Russia’s Railway COLLAPSES: 700,000 Workers TURN on Putin Amid Mass Layoffs
MOSCOW — Across the expansive depots and maintenance yards that span Russia’s eleven time zones, the quiet murmur of labor anxiety is hardening into open defiance. For more than a century, the Russian railway system has served as the iron spine of the Russian state, tethering Siberian mines to Baltic ports and projecting military power across thousands of miles of frozen steppe. Today, that colossal network is buckling under the weight of Vladimir Putin’s protracted war in Ukraine, triggering a financial and operational crisis that directly threatens its roughly 700,000-strong workforce.
Faced with mounting corporate debt, slashed investment budgets, and soaring borrowing costs, Russian Railways, known domestically as RZD, has begun quietly rolling out reduced work hours, freezing wage enhancements, and preparing for widespread personnel reductions. For an army of track maintenance crews, engineers, and station personnel who once enjoyed some of the most stable state-backed employment in the federation, the contract between the Kremlin and the working class is disintegrating. The company that moves Russia’s soldiers to the front lines can no longer guarantee the livelihoods of the workers who keep those trains on the tracks.
The crisis unfolding across RZD is not merely an isolated corporate restructuring; it represents a critical structural fault line in Russia’s broader wartime economy. By redirecting the 85,000-kilometer network to service military logistical imperatives while simultaneously demanding that it absorb the shock of Western trade sanctions, Moscow has transformed its primary economic artery into an unsustainable financial liability.
A Balance Sheet in Free Fall
The financial deterioration of the state-owned railway monopoly is both sudden and staggering. In 2025, RZD’s net profit plummeted by a factor of 22, collapsing from $552.8 million the previous year to a meager $23.9 million. The collapse occurred despite a 10.4 percent increase in nominal top-line revenue, which reached approximately $39.2 billion—a classic sign of an enterprise whose operational expenditures, inflationary pressures, and financing burdens are expanding far faster than its revenue base.
At the core of this balance sheet disaster is a mountain of debt that has rapidly grown unmanageable. Driven by wartime operational disruptions and the need to subsidize unremunerative routes, RZD accumulated roughly $8.7 billion in new debt over the course of 2025 alone, pushing its total corporate obligations past $41.4 billion, with some internal and banking estimates placing the figure at closer to 4 trillion rubles, or roughly $52 billion.
Under normal economic conditions, a strategic state monopoly could service such debt through domestic bond issuances or commercial credit. But with the Russian Central Bank holding benchmark interest rates at punitive levels to suppress wartime inflation, the cost of servicing that debt has doubled to an estimated $5.8 billion annually. RZD is now borrowing at exorbitant rates simply to pay the interest on its prior loans.
To stave off an outright liquidity freeze, the company has begun liquidating prime real estate assets. Among the properties slated for disposal are the historic Rizhsky station building in Moscow and a 62-story skyscraper in the Moscow City financial district that RZD acquired in 2024 for 193.1 billion rubles. Meanwhile, appeals to the state for emergency intervention have met with only partial relief. When RZD formally requested 200 billion rubles from Russia’s National Wealth Fund, the Ministry of Finance approved just 65 billion, underscoring the severe fiscal constraints facing the central government as defense expenditures consume a record share of the national budget.
Military Priority Over Commercial Life
The roots of the railway’s fiscal collapse lie in a fateful operational mandate issued by the Kremlin. In 2024, the Russian government ordered RZD to grant absolute dispatch priority to military echelons moving personnel, heavy armor, munitions, and fuel to the Ukrainian theater.
While that directive solved immediate battlefield logistical headaches for the Russian General Staff, it threw the nation’s commercial freight schedules into disarray. Civilian cargo has been routinely sidelined on sidings for days or weeks, creating bottlenecks that ripple through manufacturing, agriculture, and energy sectors.
Total freight volume moving across the Russian rail network fell to 1.1 billion tons in 2025—the lowest annual figure recorded in sixteen years. As commercial shippers encounter chronic delays and unpredictability, many have reduced shipments or sought expensive road freight alternatives, stripping RZD of the high-margin freight revenues needed to cover its massive fixed operating costs.
The logistical crisis has been compounded by Western sanctions, which forced a rapid reorientation of Russian commodity exports away from Europe and toward China, India, and other Asian markets. This abrupt pivot overwhelmed Russia’s eastern rail corridors, principally the Trans-Siberian Railway and the Baikal-Amur Mainline (BAM).
Yet precisely when capital was desperately needed to widen bottlenecks, electrify tracks, and double-track remote Siberian stretches, RZD was forced to cut its overall capital investment program by approximately 40 percent, with deeper cuts projected. Vital modernization projects on the BAM and Trans-Siberian lines have ground to a halt, leaving the country’s eastern trade corridor choked and incapable of handling the required export volumes.
