Peter Caddick-Adams
Russia’s economy is imploding. Largely due to sanctions caused by the Ukraine War, this year the Economics Ministry posted a record mid-year budget deficit of 3.7 trillion roubles ($45.8 billion) and the Central Bank expects the full-year deficit to reach $55 billion, or 2 per cent of GDP. This is almost certainly the reason peace proposals with Ukraine have surfaced again.
Firstly, its coal industry has been pushed to the brink of collapse. Russia exported 22.6 per cent of its coal by rail to the EU in 2021, but lost that market due to trade embargoes after the Ukraine invasion, and was forced to redirect shipments to Asia by sea, with higher freight charges. Buyers have leveraged the disruption to negotiate lower rates, and prices have dropped further to $70 per tonne, which no longer covers production and shipping costs. Russia’s overseas customers have ramped up their own production, particularly in China, India and Indonesia, but tracking the development of alternative energy forms, world coal consumption has slowed, which sent international prices plunging from $400 per tonne in late 2022 to around $100 per tonne by May 2025.
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