The world's biggest nickel producer has paid a AU$2.5 billion fine for environmental damage.

Russian mining giant Norilsk Nickel, the world's leading nickel and palladium producer, has paid the fine to the Russian government after a fuel spill last May saw 21,000 tonnes of diesel pour from a storage tank into rivers and lakes in the Arctic north.

The penalty is believed to be the biggest ever issued for environmental damage in Russia. The fine was ordered by a Russian court in February and was not appealed.

Norilsk Nickel, also known as Nornickel, has seen its net profits for 2020 fall by 39 per cent as a result of the fine.

The diesel oil reportedly began leaking from a rusty storage tank at Norilsk Nickel's power plant in Siberia. The supports of the tank appear to have been weakened when melting permafrost caused the tank to sink. 

At the time in May 2020, the Arctic had seen weeks of unusually warm weather; a likely symptom of global warming.

The oil contaminated the Ambarnaya river, drifting north into Lake Pyasino, flowing to the Kara Sea in the Arctic Ocean. 

In total, an area of about 350 sq km was contaminated.

Russia's Greenpeace climate project manager Vasily Yablokov has warned that the environmental impact from the spill could last for decades.

Former deputy head of Russia's environmental watchdog, Oleg Mitvol, says there has “never been such an accident in the Arctic zone”.

The regulator says the clean-up is expected to cost about 100 billion roubles (AU$1.75 billion) and take up to 10 years.

Norilsk Nickel was not particularly keen to report the spill, prompting criticism from Russian President Valdimr Putin.

The fuel spill came alongside a series of smaller incidents in the region, raising questions about Norilsk Nickel's environmental and safety measures.