Exclusive-Russia weighs how to prop up Russian Railways which is $51 billion in debt, sources say

By Gleb Stolyarov

MOSCOW (Reuters) – Russia’s government is discussing different ways to support Russian Railways, the country’s largest commercial employer and a debt pile of 4 trillion rubles ($50.8 billion), two people with knowledge of the matter told Reuters.

State-owned Russian Railways, which employs about 700,000 people, has seen revenues fall due to a sharp slowdown in Russia’s war economy, while debt costs have risen under the influence of the highest interest rates in two decades.

Moscow is discussing ways to help pay off the railways’ debts, mostly to state banks, according to two people who spoke on condition of anonymity because of the sensitivity of the issue.

These include increasing cargo prices, increasing subsidies, reducing taxes and even distributing money from the National Wealth Fund, sources said. The increase in rail cargo prices will negatively affect Russian exporters of bulk goods such as coal, metals, petroleum products, grain and chemicals, which are suffering from an economic slowdown and high interest rates.

Russian officials met in late November to discuss the situation and plan to meet again in December, one of the sources said. Russian Railways, the Russian government and the Ministry of Transport did not respond to requests for comment.

Some ideas not yet discussed at the government level include limiting the interest rates paid by Russian Railways to 9% or converting debt into shares (essentially giving state banks a stake in the company).

CONVERSION FROM DEBT TO EQUITY WAS PROPOSED

One of the proposals is to convert 400 billion rubles of Russian Railways debt into shares, one of the sources said. According to the source, this measure will save 64 billion rubles in interest alone in three years.

Sources stated that these measures were an attempt to “rescue” Russian Railways, which operates the world’s third longest railway network after the United States and China.

One of the sources said it was unclear what the government’s final decision would be as there were differences of opinion among representatives of the finance, economy, transport and trade ministries on what to do.

Russian Railways reported revenues of 3.3 trillion rubles and expenses of 2.8 trillion rubles by international standards for 2024.

INCREASE IN DEBT SOUNDS ALARM BELLS

In its financial statement for the first six months of 2025, the company reported net debt of 3.3 trillion rubles as of June 30, including short-term debt of 1.8 trillion rubles.

It was not clear why the debt rose to about 0.7 trillion rubles in just half a year.

Russian Railways, which transports passengers, oil and cargo across the world’s largest country from the Pacific to the Black and Baltic seas, has long been seen as the vanguard of the health of the Russian economy.

Their woes reflect the difficulties faced by a state-dominated war economy: too-big-to-fail companies are indebted to state banks, ultimately leaving the state in the lurch at a time when Russia is spending record amounts on the military as the war in Ukraine approaches its fourth year.

EVEN PUTIN’S WAR ECONOMY IS COOLING

During Vladimir Putin’s first two terms as president, from 2000 to 2008, Russia’s economy grew from less than $200 billion in 1999 to $1.7 trillion. But now, Russia’s $2.2 trillion nominal gross domestic product is about the same as it was in 2013, the year before Russia annexed Crimea, and the economy is set to slow sharply this year.

The government forecasts that GDP growth will slow from 4.3% to 1.0% in 2024 and to 4.1% in 2023, but the International Monetary Fund lowered its 2025 forecast from 0.9% to 0.6%.

While the West says it aims to cripple Russia’s economy to force the Kremlin to change course in Ukraine, Putin has said Russia will never bow to outside pressure and Russian officials say the economy is secondary to the aims of the war.

Putin says the economy is performing much better than anyone expected under the weight of thousands of Western sanctions and, unlike Western states, is largely debt-free. However, he also acknowledged that there were some problems with investments and the difficulties caused by high interest rates.

Russia’s economy “continues to cool,” with growth expected to be around 1 percent next year and business activity remaining weak for four to five quarters, a senior executive at Sberbank, the country’s largest lender, told Reuters.

($1 = 78.7500 rubles)

(Additional reporting by Reuters in Moscow and Darya Korsunskaya in London; Editing by Guy Faulconbridge, Tomasz Janowski and Ros Russell)