Russia’s state railway company (RZD), one of the country’s largest employers and operator of one of the world’s most extensive railway networks, is facing serious financial difficulties amid the war in Ukraine, Western sanctions, and rapidly rising financing costs.
According to an analysis published by Europa Liberă, the company, which operates approximately 85,000 km of railway, is going through a crisis that has prompted Russian authorities to consider exceptional measures to avoid default.
Debts of over USD 50 billion and declining revenues
Sources cited by Reuters show that Russian Railways’ total debt has reached approximately 4 trillion rubles (equivalent to about USD 50–51 billion, EUR 43 billion), at a time when revenues have been affected by the slowdown in the war economy and the highest interest rates in two decades.
The company, which has approximately 700,000 employees, is heavily exposed to state-owned banks, particularly VTB, and its inability to meet its financial obligations could have a knock-on effect on the Russian banking system, several analysts warn.
“This crisis at Russian Railways is one of the factors contributing to accelerating inflation in the Russian economy,” said Russian economist Igor Lipsiț, quoted by Current Time. According to him, falling revenues, rising tariffs, and inflationary pressures directly affect the population and companies dependent on rail transport.
The war in Ukraine, a systemic shock for the rail operator
The invasion of Ukraine was a systemic shock for Russian Railways. The prioritization of military transport, imposed by the government starting in 2024, has seriously affected trade flows and the punctuality of civilian deliveries.
Data cited by Novaya Gazeta Europe indicates that in 2024, freight volumes were 4% lower than in 2021, before the invasion — the lowest level since 2009, the year of the global financial crisis. In the first nine months of 2025, the decline accelerated, with a 6.7% drop in cargo volumes, according to information reported by The Moscow Times.
“Customers are complaining more and more about delays, and the explanation is almost always related to the fact that military transports have priority,” said Andrei Iakovlev, a researcher at Harvard University, quoted by Europa Liberă.
Forced asset sales and rescue plans
In an attempt to stabilize the financial situation, the Russian government has ordered the sale of the Moscow Towers office complex, a 62-story building in the Moscow City financial district, purchased by Russian Railways in 2024 for approximately 193 billion rubles (about USD 2.4 billion), according to the Ukrainian portal UNN.
The sale of the asset is considered an emergency measure aimed at avoiding a sharp increase in rail freight rates at a time when the Russian economy is slowing down and financing costs remain high.
Options discussed at government level
According to Reuters, the Moscow authorities are considering several options to support the company, including:
- increasing freight transport tariffs;
- increasing state subsidies;
- tax cuts;
- using reserve funds;
- converting part of the debt into shares, which would give state banks direct stakes in the company.
One of the proposals under discussion would involve converting 400 billion rubles (4.25 billion EUR) of debt into capital, a measure that could significantly reduce interest costs in the medium term. However, sources cited by Reuters indicate that there are differences between ministries regarding the final solution.
“Too big to fail”
With operations accounting for approximately 2.5% of Russia’s GDP, Russian Railways is considered an entity that is “too big to fail”. The Russian government cannot afford—nor does it intend—to let the company go bankrupt.
However, analysts warn that without structural reforms and stabilization of the economic environment, the company will continue to depend on state financial injections.
“At the current rate of decline, the Russian railway industry will only survive as long as the state can support it through forced loans, capital injections, or debt write-offs,” said Jeff Hawn, a researcher at the London School of Economics, quoted by Europa Liberă.
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