At least 40% of Russia’s oil export capacity is at a halt following Ukrainian drone attacks, a disputed attack on a major pipeline and the seizure of tankers, according to Reuters calculations based on market data.

The shutdown is the most severe oil supply disruption in the modern history of Russia, the world’s second largest oil exporter, and has hit Moscow just as oil prices exceeded $100 a barrel due to the Iran war.

Russia’s oil output is one of the main sources of revenue for the national budget and is central to the $2.6 trillion economy.

UKRAINE HAS INCREASED ATTACKS

Ukraine intensified drone attacks on Russia’s oil and fuel export infrastructure this month, hitting all three of Russia’s major western oil export ports, including Novorossiysk on the Black Sea and Primorsk and Ust-Luga on the Baltic Sea.

According to Reuters calculations, about 40% of Russia’s crude oil export capabilities – or around 2 million barrels per day, were shut as of Wednesday after the most recent attack.

That includes Primorsk and Ust-Luga as well as the Druzhba pipeline, which runs through Ukraine to Hungary and Slovakia.

Kyiv has also targeted pipeline oil pumping stations and refineries. Kyiv says it aims to diminish Moscow’s oil and gas revenue, which accounts for around a quarter of Russia’s state budget proceeds, and weaken its military might.

Russia says the Ukrainian strikes are terrorist attacks and has tightened security across its 11 time zones.

PORTS, PIPELINES, AND TANKERS

Ukraine said that part of the Druzhba pipeline was damaged by Russian strikes at the end of January, while both Slovakia and Hungary demanded Kyiv restart the supplies immediately.

The Novorossiysk oil terminal, which can handle up to 700,000 bpd, has been loading oil below plan since damage from a heavy Ukrainian drone attack early this month.

In addition, frequent seizures of Russia-related tankers in Europe have disrupted 300,000 bpd of Arctic oil exports flowing from the port of Murmansk, traders said.

With its westward export routes under fire, Moscow must rely on oil exports to Asian markets, but those routes are limited due to capacity, traders said.

Russia continues uninterrupted supplies via pipelines to China, including the Skovorodino-Mohe and Atasu-Alashankou routes, as well as ESPO Blend exports by sea via the port of Kozmino.

Together, the three routes account for some 1.9 million bpd of oil.

Russia also continues to load oil from its two far eastern Sakhalin projects, shipping about 250,000 bpd from the island.

Traders also say that Russia is supplying the refineries in neighboring Belarus with around 300,000 bpd of oil.

Gulf Arab states told the UN Human Rights Council on Wednesday they face an existential threat from Iranian attacks on their infrastructure, which the UN rights chief said might constitute war crimes.

The nearly month-long US-Israeli war on Iran has sparked large-scale Iranian retaliation in the form of drone and missile strikes on energy and civilian infrastructure in Gulf countries, killing civilians and driving up oil prices.

“We are seeing an existential threat to international and regional security. This aggressive approach is undermining international law and sovereignty,” Kuwait’s ambassador Naser Abdullah H. M. Alhayen told the Geneva-based council.

Other Gulf states said Iran’s actions were designed to spread terror, with the United Arab Emirates’ ambassador Jamal Jama al Musharakh denouncing Iran’s “attempt to destabilize the international order through reckless adventures of expansionism.”

Countries at the 47-member council adopted a motion by consensus condemning Iran’s “unprovoked and deliberate” strikes, seeking reparations from Iran and asking the UN rights chief to monitor the situation, a document showed.

Iran defended its actions, saying more than 1,500 civilians had been killed in the US-Israeli strikes so far. “We fight on behalf of all of you against an enemy that, if not restrained today, will be beyond containment tomorrow,” said Iran’s ambassador to the UN in Geneva Ali Bahreini, referring to Israel.

Iran, backed by China, will hold its own emergency session on a fatal strike on a primary school on Friday.

The United Nations’ top rights official Volker Turk urged states to end the Iran conflict, describing the situation as extremely dangerous and unpredictable.

“Attacks on civilians and civilian infrastructure must end. If they are deliberate, such attacks may constitute war crimes,” he told the council.

While Gulf states received strong backing in the council on Wednesday, the International Service for Human Rights, an independent NGO, warned against “selective outrage,” calling instead for a focus on violations by all perpetrators.

Oman, which had served as a mediator between the United States and Iran before the conflict, was one of the few countries to acknowledge that US-Israeli strikes had preceded Iran’s retaliatory attacks.

“[They were] the spark that ignited the escalation currently affecting the region and the consequences are threatening states and their vital economic interests and their security and stability,” Ambassador Idris Abdul Rahman Al Khanjari told the council.

Iran is still reviewing a US proposal to end the war in the Gulf, despite an initial response that was negative, a senior Iranian official told Reuters on Wednesday, indicating that Tehran had so far stopped short of rejecting it outright.

