Russia Energy Weekly Review: Sanctions Pressure Nuclear Sector, Hydropower Shows Growth

Bottom Line

Against the backdrop of direct sanctions against Rosatom and a structural decline in oil and gas export revenues, investors should reallocate assets in favor of hydropower companies and nuclear industry suppliers demonstrating operational growth and technological innovation, while reducing exposure to the traditional oil and gas sector due to persistent geopolitical and operational risks.

Key Developments

1. UK Imposes Sanctions on Rosatom Structures — On February 24, 2026, the UK introduced a new sanctions package directly targeting the supply chains of the Russian state corporation Rosatom, creating direct operational risks for the corporation's international projects. Portfolio implication: Expect potential delays in the implementation of Rosatom's overseas projects (e.g., the El Dabaa NPP in Egypt) and increased costs. Review portfolio companies dependent on contracts with the nuclear corporation and consider diversifying towards suppliers from friendly jurisdictions or domestic service companies.

2. Russia's Energy Export Revenues Fall by 27% — In the fourth year since the start of the conflict, budget revenues from oil and gas exports have decreased by 27% compared to the pre-war period due to Western sanctions and structural changes in global markets, highlighting a long-term negative trend. Portfolio implication: Reduce the weighting of securities of major oil and gas companies focused on European exports. Shift focus to segments with growing exports (coal, nuclear technology) and to companies developing supplies to Turkey and Asia, where Russia, according to Deputy Prime Minister Novak, maintains key positions.

3. RusHydro's Hydropower Generation Rises by 1.8% — PJSC RusHydro reported an increase in generation at hydroelectric and pumped storage power plants to 95.5 billion kWh for the reporting period, mainly due to Far Eastern facilities (growth of 14.1%), confirming the resilience and potential of hydropower generation. Portfolio implication: Increase exposure to RusHydro shares and companies related to HPP infrastructure as a defensive asset with stable domestic revenue, low dependence on export sanctions, and state support. The growth in generation directly supports cash flows and dividend potential.

4. Data Center Operators Begin Investing in Uranium Mining — On February 24, 2026, Russian data center (DC) operators began direct investments in uranium mining, reflecting a new trend of diversifying funding for the nuclear industry amid growing demand for nuclear fuel. Portfolio implication: Consider uranium mining companies and fuel cycle suppliers as targets for long-term investments. The influx of capital from the high-margin IT sector could become an additional driver of valuation growth and indicates the increasing strategic value of the nuclear value chain.

5. Disputes Over the Druzhba Pipeline: Hungary and Slovakia vs. Ukraine — The southern branch of the Druzhba oil pipeline, a key export route for oil to Hungary and Slovakia, has been halted for a month due to disrupted supplies via Ukraine, leading to joint accusations and a reciprocal halt of electricity supplies from Slovakia to Ukraine. Portfolio implication: Factor in increased transit risks and volatility for oil companies exporting via Ukraine. Monitor the possibility of redirecting flows through alternative routes (e.g., seaports, TurkStream) and be prepared for short-term spikes in logistics costs, which could pressure margins.

Sector Pulse

Risk Watch

• Escalation of Sanctions Against the Nuclear Industry — Risk of additional restrictions from other Western countries on Rosatom structures, its subsidiaries, and supply chains, which could critically disrupt the fulfillment of international contracts and access to critical technologies. Probability: High. Impact: High.

• Geopolitical Crisis Around Energy Transit — Further escalation of the conflict around Ukraine, leading to a complete halt of oil transit via the Druzhba pipeline or gas via the Ukrainian GTS, with potential retaliatory measures affecting European consumers and the financial flows of Russian exporters. Probability: Medium. Impact: High.

• Operational Risks from Physical Attacks on Infrastructure — Continuation of drone attacks on energy facilities, similar to the strike on an oil depot in Luhansk, leading to direct material losses, downtime, increased insurance premiums, and security costs. Probability: Medium. Impact: Medium.

Outlook

Key events and indicators to monitor next week:

• The anticipated signing of an intergovernmental agreement between Russia and Vietnam on the construction of the Ninh Thuan-1 NPP — a key indicator of Rosatom's ability to expand its export project portfolio despite sanctions pressure.
• Publication of operational data on oil production in Russia for February 2026 — will provide the first signs confirming or refuting Goldman Sachs' forecast of a 3% production decline in 2026.
• Progress of repair work at the Zaporizhzhia NPP and the possible lifting of the local ceasefire regime — an important signal of stabilization of the operational situation at a critical facility, affecting risk perception in the nuclear sector.

Positioning consideration: Use corrections in the shares of companies linked to Rosatom on sanctions news to gradually build long-term positions, while simultaneously increasing the share in hydropower as a more protected asset with visible generation growth.