Moreover, the measure is said to be particularly important for infrastructure sections where there is a deficit in throughput capacity.

Still controversial

“‘Ship or pay’ is one possible form of interaction between the infrastructure owner and the freight owner”, commented Pavel Ivankin, President of the National Research Center for Transportation and Infrastructure and Member of the State Council Commission on Transport, to Russian media.

“The infrastructure owner is interested in ensuring that the infrastructure volumes planned for use within the planning period are fully utilised. Freight owners, likewise, are interested in seeing the adopted plans translated into actual shipments.”

Not everyone is convinced of the effectiveness of the ‘ship or pay’ measure. The Russian Ministry of Energy and Federal Antimonopoly Service have spoken out against it. They reason that the changes will complicate shippers’ access to scarce infrastructure. Businesses are also said to oppose this mechanism.

Despite the launch of this regional test, semi-trailer transport on rail is not an entirely new concept in Russia. The first trial operations took place in 2019, and serial production of 4-axle platforms for piggyback transportation has been ongoing since 2020. The first Russian fully-loaded semi-trailer train ran in 2022.

Russian piggyback operations are on the rise. In 2025, its volume across the country grew by 22%. The routes Moscow-Ussuriysk and Moscow-Vladivostok (Far East) saw the number of wagons transported grow to 886, an increase of 28%.

Sanctions drive piggyback transportation

One of the factors supporting the growth of intermodal rail is the continuing pressure of Western-imposed sanctions. “The use of piggyback transportation reduces wear and tear on [trucks and semi-trailers] and cuts repair and maintenance costs”, the Federal Freight Company told Russian media. This RZD subsidiary is primarily a wagon owner, with over 160,000 units in its fleet. “Given the sanctions, solutions aimed at conserving vehicle resources are needed, and piggyback transportation is one such solution”, it says.

However, the reduction of wear and tear through the use of intermodal is not without its obstacles. A structural challenge will sound familiar to European companies: the road remains cheaper than rail. Attracting customers therefore remains difficult, despite the fact that intermodal rail is faster than the road.

“The technology hasn’t yet proven itself for one reason: transporting cargo by road is cheaper than using containerised freight”, commented Pavel Ivankin, President of the Russian National Research Center for Transportation and Infrastructure.

“Russian Railways has a mandatory infrastructure payment for everyone.” Road transport does not pay a comparable compensation. “If road transport will get a different level of transparency in the future, it’s entirely possible that containerised freight will increase demand, at least on long-haul routes. Until then, we can only talk about the implementation of a pilot project, which isn’t even reflected in the [financial statements].”

“Russian Railways is effectively bankrupt and has no chance of getting out of the hole on its own”, The Moscow Times cites Sergey Aleksashenko, a senior research fellow at the NEST Centre in London. Therefore, the government has decided to bail out the monopoly “by all means.”

Reuters calculated that the tariff increase will add 22.3 billion rubles (around 250 million euros) to RZD’s budget. The measure is applicable for all shippers.

It is all going downhill

Russian Railways has already lost 14% of its rail freight business since the start of Russia’s invasion in Ukraine, says The Moscow Times. RZD has accrued a debt of four trillion rubles (44 billion euros). Between 2022 and 2025, RZD has also lost 12.5% of its loading volume, a figure that the rail operator publishes each month.

The financial problems at RZD are having a far-reaching impact on the company. It has had to send employees on unpaid leave and reduce its workforce. The company has also significantly reduced its investment programme for 2026 and it is considering the sale of its 49% stake in Federal Freight Company for the equivalent of around 500 million euros. Moreover, RZD may abandon the construction of the Northern Siberian Railway due to financing challenges.

As a result, the Kremlin is preparing a financial aid package of 1.3 trillion rubles (14 billion euros). This includes a debt restructuring and assets sales, such as the company’s skyscraper in the Moscow business district.

RZD’s current financial situation remains complex, as its net profit during the first three quarters of 2025 has plummeted by more than four times and freight volumes continue to decline. Under these circumstances, Federal Freight Company could be considered as an additional opportunity to attract additional funds.

Further updates in Q2

The stake in Federal Freight Company is planned to be sold through an open auction, with RZD to develop the eligibility criteria, according to the Russian Kommersant. The company’s board is expected to analyse the situation further in Q2 2026. After this, the deal should be approved by the Russian Federal Property Management Agency and the Russian government.

In fact, RZD plans to sell the Federal Freight Company despite the fact that it remains one of the main sources of dividend income. In addition, some experts say that the price of the stake put up for sale is seriously underestimated. For example, analysts from the Russian research agency Infoline-Analytics believe that the FFC stake is valued at 2-2.5 times less than the value of its rolling stock fleet. On the other hand, given the current environment, the price seems to be reasonable.

