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Outlying Areas in Need
Last year 992.4 million people were carried by RZD that is 4.8% more than in 2010. About 114.8 million of them were transported long-distance, which is down 0.1% on the previous year, and 886.6 million on commuter trains (+5.5%). Thus turnover rose by 0.6% and was estimated at 139.7 billion passengers/km.
Last year rail transport reform came to its final stage, bringing great changes for the operation of passenger traffic. Now providing transport services is the responsibi­lity of Russian regions. They have to place orders for suburban passenger companies (there are 26 such structures), then local government provides all the necessary directions and compensate the losses using ta­riffs. According to Vladimir Yakunin, President of RZD, it meant that Russian suburban services became more modern and are now focused on loss-free operations.
Due to an efficient marketing po­licy and quality of service, the company finally managed to change the negative trend caused by a decrease in passenger traffic on long-distance destinations. But anyway it was not a great breakthrough. According to Vladimir Yakunin, the difficulties are still connected with the lack of budget. Therefore its subsidiary Federal Passenger Company had to limit the amount of transportation in berths and coach cars last year.
Also RZD received encouragement in the form RUR of 25 billion from the Government. But it seems that even that large sum of money was not enough to subsidize falling income. All regions of the Russian Federation needed RUR 14.5 billion last year to improve the situation. However, compensation from regional budgets was only RUR 6 billion, which certainly was not enough. Vladimirskaya and Kurganskaya districts were in an almost desperate situation.
It seems that RZD is paying too much attention to regional traffic nowadays. In previous years, the company was many times accused of acting to the detriment of suburban passengers and focusing too much on the development of high-speed trains. But it has now realized that commuter traffic is also important.
“Those areas where there is no falling income, should improve the quality of service. Both authorities and passengers should really see the renewal of rolling stock and railway stations,” said Vladimir Yakunin. “It’s important that last year we managed to lower ticket prices in most regions. Tariff levels have increased only by 3.2%, which is significantly below inflation”.
To improve the quality of passenger services, some new technologies were introduced. For example, it is now possible to order and pay for a ticket for suburban train travel via the official website of RZD. In addition to this, more than 1100 self-service machines were installed at railway stations. And up to 14% of train tickets are bought through them. To provide convenience, a new system of 49 season ticket types was also implemented.

Keen on Speed
Except for such a bad situation in suburban traffic, last year in general was very successful for RZD. Especially in high-speed movement. According to Mikhail Akulov, vice president of RZD and managing director of the Federal Passenger Company, the company is working on providing comfortable journeys and reducing travel times. Last spring he announced the new Moscow-Berlin-Paris train, which was launched in December. It became the second-longest route through Europe presented by company. 
Called the “Trans-European Express”, it runs three times a week during winter and five times a week in summer, taking 2 days and 1 night to get to the final destination. Launching this new high-speed train (200 km/h) Vladimir Yakunin said: “I’m convinced that it will become one of the most exciting and sought-after services in the Company’s portfolio. In any event, all the tickets until the New Year have already been sold out”. But it is too early to estimate the profitability of new route.
It was a good year for the other two high-speed trains. About 300,000 passengers chose to travel between St Petersburg and Helsinki by “Allegro”, and the company’s most profitable project “Sapsan” running between Moscow and St Petersburg was very popular. It carried more than 3.5 million people and even managed to steal passengers from air companies. According to Mikhail Akulov, all “Sapsans” were filled to 90-100% capacity. 
Summing up company’s work, Vladimir Yakunin also noted the importance of the agreement signed in December between RZD and Siemens for the supply of 8 additional “Sapsan” trains in 2014-2015. “It will help to carry out major repairs of trains and to increase passenger traffic,” he said. “We are completely ready to develop express and high-speed traffic in Russia in the future, according to the course of our Government”. Regarding other rolling stock investments, the company bought 447 modern passenger carriages.
Nowadays RZD is working on a “Concept for the Organisation of High-Speed Passenger Services during the 2018 World Cup”, which will be held in Russia. New routes will help football fans to travel between the points where games will be taking place. In particular new high-speed routes for trains, running at 400 kph between Moscow and St Petersburg, and also Nizhny Novgorod – Kazan are being discussed now.

