Despite the administrative turbulence, current and projected ridership and economic trends paint a more positive picture. In 2016, rail contributed 1.2%, or Roubles 739.1bn ($US 12.11bn) to Russia’s GDP, and in 2017, the sector expects to spend Roubles 439.25bn, including Roubles 213.16bn on fuel and electricity. Freight traffic will remain at 2015-2016 levels of around 1.2 billion tonnes in 2017, with traffic levels remaining static for the last five years. However, the proportion of high-margin commodity traffic may fall in the next 12 months, while the volume of primary goods, such as coal and ore, which are comparatively cheap to transport in Russia, will grow.

Polikarpov IRG 1Export coal has grown consistently in the last five years to reach 50% of all coal rail freight traffic and it is likely to remain on this upward trend due to the current situation in global coal markets. Coal handling is expected to report a 1-2% increase in 2017.

Construction freight traffic volumes will grow at about 1% in 2017 due to the implementation of the Platon system, an electronic toll collection system for heavy goods vehicle owners, and the introduction of crushed stone import licensing. Grain volumes are similarly expected to increase by 2-3% as production reaches 115 million tonnes, which is close to the levels seen in 2008. Chemical and mineral fertiliser volumes will also go up by about 3% due to an increase in consumption in both domestic and external markets. However, transport of ferrous materials, crude oil and refined products will fall.

Passenger traffic projections for 2017 are also relatively positive. The introduction of new rolling stock, including Talgo’s Strizh dual-gauge trains for long-distance services between Moscow and Berlin, new double-deck trains from Transmashholding, as well as the first full-year of operations on the Moscow Central Ring railway, will all help to push up passenger numbers.


Russia’s railway tariff structure consists of two different systems: track access charges, and hiring locomotive traction services, which are universally set by the state and payable to Russian Railways (RZD) as provider of both services; and payments for renting freight wagons to approximately 700 companies. In 2013, RZD was granted powers to alter its tariffs between -25% and 13.4%, but it has yet to utilise this option.

This is set to change in 2017. According to the rules for altering these tariffs, indexation coefficients refer to the 2003 rate, and RZD is expected to increase the tariff by 2%, a move that is being justified as a “bonus” payment for its new working methods and quality enhancements that have reduced freight owners’ costs.

Further changes to the tariff system are expected in 2017 after a plan was approved by the Russian government to develop a new tariff system, which could potentially set the benchmark for tariff rates for the next 10 years.

Changes are expected to infrastructure and locomotive tariffs, which should improve long-term planning, facilitate rail infrastructure renewal and help to improve the financial performance of RZD.

At the same time, freight car rental rates are expected to double to Roubles 1000 per day compared with Roubles 500 per day at the beginning of 2016. It is likely that this increase will kick-start a new era of high rates due to strong demand for bulk primary goods in the global market and in regulatory actions aimed at cutting fleets and limiting renewals.

For example, more than 95,000 wagons have been written off in the past 10 months, and 292,000 since 2012. New deliveries totalled only 30,600 wagons in 2016, while 291,300 wagons have been delivered since 2012.

However, this is not likely to be a long-term trend. High freight wagon rental rates will boost operators’ earnings, creating additional resources for new rolling stock purchases, including the latest technological solutions. Overall production in Russia will reach 40,000-45,000 freight wagons in 2017, at a cost of €1.5bn, with the state providing €148m in subsidies.

The value of rolling stock products manufactured between 2010 and 2016 amounted to €54bn, which corresponds to an annual market volume of €7.8bn. However, the market is expected to shrink in 2017. Fluctuations in the rouble:dollar exchange rate coupled with the recent reduction of RZD investment in new locomotives are likely to persist - RZD is expected to purchase 450 new locomotives for around €1bn during the year, down from roughly 500 in both 2015 and 2016.

The annual procurement rate is expected to remain in the 420-450 unit range up to 2020 with a comparable number of units written-off each year in order to retain a reduced locomotive fleet size of 17,500 units. Overall €4.3bn will be spent on new locomotives between 2017 and 2020.

Passenger rolling stock purchase plans are similarly defined on an annual basis, and in 2017 operators will purchase 338 passenger coaches for around €374.5m. Central Suburban Passenger Company, which is active in the Moscow region, will be the leading buyer of domestic EMU cars during the year, with 220 set to be ordered for €145.4m.


As well as the impact of the weak rouble, the situation in the Russian rail supplier market has been hit by economic sanctions imposed against Russia in 2014, and which the European Union agreed to extend by a further six months on December 15. The value of the market has fallen significantly in the last two years as many of the partnerships between local suppliers and established European suppliers, which resulted in a flurry of new products entering the market around 2012 were affected. For example, Finland’s Wärtsilä cancelled plans to manufacture diesel engines for locomotives and marine applications. A number of German companies have expressed frustration at the situation.

In response, Russia has enacted an Import Substitution Programme, which encourages the replacement of foreign components in Russian products with Russian-built analogues, or in some cases replacing the entire product. For example, in 2015 Bryansk Engineering Plant began producing 2TE25KM freight diesel locomotives, an analogue of Ukraine’s 2TE116 diesel locomotive. This is expected to translate into gradually improving results.

While economic sanctions may have hindered more recent investments, passenger sector service quality has improved steadily in the past five years as new regional trains have been introduced between major cities. The Moscow Central Ring railway, which opened in September, is also proving an instant success and is already carrying 300,000 passengers per day. In 2017-2018 it will be further integrated into Moscow public transport network and is expected to carry 120 million passengers per year by 2020.

Among the major projects which could stimulate further growth is the proposed Roubles 1 trillion Moscow - Kazan high-speed line. All necessary engineering drawings and specifications for construction have now been completed, and at the end of 2016, IPEM participated in a technical review of the project as a member of the advisory consortium. Public consultations on the project’s final details are set to take place in 2017, ahead of the start of the tendering process.

Rolling stock and infrastructure suppliers from Europe and China have expressed interest in the high-speed project, but in light of the economic sanctions, it is more likely that Chinese companies will now implement the project.

Despite the economic sanctions, the indications are that investments in improvements to quality and service level will transfer to continuing growth in both freight and passenger traffic. Indeed, there is a sense of cautious optimism that Russia’s railway sector can continue to strengthen its position in the next 12 months.