How strikes in Ukraine wreak havoc on Russia

Ukraine’s drone attacks have been the headlines for its war with Russia – and boosted NATO’s investment outlook.

Having ramped up drone production and energy during the four years of war, Ukraine has stepped up its attacks on Russian energy infrastructure and military assets, targeting high-tech oil refineries in major cities as part of an ongoing campaign to cut off Russia’s energy revenues.

Defense experts and diplomats have described their drone campaign as crucial in helping to stop Russia’s military push, while also warning that Kiev’s breakthrough has greatly increased the risk of escalation.

Earlier this week, Ukraine marked what appeared to be the country’s deepest incursion into Russian territory in the war so far.

Black smoke was seen billowing from an oil refinery in Omsk on Tuesday, prompting Ukrainian President Volodymyr Zelenskyy to declare that the country’s drone development had put Siberia “within its reach.” The Omsk center is located approximately 2,500 kilometers (1,553 miles) from Ukrainian territory and near the Russian-Kazakhstan border.

Ukraine’s developments on the battlefield highlight how the rapid adoption of drones is changing modern warfare, as combat becomes increasingly autonomous, connected and data-driven.

Two things have changed to allow Ukraine to accelerate its long-range strikes into Russian territory, according to Bob Tollast, a researcher in international warfare at the Royal United Services Institute, a defense and security think tank based in London.

A concerted effort from the Ukrainian military to increase production and improve internal navigation, software and machine vision have all helped improve resilience when satellite navigation is congested, Tollast said.

Foreign support for Ukraine may also have played a role, he added, noting that oil refineries and terminals were major targets.

“We will see how Russia reacts, they have had limited success with nets and drone interceptors of the type used by Ukraine, and for a long time they have put air defense systems on towers and tall buildings,” Tollast told CNBC in an email.

“But with home-made Ukrainian missiles like the Flamingo on the scene hitting industrial sites (including air defense production) the picture is worse for Moscow,” he continued.

“Ukraine’s counter-refinery campaign is now in full swing, but it may be too early to say whether Russia will be permanently damaged because the sector has long been strong,” Tollast said.

Russia has responded by ramping up its drone production and integrating them more into its overall military.

Outside the front line, Ukraine’s drone campaign also appears to have had an impact on NATO’s defense spending plans.

NATO Secretary-General Mark Rutte said on Tuesday that drones have “fundamentally changed” the nature of modern warfare and become a “decisive factor” on the battlefield, citing the Russia-Ukraine war as one example.

Rutte’s comments came as he announced the launch of the alliance’s NATO Drone Edge initiative, a program where the allies are set to invest more than $40 billion in anti-drone capabilities over the next five years.

“Together, we are building a drone-ready Alliance. We are using the latest technology, investing in our defense industries across the Atlantic, and learning real-world lessons from the Ukrainian battlefield,” Rutte said.

Along with cutting off Russia’s energy income, the Ukraine drone attacks are designed to try to force Russian President Vladimir Putin to end the war.

Ukraine’s success on the battlefield has caused a change in the way the country is viewed and its relations with NATO and the EU. Security analysts and world leaders alike have highlighted that Ukraine increasingly has something to offer allies and should not be seen as a mere beneficiary of military support and donations.

Ukraine is winning because they are good at drones and anti-drone systems — technologies that other NATO allies lack, Ulrike Franke, senior policy fellow at the European Council on Foreign Relations, told CNBC.

Ukraine holds all the cards, he said, adding that they have “drone and counter-drone systems, as well as data on how to fight the Russians.”

It comes as the war is undergoing a sea change where expensive, traditional technologies are being challenged by a more agile, decentralized model, often led by startups and informed by what’s happening in Ukraine.

Ukraine has become a world leader in drone warfare out of necessity, says Morningstar analyst Loredana Muharremi. “Faced with a larger and better armed military, it could not compete equally, forcing it to quickly innovate with less expensive, commercially available drones adapted for military use.”

“The real innovation was not the technology itself, but the procurement model,” he added in comments emailed to CNBC.

Throughout the four-and-a-half-year war, Ukraine has built an innovation cycle that is faster than that of legacy defense companies, which often take years.

Collaboration between the military, domestic startups, and private industry has allowed new technology to be deployed in just a few weeks and drones to continuously evolve based on battlefield feedback, Muharremi said.

“The big one [financial] The impact is expected to come from high-quality food and arrears in the next two to three years, making a significant contribution to revenue and earnings from 2028 onwards,” said Muharremi.

Finnish President Alexander Stubb said Ukraine’s Zelenskyy now had “the cards” to carry out long-range drone strikes, something the Trump administration said it had denied in October last year.

“There are two different problems here. You have long-range attack cards, so drones and missiles, say Russian refineries, and reduce their production and export capacity by 40%,” Stubb told CNBC on Tuesday.

“And he is actually changing the situation with the population of Russia, which is now for the first time against the war. So, this should influence the strategic thinking of Russia.”

Finland’s president warned, however, that “we shouldn’t all be surprised by it,” saying that Ukraine needs air defense to bolster its war effort.

US President Donald Trump held separate phone calls with Russia’s Putin and Ukraine’s Zelenskyy over the weekend and said Monday that a solution to the conflict is “closer than people think.”