Rail freight in Russia falls to 15-year low due to war and sanctions
Photo: Rail traffic in Russia has fallen to a 15-year low (Getty Images)
The volume of freight transportation by Russian Railways in 2024 has dropped to a 15-year low. A lack of workforce and locomotives has worsened capacity issues as Moscow redirects trade flows from Europe to Asia while continuing the war against Ukraine, Reuters reports.
In 2024, Russian Railways transported 1.18 billion tons of freight, a 4.1% decrease compared to the previous year, marking the lowest level since 2009, when Russia was recovering from the global financial crisis. Even in 2020, during the pandemic, freight transportation volumes in Russia increased.
According to Reuters, industrial production and rail freight volumes usually go hand in hand. However, while the war stimulates industrial production growth, freight volumes are lagging behind.
Six sources in the railway industry and rail transportation who spoke with Reuters on the condition of anonymity cited several reasons for the issues with freight transportation, including a lack of network capacity in the east, sanctions, labor shortages, and a reduction in investments.
One source pointed to sanctions, restrictions on spare parts, and a lack of locomotive crews as problems.
"The crews have all gone either to the special military operation (war in Ukraine - ed.) or the defense industry, and there is simply no one to drive the trains," said the source.
Another source highlighted the impact of military actions on freight transportation.
"The system used to work just fine, but everything has changed - cargoes go east, defense now takes priority and the railroads just can't cope," said this person.
Problems in economy
This year, Russian Railways faced a huge surge in interest payments as the Central Bank raised borrowing costs in an attempt to tame the rapid inflation growth, and the company cut investments by about 40%.
A source in the railway industry stated that Russian Railways did not meet its target freight volumes on the Baikal-Amur Mainline and Trans-Siberian routes, which are undergoing expansion. According to the source, in 2024, Russian Railways transported about 150 million tons on these eastern routes, less than the planned 162 million tons.
One of the industries under pressure is the coal industry. Washington has imposed sanctions on most of Russia's largest coal companies, including Suek and Mechel. After the US, EU, and UK imposed bans on coal imports from Russia, over 80% of its coal exports now go to Asia.
Exports fell by 6% last year due to Western sanctions, infrastructure disruptions, and profitability issues, the International Energy Agency stated.
"The coal industry is today experiencing specific difficulties, due to falling prices and the inability to export coal to markets in full," said Deputy Prime Minister Alexander Novak in December.
According to Chinese customs data, Russia was the only key producer whose coal shipments to China fell in 2024.
Earlier, Reuters, citing its sources, reported that Vladimir Putin is increasingly concerned about problems in Russia's wartime economy. This is happening amid US President Donald Trump's insistence on ending the war with Ukraine and promises of new sanctions.
