Russian Railways is carrying debt estimated at around $51 billion, and the government has already ordered it to sell a $2 billion Moscow skyscraper it bought two years earlier. RFE/RL reported in January that the purchase cost the company an estimated one-eighth of its budget.
The company runs one of the world’s biggest rail networks. It employs about 700,000 people and operates 85,000 kilometers of track across 11 time zones. Only the networks of the United States and China are longer.
Where the money went
Vladimir Putin created Russian Railways in 2003, in his first term, as a state-owned joint stock company. It inherited most of the Soviet network and was given a near monopoly on cargo and passenger traffic. Under president Vladimir Yakunin it shed hundreds of thousands of employees and bought new locomotives and railcars.
Yakunin, a former KGB officer and a friend and neighbor of Putin, was sanctioned by the West after the 2014 seizure of Crimea. He was ousted a year later. RFE/RL says the reason may have been Aleksei Navalny’s documentation of real estate held through offshore companies, or reports about his son’s investments, particularly in Britain. Russian Railways kept expanding and borrowing after he left.
The invasion of Ukraine then hit it hard. Western sanctions disrupted trade flows and exports of raw materials slowed. China stepped in for Western companies, and the railway took on more debt to reorient its operations. High interest rates set by the Central Bank to fight inflation made the debt heavier.
Freight and the front
In 2024 the government gave military trains carrying troops and equipment priority on the network. Novaya Gazeta Europe reported that Russian Railways shipped 4 percent less cargo that year than in 2021, the lowest freight volume since the global economic crisis of 2009.
“Quite a few [customers] are now complaining about Russian Railways’ failure to deliver cargo on time,” said Andrey Yakovlev, a researcher at Harvard University’s Davis Center. “And the explanation for this is generally linked to the fact that military cargo is prioritized.”
Igor Lipsits, a Russian economist now living abroad, tied the trouble to inflation. “Revenues are lower, tariffs are higher, prices are rising, inflation is accelerating, and people are getting poorer,” he told Current Time.
A bailout under discussion
The railway accounts for 2.5 percent of Russia’s GDP, and RFE/RL describes it as widely considered “too big to fail.” Reuters, citing two people with knowledge of the talks, reported that officials are weighing higher cargo tariffs, bigger subsidies or tax cuts. Converting debt to shares is also on the table. Higher shipping rates would raise costs for debt-laden customers in coal and agriculture.
Main creditors include state-owned VTB, the country’s second-largest bank. “If Russian Railways can’t pay interest on its loans and repay them, that spells trouble for VTB’s financial stability,” Yakovlev said.
Jeff Hawn of the London School of Economics wrote last month that the industry will “continue to shamble along only as long as the state can prop it up through forced loans from state banks, direct cash infusions, or simple debt write-offs.”
