The Irishman was forced to complete the final three stages of the Saturday afternoon loop without the use of hybrid power after an issue with the 100kW Compact Dynamics built unit.
Breen started Saturday leading Tanak by 2.6s, with that lead briefly extending to 3.0s at the end of the morning loop.
But as the afternoon progressed, the Hyundai driver, contesting the first event of his 2023 WRC partial campaign, gradually lost his advantage to Tanak.
In addition to the lack of hybrid boost, a front left tyre delamination towards the end of Stage 13 and a brush with two snowbanks cost him time.
Breen eventually reached the service park facing an 8.6s deficit to Tanak ahead of Sunday’s final three stages.
“Unfortunately coming into the second stage of the loop we basically lost the hybrid and we've carried that around for the rest of the loop," said Breen.
“It was damage limitation and we tried our best. It is a little bit disappointing but that is how it is.”
Despite the setback Breen says the fight for a memorable breakthrough win is not over as crews prepare to tackle three stages on Sunday, comprising 63.04km.
"Never say never,” he added, when asked if he could overhaul Tanak on Sunday.
“It will not be for the lack of trying. We will put our heads down tonight and see what we can do and get everything working in proper order for tomorrow.
“The kilometres are small and the gap is relatively big but we will keep at it and keep our shoulder to the wheel.
“It is good to be fighting at the front but It is obviously a bit frustrating with how the afternoon has played out.
“On the whole it has still been a good weekend and we just need to round it out in the best way we can.”
Likewise, Tanak, who also suffered tyre delamination on Stage 14, is refusing to rule out a charge from Breen on Sunday.
“It was a challenging day and challenging for the tyres, and it was actually a big shame that something from outside is deciding the rally,” said Tanak.
“We had everything planned for the last two stages to keep the tyres, but in the end we had to do the last stage with one tyre without any studs.
“It is never comfortable until it [the rally] is done, and the long stage tomorrow is a proper stage and not easy, nothing is done yet.”
