Kremlin unable to come up with funds to develop rail link with China

The rail monopoly Russian Railways is postponing a US$10 billion project that was intended to boost exports of raw materials to Russia's largest trading partner, China.

Source: The Moscow Times

Details: The project to upgrade the Baikal-Amur Mainline (BAM) and the Trans-Siberian Railway has been postponed until at least 2026-2027, Russian Railways Deputy CEO Andrey Makarov has said.

According to Makarov, the company had intended to start work on the project this year, but financial difficulties have forced it to change its plans.

For other Russian Railways infrastructure projects, too, the money has almost run out. Funding limits for the North-South Corridor will be reached in July, as will funding for the construction of rail connections to ports in northwestern Russia.

Russian Railways contractors are key taxpayers in the regions. The suspension of its projects in the Amur Oblast and Khabarovsk Krai, both in the Russian Far East, could have critical consequences for local budgets.

In total, Russian Railways has reduced its investment programme by a third, from RUB 1.3 trillion (around US$16.5 billion) to RUB 890 billion (US$11 billion). Spending on the BAM and the Trans-Siberian Railway has been cut by 3.6 times, on the North-South Corridor by 4.4 times, and on construction in the North-West region by 4.2 times. The company has also cut spending on rolling stock by RUB 32.5 billion (US$413 million).

The main reason for this is the high cost of borrowing. The company’s budget was based on a Central Bank rate of 16%, whereas it has now reached 21%. As a result, Russian Railways will spend RUB 688 billion (US$8.7 billion) on servicing debt – almost a quarter of its revenue and six times more than last year.

Background:

• Russian Railways continues to record a dramatic decline in freight traffic across the Russian Federation. Last year's drop of 4.1%, a record for the last 15 years, has doubled in 2025.
• Russian Railways announced that from 17 June, passenger trains would resume service on the Moscow-Pyongyang route after a hiatus of more than five years.

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