The impact on the market

According to experts, under favorable conditions, FFC demonstrated one of the highest EBITDA margins in the market. In 2024, it exceeded even Freight One, another major Russian rail operator in terms of net profit, in terms of profitability. However, given the currently shrinking freight base in the Russian rail freight sector and a rolling stock surplus, the situation around FFC and its services remains complex. The high share of gondola cars in FFC’s fleet, led to its profitability to seriously decline in recent years.

In the meantime, Russian analysts believe the planned deal will be potentially of interest to some large financial companies and investors. At the same time, an interest from FFC’s major rivals in the market is expected to be low, since the stake for sale is non-controlling. Analysts also believe that the sale of FFC will be associated with serious negative consequences for RZD itself, as the competition with independent operators will significantly rise. This may result in a further decline of its profitability and will require additional subsidies from the state for its support.

A hit for military mobility?

Moreover, according to experts of the Russian Vgudok railway paper, given that FFC has historically carried out some non-commercial functions, its transfer to private ownership would create a vacuum in the state-related transportation segment. That may result in a shortage of wagons for social or military cargo transportations in the Russian market, as most independent operators will continue to focus on transportations of high-margin cargo.

The -5.6% is a sizable downturn, but it is certainly not as bad as it could have been, when looking at various moments in 2025. Especially in the spring months, the year-on-year loading decline approached -10% (see the last graph).

In terms of the company’s transport performance, the decline amounted to -1.8%. With the inclusion of empty wagons, performance worsened by 1.2%. This could be explained by Russia transporting more goods to the Far East (China). That has grown the need for long-haul operations, boosting transport performance in tonne-kilometres relative to the weight of freight transported. RZD specifies that the demand for exports in the eastern direction grew by 6.5% to 163.5 million tonnes.

“External factors” to blame

Russian Railways cites “a host of external negative factors”, which led to the decline in the loading of various types of bulk freight. One can only guess which negative factors led to those losses. RZD is more transparent about the cause for the oil loading decline and identifies reparation downtime on oil refineries as one.

As a result of the business hiccups at Russian Railways, the company was forced to reduce its investment programme by around 20% for 2026. That means less spending on railway projects that are supposed to maintain and boost transportation capacity across the country.

The government has also taken note of the situation, and is looking to help RZD in attracting more freight to the railways. Rather than citing the growing economic problems in the country, Transport Minister Andrei Nikitin argues that the road sector is out-competing Russian Railways.

Nikitin indicated that measures would be taken to address the “certain imbalance between road and rail transport” in freight handling. Additionally, Nikitin confirmed that Russian Railways would receive support for its freight attraction initiatives.

Reason for Russian optimism?

Russia remains optimistic that freight volumes will grow in the coming years. According to the current baseline scenario, freight loading by rail is projected to reach 1.504 billion tonnes by 2028, marking a 15.1% increase from 2024. Over the same period, freight turnover is expected to climb to 3 trillion tonne-kilometres, which would be a 21% rise compared to 2024.

Is there some merit to those expectations? After all, in October 2025, loading even grew slightly compared to October 2024. Moreover, the most serious monthly setbacks in the spring of 2025 seem to have passed their peak.

Despite that, it is unlikely that Russia will return to growth. Earlier in 2025, the president of Russia’s central bank warned that all of Russia’s economic resources are being used. Moreover, she said that there was no prospect for further growth. Any gains for Russian Railways will therefore indeed have to come from a modal shift, but adding 400 million tonnes in two years time seems like a very steep hill to climb.

Of the approved program for 2026, 531,4 billion rubles (5,67 billion euros) are allocated for maintaining the company’s fixed assets and ensuring transportation safety, including 288 billion rubles (3,13 billion euros) for major repairs of infrastructure and rolling stock. Up to 161,7 billion rubles (1,75 billion euros) will be allocated for the purchase of rolling stock, including up to 400 locomotives. Finally, 62,2 billion rubles (675,1 million euros) will be allocated for trunk infrastructure development projects.

Sky-high debt

As the current debts of the company remain high, the national government recently discussed the option to ban additional loans to RZD and ensure its development with the use of budgetary sources. According to the company’s financial statements, RZD’s debt for the first 9 months of 2025 amounted to almost 3,5 trillion rubles (38,06 billion euros). It was assumed that a balance between these parameters would be achieved by not paying dividends on the company’s preferred shares for 2025.

