Russian Railway System in Trouble, Threatening China Trade and Russian Economy

Given Russia’s lack of a developed highway system (see EDM, October 6, 2015) and its increasing difficulties with the use of rivers for transport (Ritmeurasia.org, October 22, 2019), Moscow not only relies more heavily on the country’s long-haul railway network but counts on it to allow Russia to play a key role in trade between China and Europe. However, because of Moscow’s failure to invest in the maintenance and development of that network, Beijing is increasingly skeptical that Russia can be such a land route. Consequently, China is looking to send its goods either by sea or by routes that bypass the Russian Federation entirely. So what might seem to be a domestic problem is rapidly becoming an international one for Moscow.

The seriousness of this situation is reflected less in the frequent reports about train accidents—like the one this morning (February 25) in Vladivostok, where a 20-car coal train derailed (TASS, February 25, 2020)—than by the fact that, as a result of Russia’s failure to modernize its rail system, trains travel across the Trans-Siberian Railroad (TransSib) at rates too slow to make that route economically viable. In China, cargo trains travel at up to a hundred kilometers an hour (passenger train speeds can reach several hundred miles per hour), but Russian ones in general average only 35–40 kilometers an hour. And as Andrey Ivanov of Svobodnaya Pressa reported last year, “on certain parts of the TransSib in Siberia” that Russia wants China to use, their speed does not even exceed 10 kilometers per hour (Svobodnaya Pressa, April 27, 2019).

Moscow could change this if it found and spent more money on its railways, but that is not happening. In part, Russian railways face a combination of problems that have seen its rail network decline over the last two decades, with Moscow cutting service to many parts of the country and eliminating the government subsidies that had allowed them to function. Indeed, Moscow has announced it will cut the money it spends on the railway system by reducing Russian Rail’s employees by another 30,000 by 2025 (RBC, June 28, 2018). Moreover, the Russian government has for years spent money on high-visibility projects like the Kerch Bridge and restoring stations in major cities rather than on laying new track and improving management of the system. This investment approach has served as a major channel for state funds to end up in the pockets of Vladimir Putin’s associates rather than under-served communities or regions within Russia (Rzd.ru, Kasparov.ru, December 31, 2014).

In addition to these problems, the state-owned Russian Rail faces two other serious issues that have led some analysts to conclude that its system is “near collapse.” On the one hand, the melting of the permafrost in the Russian High North is taking place much faster than anyone had projected. Among the first portions of infrastructure there to be undermined are pipelines and rail lines, with both having to be abandoned or rebuilt at a high cost, including the installation of freezing units under the foundations (Deutsche Welle—Russian service, December 3, 2018). If those steps are not taken, Russia will lose much of the capacity to export the raw materials on which its economic system rests. But even if the government dramatically increases spending on railroads—something not now expected—most of the new money will have to go north rather than to the main east–west or north–south routes elsewhere.

Additionally, those global problems are now being compounded by the internal failures of Russian Rail itself. The latest reporting on the subject highlights that those shortcomings are causing a dramatic increase in the number of rail cars either lost or sent to the wrong destination; others are simply abandoned with their cargo left inside. Moreover, the number of trains forced to stand idle each day has been on the rise. And while such developments may make it easier for Russian Rail to collect tariffs, it simultaneously ensures that neither domestic nor international shippers are likely to trust it with their cargos in the future (Finanz.ru, Kommersant, Ehorussia.com, February 21, 2020).

The rate at which Russian trains now stand idle is truly frightening in its consequences, these sources say. Between 2014 and 2018, an average of 666 trains stood idle each day. But by 2019, that figure had nearly doubled to 1,246; and it is currently increasing to a rate of nearly 2,000 trains a day. As result, the amount of cargo Russian trains carry has fallen even more than one would project as a result of the country’s economic difficulties. Instead, problems with the railways are pushing down production on their own as factories and foreign countries cannot count on the delivery via Russian railroads of the raw materials or finished goods they need (Finanz.ru, Kommersant, Ehorussia.com, February 21).

What has Russian Rail’s response been? According to experts, it has simply purchased more railcars, even though they often stand idle. Instead, it should be working to improve the management of flows by installing computer systems and upgrading the quality of tracks to guarantee that trains can move quickly or at least in a timely and predictable manner. But there is apparently little evidence that Russian Rail either understands those needs or is ready to address them. Its managers are still profiting, even if the national rail network in its current condition no longer benefits the country (Finanz.ru, Kommersant, Ehorussia.com, February 21).

For decades, Russians have said that their country suffers from two things—fools and roads. That remains true, but increasingly the term “roads” includes railroads and not just highways.