In response to the full-scale war Russia launched against Ukraine in February 2022, the EU, which purchased 23% of Russia’s coal exports in 2021, banned coal imports from Russia in August 2022, and the UK followed suit at the end of 2022. Further, Switzerland closed its hub for Russian coal exports in August 2022, and Japan, a significant buyer of Russian coal, pledged to end coal imports from Russia. In 2024, many major Russian coal producers were added to the U.S. Specifically Designated Nationals sanctions list, blocking assets and complicating payments.

Although not significant in terms of GDP generation, the Russian coal sector is economically and socially crucial for a number of coal-producing regions. It is also a significant source of greenhouse gas emissions domestically as well as globally due to coal exports, which comprised 213 million tonnes (MT), or 48.6%, of the 438 MT of coal produced by Russia in 2023.

On the basis of Russian coal production and exports, including profits, during the first two years of the war in Ukraine, it appeared that the coal sector had successfully adjusted and managed to alleviate the impacts of Western sanctions. However, this was largely explained by peak coal prices in 2022–2023 and newly available export markets, as other suppliers shifted to replace Russian coal in sanctioning countries. In 2024, mounting costs of transport and increasing fiscal burden, as the war economy demands extra revenues, have greatly reduced the competitiveness of Russian coal exports: In January-April, Russia’s coal exports declined by 12.1% and in January-June, half of Russian coal producers were making a loss.

This report argues that, since geopolitical developments are a critical factor, the Russian coal sector could still face a range of futures, from favourable developments to a serious decline that would shift the coal sector’s focus mostly to the domestic market by 2035. We apply the backcasting method to outline how particular futures could take place, asking: what are the future options for the Russian coal sector, and which political and economic conditions would facilitate the various development paths?

Our research proposes that Russia losing the war or agreeing on a just peace to end the Western sanctions could facilitate a recovery and even growth of the coal sector in the shorter term. The continuation of the current geopolitical path, including normalizing coal prices and export-hindering sanctions, is likely to continue the 2024 trend of declining coal exports to Asia. This will come with social costs in many coal producing regions. Should the war expand resulting in greater geopolitical tensions, followed by tighter sanctions and development of Russia into an even deeper authoritarian state, the prospects for the coal sector are bleak and socially disastrous in many regions. Over time, global decarbonization trends will start influencing coal exports regardless of the scenario, and the main distinction is whether the coal producers can maximise the remaining years of global coal demand.

We apply our findings to Russia’s four major coal exporting regions: Kuzbass, Khakassia, Yakutia and Krasnoyarsk to underline the regional diversity of the Russian coal sector. Coal export-based revenues and welfare will decline in our Siberian case regions, Kuzbass and Khakassia, under all scenarios, while the opposite will be true in Yakutia in the Far East. This may be framed simply as regional competition, especially by the coal exporting regions in decline, however, in fact the war economy divides the winners from the losers, i.e. the profitable coal exports and regions from those that are unprofitable. This is because prior to the war, the latter at least partly relied on government subsidies, such as discount prices on rail transport. As a result of the war, the economic viability of exports from the coal producing regions in Siberia have been contested. The Developing coal sector scenario would ease the conditions, and thus, allow government subsidies to coal exports to continue. The Declining coal sector scenario, which would turn the coal sector inwards with disastrous impacts for most of these regions, illustrates the crucial role of China, and the political stakes the coal sector has in the relations between the two countries. After all, there is no Plan B if Russia loses China’s support.

Furthermore, low-carbon policies may be delayed but are underway, and Russian coal sector stakeholders should not fool themselves that Asian markets are immune to this transition. Alongside rapid developments in renewable energy capacity, both China and India are increasing domestic coal production to avoid supply security issues, meaning the transition from coal imports to renewables could be quite sudden. The relative stability of the coal sector in Krasnoyarsk, which is focused on the domestic market, under all three scenarios, underlines the uncertainties related to coal exports; their success makes or breaks the coal sectors of the export dependent regions. In addition, Krasnoyarsk is likely less vulnerable to the global decarbonization trend due to the lack of serious domestic mitigation policies in Russia, while the exporting regions will have to adjust to the shrinking global coal markets.

The Shift to the East scenario would be the closest continuum of the status quo in September 2024. As long as this status quo at the time of writing continues, the slowly declining coal export industry will surf the waves of domestic policy-making concerning rail tariffs and capacities, fiscal burden and coal price in the (mostly) Asian market. While the peaceful Developing coal sector scenario would be geopolitically the most desirable – at least for the West – the opportunities available to the coal sector in Europe depend on its timing as well. If Europe continues several years without Russian coal, its return seems less likely because the EU is phasing out coal altogether.