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

By Gleb Stolyarov

MOSCOW (Reuters) – Russia’s government is discussing different ways to shore up Russian Railways, the country’s biggest commercial employer, which has built up 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 around 700,000 people, has suffered a drop in revenue amid a sharp downturn in Russia’s war economy while debt costs have soared, driven by the highest interest rates in two decades.

According to two people who spoke on condition of anonymity because of the sensitivity of the issue, Moscow has been discussing ways to help the railways deal with its debt, mostly owed to state banks.

These include an increase in the prices of goods, an increase in subsidies, a reduction in taxes or even the deployment of money from the National Wealth Fund, the sources said. An increase in prices for rail freight affects Russian exporters of wholesale commodities such as coal, metals, oil products, grain and chemicals which are themselves suffering from the economic downturn and high interest rates.

Russian officials met to discuss the situation in late November 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 that have not yet been discussed at the government level include limiting the interest rates paid by Russian Railways to 9% or converting its debts ‌into shares – essentially giving the state banks a stake in the company.

DEBT-TO-EQUITY CONVERSION PROPOSAL

One of the sources said that one proposal was to convert 400 billion rubles of Russian Railways debt into shares. That measure would save 64 billion rubles in interest alone over three years, according to the source.

The sources cast the measures as an attempt “to save” Russian Railways, which operates the third longest rail network in the world after the United States and China.

It was not clear what the final decision of the government would be as there were differences of opinion on what should be done between representatives of the ministries of finance, economy, transport and trade, said one of the sources.

For 2024, Russian Railways reported income of 3.3 trillion rubles and expenditure of 2.8 trillion rubles under international standards.

INCREASING DEBT CAUSES SOME ALARMS

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 1.8 trillion rubles of short-term debt.

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

The Russian Railways, which carry passengers, oil and goods across the world’s largest country from the Pacific to the Black and Baltic seas, has long been considered a key factor in the strength of the Russian economy.

Its plight reflects the challenge facing the state-dominated war economy: too-big-to-fail companies owe debt to state-owned banks, which ultimately leaves the state on the hook at the very time when Russia is spending record amounts on the military as the war in Ukraine approaches its fourth year.

PUTIN’S WAR ECONOMY GROWS WAY

During Vladimir Putin’s first two terms as president from 2000 to 2008, Russia’s economy grew to $1.7 trillion from less than $200 billion in 1999. this year.

The government predicts that GDP growth will slow to 1.0% from 4.3% in 2024 and 4.1% growth in 2023, although the International Monetary Fund has reduced its 2025 forecast to 0.6% from 0.​​9%.

The West has said it aims to disrupt Russia’s economy to force the Kremlin to change course in Ukraine, although Putin has said Russia will never bow to foreign pressure and Russian officials say the economy is secondary to the war’s aims.

Putin says that the economy has fared much better than expected under the weight of thousands of Western sanctions, and that unlike Western states it is largely debt free. He, however, acknowledged some problems with investment and the pain caused by high interest rates.

Russia’s economy is experiencing “continued cooling” with growth expected to be around 1% next year and business activity will remain weak ‌for four to five quarters, a senior executive at Sberbank, the country’s biggest 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)