Russia is preparing to raise freight tariffs to shore up the finances of state-controlled railway operator Russian Railways (RZD), as falling cargo volumes and rising costs strain the company’s balance sheet.
The tariff adjustment comes as RZD faces its most severe financial crisis, caused by declining freight flows in key commodity segments and mounting debt obligations. Freight transportation accounts for the bulk of RZD’s revenue, making volume fluctuations critical to its financial stability.
The freight tariffs on Russian Railways will be raised by 1% from March 1st, according to an order published on the official portal of legal regulations on February 13th, and is expected to affect industrial cargo shipments across the country, raising costs for sectors ranging from coal and metallurgy to construction materials.
The introduction of a 1% surcharge on railway tariffs is necessary to finance transport security, including protection against terrorist attacks and other illegal interference, RZD was cited as having told Russia’s state-owned RIA Novosti.
The financial summaries compiled by a Russia-based news portal and analytical platform, TAdviser, show that while the company’s revenues grew in nominal terms in previous years, profitability has deteriorated significantly amid rising operating costs, debt servicing burdens, and declining cargo flows.
Per a report by Moscow-based Lenta.ru, RZD’s profit under international accounting standards plunged 76 % in the first three quarters of 2025 compared with a year earlier, while its books under Russian standards showed a loss of 4.2 billion Rubles against a 44.7 billion Ruble profit in the same period a year earlier.
The overall industry reporting suggests that cargo traffic in several segments has fallen to multi-year lows, intensifying pressure on the state monopoly.
RZD plays a systemic role in the Russian economy, as one of the largest employers, and most importantly, an operator of one of the world’s largest rail networks that serves as a core logistics artery for energy, metals and industrial goods in Russia. Its financial health is therefore a matter of national economic concern.
War, Sanctions and Trade Disruptions Behind RZD’s Troubles
Some analysts and industry publications attribute a significant share of RZD’s financial stress to the impact of Russia’s war in Ukraine and subsequent Western sanctions.
For instance, per the reporting from Georgia-based BMG News Agency, as European markets curtailed purchases of Russian energy and raw materials, freight volumes had to be rerouted to Asian destinations such as China and India but the existing railway infrastructure in Russia proved unprepared for shipments of this scale.
Also, the high-speed and modern freight trains in Russia reportedly depended heavily on Western components like high-quality bearings and electronics, and following the withdrawal of leading German and American companies from the Russian market, the country’s railway sector experienced a shortage of such critical components, which lead to increased rolling stock wear and tear and a rising number of accidents.
Other than that, sanctions have also restricted access to Western capital markets, increasing refinancing costs for RZD amid weaker Russian Ruble, elevated interest rates and tighter fiscal conditions that have increased borrowing costs, thereby further complicating the company’s investment planning.
The Georgian media outlet also discusses the financial strain facing RZD in the context of wartime economic conditions, wherein it reports that the railway is forced to prioritize transport tasks tied to military priorities like the movement of armored vehicles, ammunition and troops, which constantly disrupts civilian and commercial traffic, thereby reducing the company’s revenue.
Ther publication concludes with a warning that without sustained state support the company could potentially enter quasi-bankruptcy conditions.
Sergei Aleksashenko, a senior fellow at the NEST Center in London, has also been cited by Moscow Times as calling RZD “effectively bankrupt,” saying it cannot get out of its debt without outside support.
Structural and Policy Issues
Beyond external shocks, several internal structural and policy-driven issues have also contributed to RZD’s mounting losses.
For instance, some industrial cargo owners cited by Vgudok – an online portal about Russian rail transport, logistics and shipping – have criticized RZD for inefficiencies and lack of competitiveness compared to alternative logistics solutions, including road transport and private freight operators.
They have criticized RZD’s bureaucratic processes, limited access to empty rolling stock and logistical constraints as key factors pushing some freight onto highways.
“We’re not as concerned with record-breaking train speeds as we are with predictability. If I don’t know whether my request will be approved tomorrow or whether the car will arrive in a week, I turn to the drivers. The monopoly has created a system of restrictions (DMZI, ‘checkerboard’) that effectively pushes small shippers out of the network,” Vgudok quotes one shipper as saying.
Trucking businesses corroborate this trend. A representative of one transport company cited by Vgudok, said that they “are seeing an influx of customers from the hardware, equipment, and industrial goods sectors,” and while they have driver shortages and rising costs, they are able to offer much more flexibility than railways: “The truck will arrive at the workshop gates today, not when logistics control opens”
Market observers warn that without significant improvements in logistics efficiency and customer service, RZD risks further erosion of its freight base, compounding revenue challenges already stemming from declining traditional cargo volumes.
Denis Semenkin, Deputy Chairman of the Association of Railway Rolling Stock Operators, warns that the situation will worsen, and trucking companies, “having captured small businesses, aggressively expanding into medium- and long-haul routes (over 1,500 km), where railcars once reigned supreme.”
Moreover, subsidization policies like discounted passenger fares and socially oriented ticket programs, have also placed burdens on the finances. For instance, earlier this month, a court in Russia ordered the country’s Finance Ministry to pay 2.4 billion Rubles to the Federal Passenger Company, an RZD subsidiary, to compensate for losses from discounted schoolchildren tickets in 2023, after the company said it had not been fully reimbursed for the program.
The company had reported total losses of more than 3.8 billion Rubles from the program, which was only partially reimbursed by ‘Roszheldor’, the federal agency responsible for rail oversight, illustrating how such policies can create liquidity strain.
Will The Tariff Hikes Be Enough?
The planned cargo tariff increase represents an effort to stabilize RZD’s revenue, however, higher freight rates could increase costs for exporters and domestic producers already adjusting to new trade routes and economic constraints.
Hence, tariff adjustments alone may not resolve the financial stress facing RZD. While the Russian government appears reluctant to make any direct large-scale bailouts based on the company failed request for 200 billion Rubles in urgent support from the National Wealth Fund in December 2025, to cover a cash gap and debt repayments
However, considering the company’s criticality to Russia’s economy, it has to provide some support to stabilize the company’s finances amid falling freight volumes and mounting debts.
The Russian Ministry of Transport plans to allocate 65 billion rubles ($853 million) in federal funds to support RZD’s operations and help meet freight targets after volumes fell short of planned target for January, Transport Minister Vitaly Savelyev said earlier this month.
In addition to direct budget support, then Russian government is considering broader financial support measures for RZD, including possible debt restructuring, cost reductions and asset sales as part of a financial rehabilitation program, per a Kommersant report in December 2025.
Tanmay Kadam is a geopolitical observer based in India. He has experience working as a Defense and International Affairs journalist for EurAsian Times. He can be contacted at tanmaykadam700@gmail.com.