Russia economic meltdown as coal industry suffers £3.2bn loss and car production tanks 28%

By John Varga, World News Reporter

Vladimir Putin is facing a growing economic crisis. (Image: Getty)

Russia's coal industry faces massive losses as it struggles to cope with the effects of sanctions and over three years of war. The sector is reeling from a drop in both production and revenue, as well as rising debt - with even the largest companies feeling the heat.

Net losses could reach an eye-watering 350 billion rubles (£3.2bn) this year, according to Dmitri Lopatkine, deputy director of the coal industry department at the Energy Ministry. The sector has been directly impacted by the war and sanctions, losing access to key European markets where it was once a leading supplier. Russian coal exporters have had to reorientate towards Asia, but face stiff competition from Australian, Indonesian and South African companies.

Russian coal miners face an uncertain . (Image: Getty)

To make matters worse, China—Moscow's key trading partner—cut its imports of Russian coal by 7.8% last year.

Sanctions have also made it difficult for Russian mining firms to buy new equipment and components from the West. As a result, many have been forced to "cannibalise" their equipment—dismantling several units to assemble a single working one.

The coal industry is still a major employer in Russia, providing thousands of people with jobs. Approximately 150,000 Russians work in 58 underground coal mines and 133 open pits.

Another half a million people are employed in coal-dependent sectors, including thermal power plants, transport, services and supply industries.

Car manufacturers are also in a fight to survive, as the effects of soaring inflation and high interest rates continue to bite hard.

Inflation in Russia continues to hover at around 9%, forcing the Central Bank to keep its key interest rate high (18%). This is making it difficult for consumers to access affordable loans, impacting their ability to spend.

Consequently, car production has plunged by 28% in the first six months of this year, while truck production fell by 40%.

Several automotive factories have been forced to switch to a four-day work week in a desperate bid to cut costs and avoid mass redundancies. Those affected include truck manufacturer KamAZ, the Avtovaz and GAZ car factories and the tractor plants in Chelyabinsk and Saint Petersburg.

The reduced hours will lead to a 20% loss of income for workers and employees at the factories concerned, contributing to a further decline in consumption.