In addition, part of the debts was supposed to be compensated by a subsidy scheme from the Ministry of Industry and Trade. The amount of the subsidy is 20 billion rubles (217,21 million euros), which should be provided during the period of 2026-2028. In accordance with the boards’ decision, the company also plans to optimise its management team and office real estate personnel, particularly by transferring central office employees to the regions.

Moscow Towers for sale

Successful implementation of these plans should help RZD reduce operating expenses by at least 73,6 billion rubles (799,3 million euros). A subsidy from the Moscow city budget will also be allocated to offset 15 billion rubles (162,9 million euros) in operating expenses of RZD. Moreover, it was also decided to sell non-core real estate of RZD for at least 8,5 billion rubles (92,33 million euros), including the recently acquired premises in Moscow Towers skyscraper.

Russian analysts believe that the planned cuts of almost all expenditure items for the company will create the necessary safety reserve, which will help it to avoid potential cash flow shortfalls in 2026. Still, it will also jeopardise dividend payments, which will inevitably lead to discontent among minority shareholders. However, as most analysts believe, the planned sale of non-core assets is considered a good decision by RZD.

Fleet reduction

As for further cuts, analysts also expect the number of freight wagons on the RZD’s network to decline in 2026 and not exceed 1,3 million units, compared to 1,4 million as of December 2025. According to a recent study of the Russian Neft Research consulting agency, RZD’s freight wagon fleet remained stable throughout 2025, despite the continued decline in freight traffic and record-low rolling stock rental rates, which in some cases do not cover the cost of transportation.

Help from Moscow

In the meantime, the Russian government is aware of RZD’s current problems and is considering the provision of supportive measures. For example, the Kremlin is discussing a large-scale programme to improve the financial situation of the company which includes debt restructuring, cost reduction, and asset sales. Furthermore, the government will provide deferment for payment taxes and fees for the company until the end of December 2026. The total amount of potential support measures is estimated at 1,3 trillion rubles (14,12 billion euros), although no final decisions have been taken.

Prior to 2024, RZD actively borrowed funds for its large-scale investment programs. However, further borrowing of funds was sharply reduced in 2024, although it was impossible for the company to immediately suspend many of its projects (given that implementation of many of them is already underway). According to some Russian media, RZD initially requested 200 billion rubles in budget support, but the Ministry of Finance refused.

Selling assets amid falling profit

The company has also not ruled out the possibility of selling its subsidiary Federal Freight, which manages 134,300 rolling stock units and ranks second among Russian rail freight operators. The last such deal was the sale of Freight One in 2024 for 220 billion rubles (2,39 billion euros). RZD’s net profit fell sharply between 2023 and 2024, continuing to decline in the first half of 2025 when it reached 4,4 billion rubles (47,69 million euros), a 26-fold decrease from the same period in 2024.

Earlier this month, Russian Prime Minister Mikhail Mishustin announced that the Eastern Polygon would reach a capacity of 270 million tonnes by 2032. That is a higher target than the initial roadmap for the far east railways, and an outlier when looking at the general mood surrounding the modernisations.

Such big and ambitious announcements used to be relatively commonplace, but reports of additional investments and progress on the modernisation works have essentially disappeared in 2025.

The question of money

The reality on the ground is that those capacity targets have become increasingly unrealistic. That has to do with serious financing problems at Russian Railways (RZD), which has an annual investment programme for railway constructions like these.

Because of the high interest rate, government-imposed borrowing restrictions and sanctions, RZD can hardly attract enough funds to execute the modernisation plans. In 2024, the company planned to spend around 1,300 billion rubles (14.2 billion euros) on infrastructure investments, but the real figure reached only 730 billion rubles (8 billion euros).

In 2025, RZD intended to spend 400 billion rubles on construction work, from a total budget of 890 billion rubles. The construction budget has already been reduced to just over 300 billion rubles (3.3 billion euros), which were used up by the summer.

Delays

The start of some Eastern Polygon projects, initially planned for early 2024, had been postponed to early 2025. However, as a consequence of the financial problems, RZD is having to delay the modernisation roadmap even further. “This is truly a problem, because we were doing the design work, and we were supposed to begin the first work at the beginning of this year. Now it’s being delayed by at least a year. But realistically, we see a delay of probably two years”, said deputy general director of RZD, Andrey Makarov, in June.

Beyond the far east, the INSTC is facing investment cuts of 77% (down to 9 billion rubles, 100 million euros) and the northwest of Russia is seeing a fourfold decrease to 4 billion rubles (44 million euros).

