In 2022, the European Union slapped the Kremlin with sanctions on all coal exports, impacting a quarter of all Russian coal exports worldwide in response to Russian President Vladimir Putin’s invasion of Ukraine. The United States has also tightened its own sanctions on Russian coal companies in recent years as part of a unified Western front. Three years later, the Russian war in Ukraine rages on, but the coal sector is now showing serious cracks and is likely on the verge of collapse.
Russia has the 6th largest coal industry in the world, and is a major player in global fossil fuel markets. For this reason, Europe and the United States have specifically targeted Russian energy exports as a strategic vulnerability in order to condemn and undercut the Kremlin’s military operations in Ukraine. Coal is a much smaller economic sector than oil and gas in Russia, but it still has a considerable impact on the economy, and remains a “critical sector for dozens of single-industry towns where it employs hundreds of thousands of workers,” according to Newsweek.
The European Union’s sanctions on Russian coal have amounted to an?€8 billion?loss of revenue per year for Russia. This financial blow comes on top of extreme and intensifying challenges to access the necessary equipment to continue operations as usual. This is thanks to high borrowing costs (exceeding 20%) and compounding sanctions limiting the Kremlin’s access to critical technologies. Before 2022, Russia was reliant on the United States, Japan, and Europe for much of its mining equipment.
The Russian government has also pointed the finger at “high company debt of 1.2 trillion rubles ($15.34 billion) in loans, weak external demand, coal prices at a four-year low and an unfavorable ruble exchange rate,” according to a report from the Moscow Times. Natalya Zubarevich, a specialist in the region, told Bloomberg that “the coal industry faces what you’d call a perfect storm: all problems have converged at once”.
On Tuesday, Russian Deputy Energy Minister Dmitry Islamov stated that altogether, these sanctions have taken a brutal toll on the sector, with losses totaling 112.6 billion rubles ($1.44 billion) by the end of 2024. On top of this critical decline, he said that, “unfortunately, the situation continues to deteriorate.” Indeed, the crisis is picking up speed. Between January and May of 2025 alone, coal enterprises registered losses of 112 billion rubles ($1.43 billion), according to Dmitry Lopatin, deputy director of the coal department at the Energy Ministry.
As a result, only about half of Russia’s approximately 180 coal companies remained profitable in 2025, and more than a quarter of all Russian coal companies are at risk of closure. “Based on data from the Energy Ministry, 51 enterprises — both mines and open-pit operations — have either been halted or are on the verge of suspending activities,” Islamov said at a Federation Council Committee on Economic Policy meeting.
In short, Russia’s coal sector is caught in a downward spiral. Russia is attempting to prop up the failing industry through measures like tax breaks and social insurance payouts, but the writing is on the wall. Exchange rates are untenable and companies would be lucky to break even. Plus, thanks to sanctions, Russia’s pool of buyers has shrunk considerably, making the Kremlin vulnerable to any shifts in a given buyer’s demand – especially if that buyer is China. “Any fluctuation in Chinese import activity could significantly impact the industry’s recovery and pricing stability,” says Isaac Levi, CREA’s Europe-Russia policy and energy analysis team lead.
Government subsidies and reforms may delay the inevitable, but analysts warn the industry faces sweeping consolidation or collapse. While Putin has historically crowed about the resilience of Russia’s economy in the face of sanctions, the coal industry is showing major cracks in that facade, which could be indicative of much deeper problems and an exhausted and beleaguered wartime economy. At minimum, it shows that the sanctions are working, slowly but surely.