Russia economy meltdown as energy chief reveals dire state of crucial industry

Russia's coal sector, a cornerstone of its energy exports and regional economies, is plunging into what officials describe as its worst crisis in three decades, with losses doubling and dozens of firms on the brink of collapse. Deputy Energy Minister Dmitry Islamov delivered a stark assessment at the Russian Energy Week forum on Thursday, warning that the industry's consolidated losses reached 225 billion rubles (£2.1 billion) in the first seven months of 2025 - twice the total for all of 2024. He forecast full-year shortfalls exceeding 300 billion rubles (£2.8 billion), with accounts payable ballooning to 1.5 trillion rubles (£14 billion).

Islamov said: "The coal sector has been in a crisis situation for the second year, unfortunately." In a video clip from the forum, his voice measured amid a backdrop of economic strain, he detailed how the number of companies in the "red zone" of risk - those halting or slashing production - surged from 30 in April to 53 by July. He added: "Indeed, the industry is struggling right now, but at the same time, it is working very hard," underscoring efforts to sustain output despite mounting debts.

The revelations, shared widely on social media by former Ukrainian interior ministry advisor Anton Gerashchenko, paint a picture of an industry battered by Western sanctions imposed since Moscow's full-scale invasion of Ukraine in 2022.

The European Union's coal embargo forced a pivot to Asian markets, where buyers like China and India demand deep discounts - up to 60% below pre-war levels. Global thermal coal prices, which peaked at around $400 per tonne in late 2022, have cratered to $93 per tonne as of mid-October, driven by a glut from producers including China and Indonesia.

Export prices at Russia's Far Eastern ports hit a low of $69 per tonne in June, the cheapest since 2020, while production costs hover at 6,000-6,500 rubles (£56-£61) per tonne, rendering operations unprofitable for many.

Rail bottlenecks, exacerbated by sanctions on oil tankers clogging tracks, have driven freight costs to 90% of coal prices - up from 50% pre-war.