Crisis drags Siberia coal town from boom to bust

By Robin Paxton

MEZHDURECHENSK, Russia (Reuters) - Siberia's mining towns were booming early this year as steel mills feasted on their coal.

Then came the global financial crisis. In a few short months, demand for the region's raw materials has evaporated and cast into doubt the revival of Russia's coal-mining heartland.

The crisis has handed Prime Minister Vladimir Putin, the former president, the first test of his ability to handle leaner times after building his popularity on a decade of economic growth fueled by high oil and commodity prices.

"Half the city isn't working," said Boris Sedov, an out-of-work trader in Mezhdurechensk, a city of just over 100,000 people more than 3,000 km (1,875 miles) east of Moscow.

"Employers aren't paying and, if they are, only 50 percent."

Raspadskaya, a major employer in Mezhdurechensk, will ship only a third of planned volumes in the fourth quarter and said last month steel mills had paid for only 21 percent of supplies since September.

The company is among several that wrote last month to Deputy Prime Minister Igor Sechin requesting financial assistance and a review of taxes and rail tariffs. Mines are already cutting output and, without such help, many will be forced to close.

Raspadskaya and Mechel, another big local employer, are Russia's two largest coking coal producers. They, along with rivals Sibuglemet and Belon Group, said in the letter they were owed a total 13.6 billion rubles ($490.4 million).