1st February 2026
Russian Railways (RZhD), the state-owned rail monopoly that's vital to Russia's economy, is facing serious financial stress and a deepening crisis, but it's not literally "collapsed" yet. However, multiple credible sources now describe it as being in financial trouble that's worsening and putting the company under severe strain.
Declining Revenues and Falling Freight Volumes
Freight traffic — historically the backbone of RZhD's business — has been falling for multiple years in a row and hit near-record lows as Russian industry contracts and sanctions affect exports.
Lower freight volumes mean less revenue and less cash to cover operating costs and investments.
Huge Debt and Mounting Losses
RZhD's debt has ballooned to around 4 trillion rubles (~$50 billion).
Operating losses have been reported, and profitability has plunged — in the first half of 2025 net profit dropped by about 96 % compared with the previous year.
Company Seeking State Support
According to multiple reports, RZhD asked the Russian government for billions of rubles in budget support to cover cash shortfalls.
Officials are considering measures like tariff increases, subsidies, and financial restructuring to prevent deeper collapse.
Cuts to Investment and Cost-Saving Measures
Capital investment and infrastructure projects (including key expansions) have been sharply reduced.
The company has instituted cost-saving measures like unpaid leave for some staff and reported cuts to purchasing locomotives and rolling stock.
Operational and Structural Issues
RZhD is also struggling with a shortage of staff due to mobilisation, emigration, and fewer migrant workers.
A large number of freight cars are idle or unused, increasing maintenance costs while revenue shrinks.
Russian Railways is not literally "collapsed" in the sense of shutting down, but it is under serious financial strain that is affecting operations, investment, debt servicing, and overall financial health. Many analysts and intelligence reports describe the company as being on the brink of significant crisis or even potential bankruptcy if trends continue.
Russian Railways (RZhD) is affecting the wider Russian economy and military logistics
Rail freight collapse reflects systemic economic weakness
Russian Railways is the backbone of Russia’s logistics and economy, carrying around half of all cargo and the vast majority of heavy bulk freight. But:
Freight volumes have fallen for four years in a row, hitting pandemic-era lows and continuing into 2025.
Net profits plunged sharply — in some periods by over 95 % year-on-year.
Major categories like grain, metals, construction materials and timber are all significantly down, some by double digits.
Why it matters: Rail freight is a barometer of industrial activity and demand — when it falls this sharply, it reflects a deep slowdown in production, construction, mining and exports across the economy.
Investment cuts hurt long-term infrastructure and industry
The financial squeeze means RZhD is drastically cutting back on:
Capital investment in new rail lines, modernization and major projects (e.g., Trans-Siberian expansion).
Replacement of older locomotives and rolling stock.
Staffing and operations, including hiring freezes and forced unpaid leave for staff.
This not only affects rail efficiency but also industrial supply chains — slower, less reliable logistics raises costs for factories, mines and exporters, and undermines regional economic activity.
Military logistics and war economy impact
Rail is central to moving military supplies, equipment and mobilised personnel across Russia’s vast territory. The crisis therefore has broader implications for:
Delays in moving military freight
With fewer trains and crews available, rail capacity for transporting military freight — including heavy equipment — is lower, worsening bottlenecks in logistics.
Strain on war economy supply chains
The war effort increased demand for military production while civilian freight collapsed — rail infrastructure is being pulled in two directions. This unbalanced load raises costs and inefficiencies.
Strategic repositioning and export challenges
Russia has pivoted trade toward Asia, but rail infrastructure and freight capacity are stretched and financially constrained — limiting its effectiveness and raising logistical costs.
Ripple effects across the economy
The rail crisis amplifies wider economic problems:
Regional economies that depend on rail freight and related jobs are contracting.
Industrial output and investment slow as transport becomes less reliable and more expensive.
State budget support for RZhD competes with other priorities like defence spending, reducing fiscal flexibility.
Financial strain on RZhD feeds back into the economy rather than being isolated — it exposes and worsens broader stagnation and inflationary pressures.
What this means in practice
Russian Railways hasn’t collapsed outright, but its financial crisis is real and deepening with falling freight, rising debt, and slashed investments.
This isn’t just a transport company issue — it reflects and reinforces a broader economic slowdown in Russia.
Military logistics are affected too, as rail capacity and efficiency struggle under the combined weight of economic contraction and war demands.