\r\nRUSSIAN Railways (RZD) had a strong start to 2012. Freight volumes in January rose more than 12% year-on-year and the average daily volume was 3.28 million tonnes, exceeding 2006 levels for the first time since the economic crisis. Overall passenger volume increased 0.7% over January 2010 levels to 10.2 billion passenger-km, while the suburban sector grew by 7% year-on-year. However, RZD president Mr Vladimir Yakunin (right) is cautious about prospects for the rest of the year. Talking to IRJ at University of Oxford Sa\u00efd Business School, where he delivered a lecture to the Oxford Entrepreneurs society last month, Yakunin suggested that Russia should address domestic markets to sustain the economic recovery, and argued that modernising transport would stimulate demand for domestic industrial production. "The fact is that we are still in a deepening crisis fuelled by the problems in Europe," he says. "What happens this year really depends on the financial policies of governments around the world. We need to invest to address the real substance of the crisis and kickstart growth. My view is that Russia needs to focus on developing domestic markets, something that the Chinese government has been doing successfully." Despite the murky financial outlook, significant investment in the Russian rail network is planned in 2012. "We have three priorities for 2012," explains Yakunin. "Infrastructure modernisation is the first. The second is new technology, including new locomotives, and the third is high-speed development." Yakunin is keen to improve links with Europe, and RZD recently took an important step towards improving its international passenger services by signing an agreement with Talgo to develop variable-gauge trains. "The potential market for passenger services between Russia and Europe is much bigger than the services we are already running with our European partners to Nice and Paris," he says. Another key international project for RZD is the extension of the 1520mm-gauge network from Ko\u0161ice in eastern Slovakia to Vienna. Yakunin discussed the project at a meeting with the European transport commissioner Mr Siim Kallas in Brussels in January. "This could be the first big joint project between Russia and Europe. I am very serious about promoting broad gauge between Russia and Austria." Yakunin confirmed that a prefeasibility study on the line is complete and a more detailed evaluation is underway, although the project still faces major administrative hurdles before construction can start. "There is a lot of red tape in the way of this project," he says. "RZD is not a European company but we have to interface with European authorities, and yet there is no official mechanism at present to facilitate this. How can the transport commissioner and I be expected to communicate without it? We need to find that political interface if we are going to improve rail links between Russia and Europe." Back in Russia, the planned Roubles 69bn ($US 2.35bn) high-speed line between Moscow and St Petersburg is a key project for RZD and a flagship transport project for Russia in the run-up to the 2018 Soccer World Cup. "We hope to launch tenders for the design contract in August," Yakunin explains. "The main challenge is finalising the public-private partnership model. We need support from the government in the form of legislation in order to tender a life-cycle contract, and because this is the first infrastructure project in Russia to be tendered using this model. Therefore the timing of the project depends on the government." Improving transit times for Europe - Asia freight on the Trans-Siberian route is another priority, and one in which RZD has made considerable headway. "We're now able to achieve 850km per day, which means 9000km could be completed in 10 days, but technical barriers mean it still takes 12 days," says Yakunin. "Nonetheless we have made a lot of progress. Transcontainer is achieving reliability above 98% on its Trans-Siberian services, which is even better than passenger trains on this route." The expansion of RZD's international rail projects business is another key objective. Last month it emerged RZD had been selected to build a new railway in the Indonesian province of East Kalimantan, and the company is currently negotiating other projects in the UAE and Mongolia. However, one of its highest-profile overseas projects, the 551km Surt - Benghazi line in northern Libya, is currently suspended following the toppling of the Gadaffi regime last year, and faces an uncertain future. "We face big losses as a result of the war with machinery and camps destroyed, and equipment stolen," Yakunin says. "We've begun talks with the interim government in Libya and we hope construction will eventually resume."