One of Russia’s main trade channels with China is experiencing significant disruptions as Russia’s war-torn economy, under pressure, has significantly slowed the country’s railway industry. It should also be noted that the railway system is a necessary component for trade between Moscow and Beijing.
During the first nine months of 2023, more than 128 million tons of cargo were transported by rail between the two countries. This represents a 51.5 percent increase over the same period in 2022 recorded last year.
Sanctions have made it more difficult for Russian exports and imports of technology. Russia has increased its imports of military technology and equipment from “Third World” countries, including China. According to the Atlantic Council, increased rail trade with China has thwarted the desired goal of Western sanctions, involving isolating Russia’s economy and fueling Putin’s wartime resource shortages.
Despite the positive indicators recorded last year, the current situation does not look so favorable. Russia’s rail industry is facing its sharpest slowdown since the Great Financial Crisis, and the trend is on the rise, according to a report from Russian research firm MMI Research.
MMI data cited by Bloomberg show that the volume of cargo carried by Russian State Railways in the first 11 months of 2024 fell by 5% compared to last year. This slowdown is partly due to Russia prioritizing the transportation of war-related materials. All this hampered the transportation of such important goods as coal and aluminum.
The reduction of investments in Russian railways is another factor that causes the mentioned slowdown. According to the state news agency Tass, high interest rates in the country make project financing even more difficult.
In addition, as reported by Tass, in 2025 Russian Railways plans to allocate only 890 billion rubles ($8.5 billion) for the investment program, which means that compared to 2024, this figure will decrease by 30%. As reported by the Russian news outlet Kommersant, the company may reduce investments by another third by the end of the decade.
The changes are also bad news for Russia’s trade with China, which depends on rail transport due to Western sanctions. Russia invested billions in railways in early 2024 to boost trade with China, but ongoing economic woes continue to hamper progress.
The issues discussed above highlight the growing costs of Russia’s war against Ukraine, which is causing the country many economic challenges. It is also significant that earlier this year, to combat high inflation, the Central Bank of Russia raised interest rates to a record 21%. In a decision last week, the bank kept interest rates on hold because of what they believe are risks of excessive cooling in Russia’s war economy.
It should be noted that Russia’s military strategy is completely dependent on its railway networks. Railroads are logistically critical to Putin’s all-out war in Ukraine. With relatively limited alternatives for large-scale transportation, Russia needs efficient railroads to move troops, equipment, and supplies.
Ukrainian intelligence services and guerrilla groups are working with Russian anti-war groups to strategically target Russian railway logistics points. “Stop the Wagons” is one of the most famous Russian political groups that express their opposition to Russia’s war in Ukraine by sabotaging railway infrastructure.
