By Elena Alexeeva | 2026-04-15

Russia's railroad network is both infrastructure and the circulatory system of the country's war machine and economy. Now that system is hemorrhaging.

Russian Railways (RZD), one of Russia's largest state-owned companies and its biggest commercial employer, is selling landmark Moscow real estate, forcing unpaid leave on workers and laying off thousands, all while the Kremlin prioritizes military cargo over civilian freight that once kept the company solvent.

The scale of the crisis is hard to overstate. For a country waging a large-scale land war, a functioning railway is not optional. It is how troops move, how weapons reach the front and how a wartime economy stays alive. Yet the very war RZD is serving is helping destroy it.

RZD's net profit collapsed from 118.3 billion RUB ($1.35 billion) at the end of 2023 to 13.9 billion RUB ($158 million) in 2024. By mid-2025, profit had dropped another 95%, to 2.7 billion RUB ($31 million). The company now carries 4 trillion RUB ($45.5 billion) in debt, one of the heaviest corporate debt loads in Russia, and high interest rates have caused its interest payments to nearly wipe out all operating profit.

Freight in free fall

Since the start of the war, RZD has posted annual declines in freight traffic: down 3.9% in 2022, 0.2% in 2023, and 4.1% in 2024 -- the worst performance in 15 years. Between January and September 2025, traffic dropped another 6.7% year-on-year, with nearly every cargo category in decline.

One category bucked the trend -- a vague line item called "other goods, including in containers." Transportation analysts believe this is a front for military equipment, ammunition and weapons components.

The Russian government in 2024 approved new priority rules for rail freight, putting military cargo at the front of the queue. Analysts from the macroeconomics Telegram channel MMI called this a "factor that is not proper to discuss." The prioritization, however, has come at a direct cost to civilian cargo volumes and to RZD's bottom line.

Sanctions cut off export routes to Europe, collapsing one of RZD's most profitable corridors and accelerating the broader damage. Specialists from Alfa Rail Export, which arranges rail transport, say the severing of Western ties drove a sharp drop in deliveries to European countries.

The sale of the Rizhsky train station in Moscow, a landmark that once served westward routes, has become a symbol of that decline. When RZD also put its 220-billion-ruble ($2.5 billion) Moscow Towers skyscraper on the market, it became clear that the company no longer generates enough operating profit to cover its investment ambitions and debt obligations.

The Eastern pivot

In response, RZD is retooling itself as a corridor operator for China and the Asia-Pacific, betting its future on the Baikal-Amur Mainline (BAM) and the Trans-Siberian Railway.

But expanding eastward requires Western technology that Russia is officially barred from buying. To keep its megaprojects running, RZD and contractors such as Group 1520 have built networks of shadow operators.

Sanctioned electronics and locomotive parts flow through the Dostyk and Altynkol checkpoints in Kazakhstan, purchased by shell companies in the United Arab Emirates or Turkey, declared for Kazakhstan, then quietly reloaded onto RZD platforms. A parallel corridor through Mongolia serves as a technical intermediary for Chinese components with Western origins, according to the analytical platform Kharon and industry outlet RailFreight. These workarounds cost RZD 30 to 50% above market rates, tightening a debt noose that was already cutting off circulation.

The company has responded by slashing its capital investment program by nearly 40%, from 1.3 trillion RUB ($14.8 billion) to 890 billion RUB ($10.1 billion), with further cuts on top of that. Locomotive purchases and track modernization have been frozen.

A structural reckoning

Economist Nikolay Kulbaka, a professor at the Russian Presidential Academy of National Economy and Public Administration, said RZD is "a rather rigid and conservative entity" that since the Soviet era has seen itself as the "backbone of the Russian economy" and is "not really ready for serious competition." The rigid infrastructure of the state monopoly, he said, proved unprepared for a drastic reshuffling of cargo traffic.

The Russian government is weighing options to prop the company up, according to Reuters, which cited two anonymous sources familiar with the discussions. Options reportedly include higher freight prices, increased subsidies, tax relief, or tapping the National Wealth Fund. But raising freight prices would hurt Russian exporters of coal, metals, oil, grain and chemicals -- sectors already battered by the economic downturn.

In August 2025, RZD began requiring workers at its central office and regional branches to take two days of unpaid leave per month. The March 2026 announcement of 6,000 layoffs, framed as an efficiency measure, is widely seen as an acknowledgment that the company's financial position is unsustainable.

The train station that faced west is going up for sale. The line east is where the money is. Whether that pivot can save RZD, or just delay its reckoning, remains the open question.