Russia-Europe rail link 'still on track'

Russian Railways (RZD) has said it will go ahead with building a wide-gauge link to Europe despite admitting that the government had slashed its infrastructure investment budget in half.

Speaking in a public lecture at the London School of Economics (LSE), last Tuesday, RZD president Vladimir Yakunin said the country faced the same economic crisis as the rest of the world, but long-term international plans would still go ahead.

He said freight volumes had tumbled 40% through January, compared with the same period last year.

"We are all suffering from the crisis as we see it today, and nobody, not any professor, not any politician can explain what was actually the cause of the crisis or what the outcome will be, " he said.

He confirmed that the planned link from Moscow to Vienna in Austria, using a 1,520mm wide gauge line running through Ukraine and Slovakia, would go ahead, despite a reduced infrastructure investment budget of Rb265bn (US$7.3bn). This included maintaining current infrastructure commitments inside the country.

The Vienna scheme is part of a long-term plan to increase box traffic and offer customers a reduced transit time from China. "By 2011, we would like to cover the distance between Vladivostok and the border of the EU in seven days, " he said. "We want to introduce an international product. We already have support from the Austrian government, the prime minister of Slovakia, the Italians and the Germans, and of course Ukrainians and Russians."

However, he added the Russian government was maintaining a "pessimistic view" over the recession.

"The current crisis has affected us notably.

We are trying to increase the efficiency of the company - we are cutting expenditures by Rb173bn, and for the moment enjoy the moral support of the government. They are seeing that we are cutting our expenditures and trying to make ourselves efficient."

He said RZD was cutting working hours and reducing its use of part-time labour to save costs. The organisation currently accounts for 3.6% of Russia’s GDP, employs 1.2m people and runs 20,000 locomotives along 85,000km of track.

However, Yakunin was bullish about future prospects and said RZD would continue to work to increase the compatibility between operating gauges between it and the EU - divides that had existed since the end of the Second World War.

"The CIS countries’ system developed separately [to Europe] and today it is impossible to run trains between. Everything is different - not only the gauge but the standards. The weight of the cargo that is permitted on the infrastructure is different; communication systems are different. We are trying to bring railways in CIS countries and Russia closer."

He added that RZD may well post a loss this year. Although its 2008 financial results are not due to be published until March, Yakunin indicated profit was likely to come in at Rb4bn, compared with Rb84bn in 2007.