baltic Sea, lying approximately 1,087km from the Ukrainian border. The port can export more than 1mn barrels of oil per day, or about a quarter of all Russia’s oil exports. Ust-Luga handles around 700,000 barrels of oil exports per day, according to Reuters. Ust-Luga exported 32.9mn tonnes of oil products last year, and Primorsk 16.8mn tonnes, Reuters said.

The port of ‌Ust-Luga resumed oil loadings the same day, Reuters reports, after a drone attack alert was lifted, three sources familiar with the matter said. Primorsk remains shut following aerial strikes.

Ukraine also attacked the Primorsk port in September, disrupting oil loading for a few days until fires were brought under control.

A fuel tank and oil-loading infrastructure were hit and burst into flames, according to the General Staff, Reuters reports. The authorities downplayed the damage, but RFE/RL reported that at least four tanks were on fire, citing satellite imagery.

“A fuel tank was damaged in the port of Primorsk, causing a fire,” said Alexander Drozdenko, governor of Russia’s western Leningrad region. He added that Russian air defence systems had destroyed more than 70 drones over the region, but clearly a few got through.

“According to preliminary information, both the tank farm and the oil loading infrastructure were hit,” Ukraine’s General Staff said on social media on March 23. “The aggressor country uses the proceeds from oil sales to continue the war against Ukraine.”