April 25, 2026 - Russia's coal industry is heading toward a systemic crisis from which the Kremlin's patronage network can no longer shield it, according to a paper published this week by the Carnegie Endowment for International Peace.

The analysis, by independent sociologist Alexey Gusev, argues that the sector's gradual demise is now having tangible socioeconomic consequences for some of Russia's most vulnerable regions — and that the war in Ukraine, paradoxically, has made the necessary restructuring both more urgent and less likely.

Data from the first quarter of 2026 shows the Russian economy under mounting pressure: key industries including metallurgy have failed to secure state support; the debt-to-income ratio in some regions has reached 70%; and the Finance Ministry has been preparing to cut all nonessential spending by 10%.

The Iran war's effect on oil prices has given Moscow some financial breathing room, but Gusev argues it will not resolve the underlying structural problems. "The oil price spike caused by the war in Iran means Moscow can afford to delay its response by a few more months, but it won't solve the problem," he writes.

From boom to bust

Russia's coal sector was, until recently, performing well. In 2021 — the last full year before the invasion of Ukraine — global coal prices rose to as much as $150 a tonne, allowing Russian companies to export more than 220mn tonnes and earn over $17bn. Revenues in the Kuzbass, the Siberian region that is home to approximately 60% of Russia's hard coal production and 80% of its coking coal, doubled over the preceding decade.

The European coal embargo that followed the invasion fundamentally disrupted that model. Europe had previously absorbed up to 50% of Russian coal exports. Rerouting to Asia proved costly and logistically fraught: transport costs to Russia's Far Eastern ports reached as much as $70 a ton in some cases, making Russian coal less competitive than that from Indonesia or Australia. The Kuzbass alone requires its product to travel approximately 5,500 kilometres to reach Far Eastern loading points.

A temporary windfall came in 2022 when coal prices spiked to as much as $400 a tonne, allowing Russian exporters to book around $22bn in profit despite losing the European market. The integration of Kuzbass coal with the domestic iron and steel industry also cushioned the immediate blow, as unwanted export coal was redirected domestically.

But those buffers have since been exhausted. According to the Kuzbass regional government, all coal companies in the region are now operating below the profitability threshold. Since the beginning of 2025, 64% of mining companies in the region were unprofitable, with 27 companies on the brink of bankruptcy. China — now Russia's primary coal customer — cut imports by 25% in the first half of 2025 and by 34% in the second quarter alone. Kuzbass coal production is forecast to fall to 170mn tonnes in 2026, a record low.

Gusev notes that the Kuzbass was "virtually the only region in the country where average gross regional product shrank" while Russia's economy was booming in 2023 and 2024, declining by 0.5% between 2021 and 2024, against national growth of 13.7% over the same period. Preliminary data suggest the contraction may have hit double digits in 2025.

The Kremlin connection

The political economy behind this drift is as striking as the economics. Gusev points to the lobbying power of a specific family network that has helped insulate the sector from reform.

Sergei Tsivilev served as governor of Kuzbass from 2018 until 2024, when he was appointed Russia's energy minister. His wife, Anna Tsivileva — described by the British Foreign Office as Putin's "first cousin once removed" and by other investigators as the daughter of Putin's cousin Yevgeny Putin — simultaneously serves as deputy defence minister and heads the state's Defenders of the Fatherland fund supporting the war effort.

Tsivileva also holds the presidency of JSC Kolmar Group, a major Russian coal mining company, which was placed on UK sanctions lists in 2022. The couple's command of both the energy ministry and the defence ministry social welfare apparatus gives them formidable leverage at the federal level.

"They help ensure the continuation of state subsidies, transfers, and tariff exemptions — mitigating the short-term effects of a growing crisis while leaving its fundamental causes unaddressed," Gusev writes.

"Even Energy Minister Sergei Tsivilev, a former Kuzbass governor and coal magnate himself, appears constrained," noted one industry analysis. The Kemerovo region ended 2024 with a deficit of RUB70.6bn ($863mn), plugging the gap through heavy borrowing.

The missed opportunity

Moscow has squandered a structural opportunity. The military Keynesianism of 2023–2025 — the unprecedented demand for workers across the defence sector — provided an ideal window to restructure coal-dependent labour markets. Workers displaced by mine closures could have transitioned to defence industry employment relatively smoothly, as happened in other Russian regions facing industrial contraction. In the Kaliningrad, Kaluga and Samara regions, workers laid off by car assembly plants in 2022 were absorbed by machine-building factories in the defence sector.

"If coal mines had been closed, many ex-miners would not have ended up out of work: they would have found jobs in the defence industry, or gone off to war," Gusev notes, with a deliberate edge. Kemerovo's regional government increased the one-time bonus for signing a military contract to RUB1.5mn ($19,570) last June — a measure economists noted was being used to address labour market problems that structural reform could have tackled more durably.

The inertia is not economic but political. "The Russian state supports the Kuzbass' uncompetitive coal industry not for economic reasons, but for social ones. It is the result of lobbying by major coal and metals companies, as well as management inertia,” Gusev said.

Kemerovo Governor Andrei Panov has predicted 2026 will be "even more challenging" for coal mining companies, hinting that dozens are likely to shut completely. Economist Natalya Zubarevich expects only a few efficient companies to survive, while "many of the weakest mines, and to a lesser extent open-pit ones, are expected to go bankrupt." Out-of-work miners, she noted, will face limited options beyond early retirement or signing military contracts.

An inevitable transition, indefinitely deferred

Gusev draws a historical parallel to contextualise what Russia is avoiding. The decline of coal-mining monocultures is a well-documented feature of post-industrial transitions worldwide: the rust belt of the United States, Germany's Ruhr valley, and now parts of China's Inner Mongolia have all navigated versions of this restructuring, with varying degrees of state support and social pain. Russia's Kuzbass, with its dense network of monotowns where economic life is entirely organised around a single mine, is following the same trajectory — just more slowly, and with the costs accumulating rather than being addressed.

"The death of the coal industry — and coalmining monotowns — is an inevitable stage in the post-industrial transformation," Gusev concludes. "But the Kremlin's obsession with the Ukraine war means Russia continues to ignore this natural process. Such an approach simply increases the risks of a systemic crisis further down the line."