Publicly, Iranian officials poured withering scorn on the prospect of any negotiations with the administration of US President Donald Trump. But an apparent delay in delivering a formal response to Pakistan, which delivered a 15-point proposal on behalf of Washington, appeared to signal that at least some figures in Tehran may be considering it.

The senior Iranian official‘s comments that the proposal was still under review – though the initial response was “not positive” – appeared to contradict a report by Iran‘s Press TV that cited an unidentified official as saying Iran had rejected it.

A senior Pakistani security official said that Pakistan had followed up with Iran‘s foreign minister and was still awaiting a formal reply.

A second Pakistani source said: “The Iranians told us they will get back to us tonight. The media is reporting they’ve said no. But we have not received any official confirmation from Iran. So, we are just waiting. They are all underground and communication is big challenge.”

Another senior Iranian official had earlier confirmed that Tehran had received a proposal and said that talks, if they went ahead, could be held in either Pakistan or Turkey.

PENTAGON TO SEND MORE TROOPS

Oil prices fell and shares regained some ground on Wednesday after reports that Washington had sent the 15-point plan to Iran, with investors hoping for an end to a war that has killed thousands of people and disrupted global energy supplies.

The senior Pakistani security official said Pakistani intelligence had delivered the US proposal to Iran, and Foreign Minister Ishaq Dar had followed up with Iranian Foreign Minister Abbas Araqchi.

So far there had been no response from the Iranians, or any confirmed dates or venue for talks, the Pakistani official said.

Three Israeli cabinet sources said Prime Minister Benjamin Netanyahu’s security cabinet had been briefed on the US proposal. They said its terms included removing Iran‘s stocks of highly enriched uranium, halting enrichment, curbing its ballistic missile program, and ending funding for regional allies.

The Pentagon is meanwhile planning to send thousands of airborne troops to the Gulf to give Trump more options to order a ground assault, sources have told Reuters, adding to two contingents of Marines already on their way. The first Marine Expeditionary Unit aboard a huge amphibious assault ship could arrive around the end of the month.

IRANIAN MILITARY RULES OUT DEAL WITH TRUMP

Pakistan has offered to host talks attended by senior US officials as soon as this week. A senior ruling party official in Turkey, Harun Armagan, told Reuters that Ankara was also “playing a role passing messages” between Iran and the US.

But so far there has been no public recognition from Iran that it is willing to negotiate at all, and its assertions that it will not do so have become increasingly caustic.

“Has the level of your inner struggle reached the stage of you negotiating with yourself?” the top spokesperson for Iran‘s joint military command, Ebrahim Zolfaqari, taunted Trump in comments on Iranian state TV.

“People like us can never get along with people like you,” he said. “As we have always said … no one like us will make a deal with you. Not now. Not ever.”

Iran‘s foreign ministry spokesperson, Esmail Beghaei, appearing on television in India, said nuclear talks had already been under way when Trump attacked. He called this “a betrayal of diplomacy” that proved further talks were pointless.

There are “no talks or negotiations between Iran and the United States,” he said. “No one can trust United States diplomacy.”

A senior Israeli defense official said Israel was skeptical Iran would agree to the terms, and that Israel was concerned that US negotiators might make concessions in any talks.

TRUMP’S SOFTER STANCE SOOTHES MARKETS

A source familiar with Israel’s war plans said Israel wanted any US-Iranian agreement to preserve Israel’s option to conduct pre-emptive strikes.

Trump said early in the war that it would end only with Tehran’s “unconditional surrender,” but has abruptly changed tack this week, saying “productive” talks were already under way with unspecified Iranian officials.

His softer stance has brought a respite in financial markets, which have seesawed but largely stabilized since Monday when he postponed a threat to escalate the bombing by attacking Iran‘s civilian energy system.

Iran has derided Trump’s announcement as an attempt to buy time and placate markets.

MORE STRIKES

The war has raged on with no let-up in air attacks against Iran, or in Iranian drone and missile strikes against Israel and US allies.

An Israeli military official, asked whether Israel had adjusted its military plans since Trump said talks were under way, said it was “pretty much business as usual.”

The Israeli military described several new waves of attacks on Iran during the day, including one on Iran‘s construction of ships and submarines.

The semi-official Iranian SNN News Agency said a residential area was hit in Tehran, with rescuers searching the rubble.

Kuwait and Saudi Arabia said they had repelled new drone attacks.

Iran‘s Revolutionary Guards said they had launched new attacks against Israel and US bases in Kuwait, Jordan, and Bahrain.

Since the start of what the US calls “Operation Epic Fury,” Iran has attacked countries that host US bases and effectively closed the Strait of Hormuz, conduit for a fifth of the world’s oil and liquefied natural gas.

Iran has told the United Nations Security Council and the International Maritime Organization that “non-hostile vessels” may transit the strait if they coordinate with Iranian authorities. In practice, however, only Iran‘s own oil and a handful of ships from friendly countries have made it through.