Russian railways towards China: A New Role Amid the Conflict in Ukraine

The adoption of new sanctions by Western countries against Russia has accelerated the reorientation of Russian trade relations towards Eastern countries, which continue to conduct business with local companies and authorities. However, a full-scale shift of the economy towards partners in Asia and the Far East is complicated by the insufficient capacity of the main railway lines in the region — the Trans-Siberian and Baikal-Amur Railways. This article delves into how Russian authorities are addressing the issue of transport corridors towards China.

Railway Network Modernisation

As early as the beginning of the 2010s, when relations between Moscow and the West had already begun to deteriorate, Russian authorities and companies started to invest significant funds in the development of transport infrastructure leading to the East, specifically in the modernization of the Trans-Siberian and Baikal-Amur Railways.

For instance, since 2013, Russian Railways (RZD) has initiated the modernization of the Eastern Railway Polygon — the network of railways in the country’s east. In 2018, following Vladimir Putin’s reelection, the country adopted a program for the modernization of transport infrastructure, which includes projects for the development of railway infrastructure in the Eastern direction.

The main goal of the transport system modernization is to increase the throughput and carrying capacity of the region’s railways, which would enable a fourfold increase in transit container traffic, while ensuring a delivery time of seven days for cargo on the “West-East” route (Asia to Europe via the Trans-Siberian Railway). Thus, by 2032, the throughput capacity should reach 255 million tons annually, compared to 158 million tons in 2022.

Efforts to modernize infrastructure are already underway: in 2019, train traffic was opened on a new railway bridge across the Zeya River on the Trans-Siberian Railway. In 2021, electrification of a 365-kilometer section from Karymskaya station to Zabaikalsk station was completed — the largest railway checkpoint on the Russian-Chinese border. In the same year, the Second Baikal Tunnel was opened, increasing throughput capacity from 17 to 85 pairs of trains per day and carrying capacity from 13.2 to 32.4 million tons of cargo per year, or 2.5 times.

The New Role of the Eastern Polygon Amid the War in Ukraine

The full-scale conflict in Ukraine and the adoption of severe restrictive measures against Moscow disrupted trade between Russia and Europe: according to Federal Customs data, from January to September 2023, Russian exports to Europe decreased from $216.7 billion to $65.3 billion, a 70% decline. Imports from Europe decreased by less than 10% to $59.2 billion.

However, Russia managed to swiftly reorient towards trade with Eastern countries, notably China. Trade turnover between Russia and China in goods increased by 26.3% in 2023, reaching $240.11 billion, according to Chinese customs statistics. Chinese exports to Russia increased by 46.9% in a year (to $110.97 billion), while Russian imports rose by 12.7% (to $129.14 billion).

Trade relations between Russia and India also significantly improved: bilateral trade turnover in 2023 increased by 1.8 times, reaching approximately $65 billion.

The changed geopolitical situation has significantly increased the importance of railways in the country’s east — the Trans-Siberian and Baikal-Amur Railways — as they bear the burden of transporting the bulk of goods from China. This is evident from the numbers: freight transportation volume through the Eastern Polygon exceeded 280 million tons in 2023, 8% higher than the 2021 level and a historical maximum.

Capacity Limits

However, despite the fact that work on expanding railways in the country’s east began long before the start of the war in Ukraine, the increase in freight volumes immediately highlighted several unresolved issues.

For example, in April 2024, it was reported that the coal mining company “Kolmar,” located in Yakutia, had suspendedthe operation of two processing plants, while another was operating at only 50% capacity. The reason was the overload of railways, which made it impossible to transport coal, while warehouses were overflowing. And this is not an isolated example.

The scale of the situation can be understood from the data provided by Deputy Prime Minister Yuri Trutnev at a meeting with responsible ministries and representatives of Russian Railways. The official stated that in 2023, the carrying capacity of the Eastern Polygon was 173 million tons, while the demand from shippers was significantly higher—requests for the transportation of goods in 2023 amounted to 353 million tons (one way). Thus, the volume of unshipped goods amounted to 180 million tons.

“Several Far Eastern shippers are having their requests denied. Container exports are delayed. Companies that pay taxes to budgets at all levels and provide a significant portion of the population of the Far East with jobs are suffering losses. Several industries are at risk of shutdown,” noted Yuri Trutnev.

Main Problems

According to experts, the inability to transport more significant volumes of goods is explained not only by the presence of bottlenecks throughout the Baikal-Amur Mainline (BAM) and the Trans-Siberian Railway but also by problems within Russian Railways (RZD): the lack of an adequate number of locomotives and staff shortages, as well as corrupt practices.

● Shortage of Trains and Locomotives

In an interview for the industry newspaper Vgudok, Alexey Shilo, Deputy General Director of Russian Railways (RZD), stated that in 2023, around 2 million tons of cargo were lost “due to systemic problems in the organization of locomotive fleet maintenance caused by service companies.”

As reported by journalists from Vedomosti, in 2023, RZD faced a severe shortage of locomotives: nominally, there are enough locomotives to handle the existing freight base, but due to extensive repairs and their prolonged service, the capacity for transporting cargo is reduced.

Moreover, the repair process itself can be prolonged because of the frequent shortage of spare parts, and the production of new freight cars and locomotives is hindered. The production of freight rolling stock decreased by 16% in the first quarter of 2023 compared to the same period in 2022, almost reaching 13,000 wagons, due to a shortage of components.

● Staff Shortages

Another factor that may affect the throughput capacity of the Trans-Siberian and Baikal-Amur Railways is the shortage of workers, which both Russia and RZD are facing.

In recent years, the personnel shortage has intensified in Russia due to both objective circumstances — nowadays, a small generation born in the 1990s, when there was a serious decline in birth rates, is entering the labor market—and due to artificial factors, such as mobilization, which affected mainly “white-collar” workers and prompted many Russians to emigrate.

Dmitry Shahanov, Deputy General Director of RZD, characterized the situation in the company as follows: “We have reached a point where there is practically no available personnel not only for the railway but also for the railway industry in the labor market. If previously the main task of our HR departments was to retain personnel to a greater extent, now the priority is to attract this personnel.”

● Corruption and Ineffective Management

In March 2023, the General Prosecutor’s Office drew attention to the significant lag in the modernization of railway infrastructure in the country’s east. The first stage of the project to develop the BAM and the Trans-Siberian Railway was not completed on time, and a “significant lag” is occurring in the second stage of modernizing the Eastern Polygon.

According to the supervisory authority, this situation could have been caused by an illegal scheme of settlement with designers, meaning that organizations were advanced funds, either while in a state of bankruptcy at the time of advance payment or having unfulfilled obligations — both of which delayed the deadlines.

Denis Semyokin, an expert from an industry-specific media outlet, believes that problems on the Baikal-Amur Mainline are also due to the inefficient management of RZD, as the company is highly centralized, and employees on-site cannot make any decisions without prior consultation with Moscow.

Prospects

Despite several serious problems encountered in the implementation of railway modernization projects in the country’s east, it is evident that due to the geopolitical situation, this project is one of the top priorities for the Russian leadership. Therefore, significant investments in this program can be expected in the coming years.

If a peaceful agreement on Ukraine is reached in the near future and EU sanctions against Russia are gradually lifted, Russia, with the successful implementation of infrastructure projects in the Eastern Polygon, could once again become the main transit country for goods from China to Europe, overshadowing the prospective Trans-Caspian Transport Corridor, the delivery of goods through which is aimed to be reduced to 14-18 days by 2024.