Russian Railways Enter the Collapse Territory
May -2.1%. June -3%. July -5.6%.
Russia has the third-largest railway network in the world, after the United States and China. With nearly 87,000 kilometers of railroads, Russia uses railways to move goods and people across its vast expanse.
As the largest country in the world by landmass, its railway network is the main transportation artery for people and businesses to reach other parts of the country. It is their primary transportation lifeblood.
It underpins everything in Russia.
- Russia's rail network is vital to the nation's economy, facilitating the transport of its abundant natural resources—such as oil, gas, coal, and minerals—from extraction sites to processing facilities, ports, and other destinations.
- It also plays a critical role in the manufacturing sector, enabling the efficient delivery of raw materials, components, and finished products to factories and markets.
- As a major exporter of commodities and manufactured goods, Russia relies on its extensive rail system to connect production centers with international markets.
- Even Russia’s military weapons are designed with rail transport in mind.
If we want to understand the state of the Russian economy, freight traffic is one of the best indicators. And it’s starting to flash an ominous red warning.
Data collected by The Moscow Times shows that freight traffic declined by 2.1% in May, 3% in June, and 5.6% in July.
According to Russian Railways, from January to August, ferrous metal shipments fell by 7.4%, iron ore by 3.8%, ferrous scrap metal by 14.2%, and non-ferrous ore by 8.6%. Coal loading fell by 5.7% following a drop in seaborne exports by 11.4%.
Of the 15 types of cargo that Russian Railways tracks in its statistics, 10 were in the red by the end of August. Transportation of construction materials fell by 13.8%, cement by 4.4%, chemicals and soda by 3%. After a series of accidents at oil refineries, which have been attacked by drones at least 40 times since the beginning of the year, transportation of petroleum products fell by 0.6%.
In addition to the decline in exports, Russian Railways is experiencing increasing difficulties with locomotives, MMI points out: last year, 42.6 thousand trains were left without service due to rolling stock breakdowns — twice as many as in 2022. According to Russian Railways itself, the shortage of locomotives for transportation may amount to 1.5 thousand units by 2035.
For more than two and a half years, the Kremlin insisted to the world and its citizens that the Russian economy was growing. In a way, it did, by diverting oil and gas revenue and channeling savings into war production. The state provided subsidies, cheap loans, and increased one-time payments and annual salaries to military personnel. This steady flow of money successfully masked the underlying weaknesses in the overall economic output.
However, the problem with applying a band-aid to a wound that needs surgery is that, eventually, it will start bleeding, and when it does, the issue begins to spread. By the end of June, the chief of the Russian Central Bank warned that the economy was facing stagnation and potentially heading toward a recession. She also cautioned that using savings to mask labor shortages would only worsen the economic situation.
She has been sounding the alarm for nearly six months now, and she is right. She has been careful with her words, but in the last two years, I haven’t seen her lie.
Despite the Kremlin pouring substantial funds into weapons manufacturing, industrial growth fell by 1.1% in the first half of 2024, with output volumes declining for two consecutive months, May and June.
For a long time, my readers have been asking for indicators of a Russian economic collapse. We are not there yet, but the pace toward that destination has significantly increased. One by one, Russia’s crown jewels are falling apart. Gazprom is done — gone, over. Russian Railways, already struggling due to a lack of state funds, is now seeing its revenue take a massive hit from a slowdown in freight transport.
If the Biden-Sullivan team really wants to end the war without bloodshed and force Putin to the negotiation table, drying up Russia’s war funds is the best path forward. They need to leverage their economic power to tighten the screws on a Russian economy that is beginning to crack.
This strategy could even support their goal of managing Putin in the post-Ukraine war era. If Putin realizes he has no money to sustain the war, he will temporarily abandon his imperial ambitions, finding a convenient angle to declare he has achieved his objectives in Ukraine and walk away. The Biden-Sullivan team could then have their reset with Putin.
But will they act? Sanctions now. Not later, not two months from now, but now.
Alexander the Great kept winning because he was one of the greatest opportunists. In war, the door of opportunity doesn’t open itself and wait for you to walk through; you either seize it or squander it.
The competent ones seize it.
Thanks for reading. Making critical information on Ukraine accessible is one way to fight misinformation. That’s why I’ve made 267 stories free to the public in 2024, including this one.