The Kuzbass Coal Trap
Nowhere is the collision between railway dysfunction and industrial reality more acute than in the coal-rich basin of Kuzbass in southwestern Siberia. Coal represents RZD’s single largest freight commodity by volume, accounting for roughly 38.8 percent of all freight turnover across the network. However, because coal is a heavy, low-value bulk good, it generates only 21.4 percent of the railway’s operating revenue.
To compensate for its widening revenue shortfall, Moscow began introducing aggressive freight tariff hikes. Overall rail freight tariffs climbed by 64.5 percent between 2022 and 2024, followed by a targeted 1 percent transport security surcharge in March 2026 and an additional 8.5 percent freight rate hike scheduled for the autumn.
These escalating transportation costs have devastated Russian coal producers, who were already reeling from depressed global prices and Western trade bans. After generating nearly two trillion rubles in combined net profits between 2021 and 2023, the Russian coal mining industry swung into an aggregate net loss of 48 billion rubles in 2025, with more than 66 percent of all coal enterprises operating in the red.
In the Kuzbass region, which produces roughly 40 to 45 percent of the country’s coal output, the outcome has been catastrophic:
Nineteen mining companies have suspended operations entirely.
Another thirty-two enterprises have entered acute financial distress, unable to meet debt or payroll obligations.
Russian coal exports to China dropped by 21.1 percent in the first five months of 2026, as Chinese buyers balked at paying higher delivered prices driven by Russian rail tariffs.
The result is a classic economic trap. RZD raises freight rates to plug its own budgetary holes, but the higher rates push its biggest corporate customers into insolvency. As mines shutter and carloadings plummet, RZD’s revenue base shrinks further, prompting calls for yet another round of tariff hikes on the surviving commercial shippers.
Physical Decay and Asymmetric War
Beyond its balance sheet woes, RZD faces growing operational hazards on the ground. Ukrainian deep-strike operations using long-range drones have repeatedly targeted key railway junctions, electrical traction substations, repair depots, and fuel distribution hubs inside Russian territory.
While these strikes rarely sever an entire multi-track mainline permanently, they cause localized bottlenecks, necessitating complex detours, consuming scarce repair crews, and driving up insurance and security costs. The March 2026 freight surcharge of 1 percent was officially earmarked to fund counter-drone defenses and security personnel across the rail perimeter—an administrative admission of the soaring cost of protecting a vast civilian network in wartime.
Compounding the problem is an emerging energy crunch along regional industrial lines. Intelligence assessments and logistics reports indicate that industrial railway operators in several key manufacturing hubs have faced spot shortages of diesel fuel, with regional wholesale prices surging to between 150 and 180 rubles per liter. Because more than 80 percent of Russian freight traffic originates on private or industrial track sidings that connect factories and extraction pits to the national grid, local locomotive fuel shortages can paralyze entire regional supply chains before freight ever reaches an RZD mainline.
At the same time, maintenance backlogs are accumulating. Slashed capital budgets mean less money for track re-ballasting, switch replacements, and locomotive overhauls. Deprived of critical Western components—such as advanced cassette bearings for high-capacity freight cars and electronic control modules for modern locomotives—maintenance crews are increasingly resorting to cannibalizing decommissioned rolling stock to keep priority military lines functioning.
The Looming Social Rupture
For the Kremlin, the political danger of the railway crisis lies in the demographics of its labor force. RZD is one of the largest single corporate employers in the world, with roughly 700,000 workers stationed in nearly every city, town, and railway junction across the Russian Federation. In many Siberian and Far Eastern company towns (monogoroda), the railway depot and the local maintenance yard are the only reliable sources of income for the civilian population.
As the company reduces work shifts, cuts discretionary bonuses, and prepares structural layoffs to service its bank debt, public discontent is steadily mounting in regions that have historically formed the bedrock of political support for the state. Railway workers find themselves squeezed between double-digit real inflation and falling take-home pay, even as they are ordered to work mandatory overtime on military supply corridors under increasingly hazardous conditions.
The Kremlin cannot permit Russian Railways to go into formal bankruptcy; the logistical demands of the war in Ukraine and the survival of basic domestic commerce make the network too critical to fail. The government has already begun assembling a broader 1.3 trillion ruble stabilization package involving state bank debt restructurings and fiscal subsidies.
Yet financial lifeboats from Moscow do not solve the fundamental physical contradiction facing the country’s transport infrastructure. The very conflict that relies on the railway system to sustain its battlefield operations is systematically exhausting the financial, physical, and human resources required to keep the trains running. In attempting to turn a civilian railway monopoly into an instrument of prolonged total war, Russia has placed an unsustainable burden on its iron arteries—and the workers tasked with keeping them alive.
