Russian Government Considers Rescue Plan for Debt-Laden Railways Amid Economic Headwinds

Russian Railways Grapples with Mounting Debt

Russian Railways (RZD), the largest commercial employer in the Russian Federation with approximately 700,000 to 800,000 employees, is facing a significant financial challenge, having accumulated a debt of around 4 trillion rubles, equivalent to approximately $50.8 billion. This substantial debt burden has prompted the Russian government to actively explore various measures to stabilize the state-owned company, which is crucial for the country's economic and logistical infrastructure.

The financial difficulties are attributed to a combination of factors, including a decline in revenues amid a slowdown in Russia's war economy and surging debt service costs driven by high interest rates. Freight loading volumes on RZD's network have reportedly plummeted, contributing to a net loss for the company in the first nine months of 2025.

Government Explores Multi-pronged Rescue Strategy

In response to the crisis, the Russian government is considering a range of rescue options. Discussions have been ongoing, with meetings held in late November and further deliberations planned for December 2025.

• Cargo Tariff Increases: One confirmed measure involves raising freight tariffs. RZD is set to increase freight rates by 13.8% starting December 1, 2024. Additional hikes are planned for certain types of cargo and empty wagon mileage in January 2025. Further proposals for tariff adjustments in 2025 and beyond are also under consideration.
• Increased Subsidies: The government already provides annual subsidies to RZD. There are discussions about increasing these subsidies, including an additional 10 billion rubles allocated for RZD's purchase of rolling stock in 2025.
• Debt-to-Equity Conversion: A significant proposal involves converting a portion of RZD's debt into equity. One suggestion entails converting 400 billion rubles of debt into shares, which would effectively grant state banks a direct stake in the company.

Other potential solutions being debated include cutting taxes, utilizing funds from the National Wealth Fund, and capping interest rates for RZD at 9%.

Impact on Investment and Operations

The financial strain on Russian Railways is already leading to significant operational adjustments. The company's investment program for 2025 is projected to be cut by approximately 40% compared to the current year. This reduction is expected to impact various infrastructure projects and suppliers. Furthermore, RZD is reportedly facing an acute personnel shortage, with a lack of train compilers, car inspectors, and track fitters.

The challenges faced by RZD underscore broader economic issues within Russia, particularly concerning state-dominated enterprises heavily indebted to state banks, especially amidst prioritized military spending.