The events of 24 February 2022 marked a milestone: the emergence of a totally new reality for the Russian economy – in particular, for Kuzbass coal industry and the related sectors. The country and the region were not prepared for the turmoil surrounding the war in Ukraine; there came sanctions on key sectors including exports of coal, oil and industrial products, a ban on imports of modern technologies and services, and an unprecedented outflow of investors from the country.

From our analyses of statistical data, and the views of governmental officials, experts and businesses, we can conclude that post-February 2022 trends have shown significant drops in production, domestic and export supplies of coal from Kuzbass. Coal exports from Kuzbass declined by 14% while the equivalent figure for the federal level was only 7.6%, and coal production in Kuzbass declined by 8% but increase on the federal level by 0.4%. Revenue losses will have severe shortand long-term consequences for the regional economy, as the coal sector contributes some 19–26% of regional GDP and has substantial impact on linked sectors like power and heat generation, metallurgy, transportation, infrastructure, communal services and many others. Such heavy dependency on coal, coupled with insufficient transport capacity to alternative markets, makes Kuzbass more vulnerable than many other coal regions of Russia.

Job losses and declining standards of living in Kuzbass if the economic situation does not change in the foreseeable future could lead to social unrest. The experience of the 1990s in Russia showed that coal miners can become a highly influential force for political change. The consequences may be similar at the regional level in the coming years, if the scale of losses proves comparable, as per the ‘hard’ scenario: approximately 50% decline of coal production, 75% loss of revenues, 50% loss of jobs.

Coal producers and Russian policymakers alike are seeking ways to reduce the impacts of sanctions, and to resolve internal problems (with transport, other logistics) and redirect exports towards ‘friendly’ countries – even at great expense (rising production costs, big discounts to coal export price, huge transport costs, etc.). The effects of such actions will depend on many factors, some of which relate to the strength and soundness of the West in pursuing its goals of tightening Russia’s economic situation and reducing the revenues partly financing the war in Ukraine. If the EU and partners fail to prevent leakage of Russian coal and other export products to third countries, and Russia continues to receive significant revenues in hard currency, the technological restrictions would be eased, or access to financial resources of the West would be softened – and the preconditions for the ‘soft’ scenario would appear.

Today, the Kuzbass coal sector finds itself at a crossroads. Impressive plans for launching many new mines to raise coal production by over 25% in the near term and modernization of existing facilities are highly risky in such an uncertain situation: sufficient demand is lacking. Although previous years yielded big incomes, the revenue losses expected for the coming years curb the appetite of coal companies to spend on business projects and on social programmes which they had agreed to finance in the region. Avoiding the negative impacts of collapsing demand for coal has not been resolved and seems unlikely: rescuing the coal companies is not a priority for the federal government. It is concentrating on more important challenges, such as the Ukraine war, tensions with the West, and oil and gas exports.