The official modernisation schedule remains as ambitious as it was before. In order to meet the Eastern Polygon deadlines, the Russian state development corporation VEB and various banks chipped in with a trillion rubles last summer. Whether or not that will be enough remains to be seen, but local experts are cautious. They told Russian publication Kommersant that RZD plans to recoup its investment through increased freight traffic. However, volumes have been on the decline, and RZD does not make enough money by transporting its least-favourite but highly available commodity: coal.

The 9-month net loss comes despite an increase in revenues of 10.1%, and gross profit grew by 12.4% to 319 billion rubles (3.4 billion euros).

In addition, Belozerov ordered deputies and heads of departments to prepare proposals for staff reductions before 1 November. As a first measure, RZD will introduce hiring restrictions.

Just last year, talk surrounding RZD’s workforce centered around persistent staff shortages. The company did not have enough locomotive drivers and maintenance staff. By now, the situation has changed quite radically: the company is not looking to hire more people, but instead wants to shrink its management staff.

Challenging economic circumstances

In August, RZD started by forcing employees to take a couple of days of forced unpaid leave each month. That measure will last until the end of the year.

The problems at RZD have a lot to do with its financial obligations. The high interest rate in Russia has grown the rail operator’s debt payments significantly, the prime reason for a ninefold collapse in its net profit from 118,3 billion rubles in 2023 to 13,9 billion rubles in 2024.

Besides its debt obligations and the high interest rate, RZD also has to deal with a constantly declining freight volume. This is evidenced by the company’s monthly loading figures, which shows that Russian companies are putting fewer and fewer goods on trains, hurting RZD’s business.

Some media outlets have reported that Ukrainian attacks on Russian refineries have taken out 38% of Moscow’s refining capacity. While that figure may be grounded in facts and data, according to Carnegie Politika, the impact on the Russian oil industry remains limited and is not catastrophic.

Rail freight reveals reductions

The real damage inflicted by Ukraine’s attacks is not publicly known, but the impact of the increasingly frequent attacks is clearly visible in rail freight statistics. The refinery attacks seem to be the leading cause of a drop in oil in petroleum loading across RZD’s network as production capacity takes a hit. In contrast to other types of freight, oil and petroleum was always stable and steady in terms of loading numbers.

As a general rule, the Russian national rail operator used to load around 17-18 million tonnes monthly, but that has now taken a dive to 15,1 million tonnes in September 2025. If Ukrainian attacks grow in frequency, that number could drop even further.

Not only Russian rail freight figures reveal the effect of the refinery attacks. Also in Russia’s staunch ally Belarus, changes are visible. Belarusian rail exports of oil and petroleum products have risen fourfold month-on-month in September to 49,000 metric tonnes, according to Reuters.

Losing a lucrative business

Again, while the situation is not exactly catastrophic, the drop in oil and petroleum product transportation is bound to be a thorn in the side of RZD and a sign of war woes. Oil is typically the second-biggest product category on the railways (after coal), good for some 17% to 19% of the total volume.

When RZD was forced to prioritise coal exports on Kremlin orders, it made its dissatisfaction with the situation very clear. The rail operator then fought to revert the coal prioritisation, hoping to carry more high-value products that earn the company more money. It specifically mentioned oil and petroleum as a more lucrative choice.

That was especially true for the Far Eastern railway towards China and the Pacific ports. Rail infrastructure in the area was operating at maximum capacity, meaning that RZD could not simply run more trains and move more goods. Russia currently has an investment programme running to significantly boost capacity on those routes, setting up for tightening trade relations with China.

Far Eastern railway

What those programmes likely did not foresee is that transportation demand would soon fall short of the maximum capacity. Russian publication Kommersant writes that volumes on the Far Eastern railway have actually dropped, with the leading cause of that being the drop in oil and petroleum transportation.

Between January and September 2025, the rail freight volume on the Far Eastern railway dropped by 5,3% year-on-year. Oil and petroleum products saw a 7,2% decline, as did timber and industrial raw materials (-8,9% and -18,9%), although those are smaller freight categories. Coal shrunk by around 4%.

An across the board decline in loading has been a trend in Russian rail freight for some time now. However, the recent faster-than-average fall in oil and petroleum volumes are new and noteworthy, because oil has traditionally been a stable commodity for the Russian rail industry.

What comes next is anyone’s guess. A continuation or intensification of the Ukrainian attacks will probably show up in RZD’s monthly figures in the near future. The conclusion for now is twofold: the Russian rail operator is losing volumes of a product that is much-desired, as the company has repeatedly indicated, and the Far Eastern railway is shrinking contrary to long-term expectations.