Russia’s coal Industry Plunges into Crisis, Threatening Economic Strain
Moscow – Russia’s coal industry is facing a “once in 30 year crisis,” with widespread losses and potential bankruptcies threatening a key sector of the nation’s economy. The downturn, exacerbated by sanctions and the war in Ukraine, is prompting a limited government bailout and raising concerns about the future viability of numerous mining operations.
Kuzbass, responsible for over half of Russia’s coal output, registered a 70.6 billion-rouble (£647 million) deficit in 2024 and has already borrowed 36 billion roubles (£330 million) in the first half of 2025. Across the country, 19,000 coal industry jobs have been lost this year, with 30 enterprises – representing 30 million tonnes of annual production - at risk of bankruptcy.
Steel-to-coal conglomerate Mechel is scaling back operations, including mothballing a mine and reducing its workforce, reporting a 28% decline in output during the first half of the year.The company anticipates full-year losses could triple to between 300-500 billion roubles (£2.8 billion-4.65 billion), potentially increasing the sector’s total debt to 1.5 trillion roubles (£14 billion).
In May, President Vladimir Putin approved a bailout package – following resistance from the finance ministry – offering tax pauses, loan forbearance, and reduced tariffs to struggling companies, but stopping short of direct subsidies. Energy minister Sergei Tsivilev, a former Kuzbass governor and coal tycoon with close ties to Putin, is leading the implementation of the aid.
“Our forecast for global coal prices is bearish through to 2027, with some seasonal upside risk in the final quarter of 2025,” stated Alex Thackrah, senior manager at a coal analytics firm.more than half of 180 Russian coal companies reported losses last year, and sanctions are hindering access to Western equipment, forcing companies to scavenge for parts.
The Kremlin is also attempting to leverage coal mines in occupied Donbas, Ukraine, which previously relied on approximately £750 million in annual subsidies from Kyiv. With those funds now unavailable, Russian-backed operations are increasingly being transferred back to state control due to their unprofitability.
“War is bad for most of the Russian businesses,if not all of them. But the coal sector is in really deep s***,” an unnamed businessman told the Financial Times.
Pavlo Kukhta, Ukraine’s former deputy economy minister, explained, ”The Donbas mining industry is old and relied heavily on state support from Kyiv, with subsidies reaching about £750million a year.When Russia took over,the subsidies dried up and now the industry is collapsing. Russia’s mining sector faces the same problems.”
