economic impact

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.”