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Production Halted In Russia's Largest Coal Basin Due To Sanctions

Production Halted In Russia's Largest Coal Basin Due To Sanctions

The economy of the Kemerovo region of the Russian Federation is on the verge of collapse.

EU sanctions, which came into force in early August, have brought the economy of the Kemerovo region, Russia's main coal mining center, to the brink of collapse.

Due to the EU embargo, which closed a key sales market for Russian coal miners, companies are forced to curtail production in the Kuznetsk coal basin, one of the largest deposits in the world with total reserves of almost 90 billion tons.

Several coal mines, where coal is mined in an open way, have temporarily suspended its extraction, TASS was told by the government of the Kemerovo region. These are the Kuznetsky Yuzhny open pit, Zadubrovsky Novy open pit mine, Kiselevsky open pit mine, and Polyany JSC.

Companies are lowering their production plans, as it has proved difficult to redirect flows to Asia. The capacity of the Russian Railways Eastern range is “substantially limited”, a spokesman for the regional government said.

The Kemerovo region accounts for 60% of Russian coal production, about 80% for coking and 100% for some especially valuable grades of coal.

After August, there will be “the toughest situation in the region,” says Natalya Zubarevich, an expert in regional economics, professor at Moscow State University: due to the loss of the market, companies will be forced to keep employees on a part-time basis (it is difficult to fire them) or send them on vacation without pay.

In total, 91,000 people work at the coal enterprises of Kuzbass, while 20% of the region's able-bodied population lives in single-industry towns, experts from the Center for Strategic Research have calculated. The largest of them are coal mines built around the enterprises of the main companies of the industry (Raspadskaya, OJSC Mezhdurechye, OJSC Southern Kuzbass).

“Notifications from coal mining enterprises about the reduction of workers in connection with a possible decrease in coal production have not been received by the regional ministry of the coal industry,” the regional government told TASS.

However, it's only a matter of time. Workers are kept “idle”, and this can continue until the end of the year — then the real scale of the threat to the labor market becomes clear, Zubarevich warns.

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