Focusing on Innovations
RZD representatives presented a lot of great ideas last year. But, unfortunately, most of them are still not concrete. In particular, they spoke about the importance of creating a single regional transport area by organizing ground-based public transport approach routes. And about the law concerning combined transport, which will let passengers travel using a single document. But as for the most immediate actions, the company is going to invest in modernization of its infrastructure.
It is an open secret that the present condition of most of Russia’s railway stations, especially in suburbs, leaves much to be desired. Therefore RZD last year began to work on their reconstruction in earnest. Last year Sergey Abramov, the Head of the RZD's Directorate for Railway Stations, announced that major repair of 400 railway stations would be finished by 2015. In 2010 company needed about RUR 30 billion to do it, but last year they understood that construction of a logistics center in Ekaterinburg’s station alone will cost about RUR 10-30 billion. It is going to be a hard task without financial support from private investors. And, of course, without the Government. Last September RZD asked the Government to remove the restrictions on privatization of railway stations. But now they are talking only about the privatization of secondary space, used for commercial purposes, because those areas can generate maximum profit. Thus this year RZD will be completely focused on commuter services. In 2011, according to Maxim Shneider, head of the company's commuter service management, Russian Railways lost more than RUR 9 billion in this sphere, only 10 commuter companies became profitable. And this year company is going to do its best to make suburban traffic break even.
By Kristina Alexandrova 
    [~DETAIL_TEXT] => 
Outlying Areas in Need
Last year 992.4 million people were carried by RZD that is 4.8% more than in 2010. About 114.8 million of them were transported long-distance, which is down 0.1% on the previous year, and 886.6 million on commuter trains (+5.5%). Thus turnover rose by 0.6% and was estimated at 139.7 billion passengers/km.
Last year rail transport reform came to its final stage, bringing great changes for the operation of passenger traffic. Now providing transport services is the responsibi­lity of Russian regions. They have to place orders for suburban passenger companies (there are 26 such structures), then local government provides all the necessary directions and compensate the losses using ta­riffs. According to Vladimir Yakunin, President of RZD, it meant that Russian suburban services became more modern and are now focused on loss-free operations.
Due to an efficient marketing po­licy and quality of service, the company finally managed to change the negative trend caused by a decrease in passenger traffic on long-distance destinations. But anyway it was not a great breakthrough. According to Vladimir Yakunin, the difficulties are still connected with the lack of budget. Therefore its subsidiary Federal Passenger Company had to limit the amount of transportation in berths and coach cars last year.
Also RZD received encouragement in the form RUR of 25 billion from the Government. But it seems that even that large sum of money was not enough to subsidize falling income. All regions of the Russian Federation needed RUR 14.5 billion last year to improve the situation. However, compensation from regional budgets was only RUR 6 billion, which certainly was not enough. Vladimirskaya and Kurganskaya districts were in an almost desperate situation.
It seems that RZD is paying too much attention to regional traffic nowadays. In previous years, the company was many times accused of acting to the detriment of suburban passengers and focusing too much on the development of high-speed trains. But it has now realized that commuter traffic is also important.
“Those areas where there is no falling income, should improve the quality of service. Both authorities and passengers should really see the renewal of rolling stock and railway stations,” said Vladimir Yakunin. “It’s important that last year we managed to lower ticket prices in most regions. Tariff levels have increased only by 3.2%, which is significantly below inflation”.
To improve the quality of passenger services, some new technologies were introduced. For example, it is now possible to order and pay for a ticket for suburban train travel via the official website of RZD. In addition to this, more than 1100 self-service machines were installed at railway stations. And up to 14% of train tickets are bought through them. To provide convenience, a new system of 49 season ticket types was also implemented.

Keen on Speed
Except for such a bad situation in suburban traffic, last year in general was very successful for RZD. Especially in high-speed movement. According to Mikhail Akulov, vice president of RZD and managing director of the Federal Passenger Company, the company is working on providing comfortable journeys and reducing travel times. Last spring he announced the new Moscow-Berlin-Paris train, which was launched in December. It became the second-longest route through Europe presented by company. 
Called the “Trans-European Express”, it runs three times a week during winter and five times a week in summer, taking 2 days and 1 night to get to the final destination. Launching this new high-speed train (200 km/h) Vladimir Yakunin said: “I’m convinced that it will become one of the most exciting and sought-after services in the Company’s portfolio. In any event, all the tickets until the New Year have already been sold out”. But it is too early to estimate the profitability of new route.
It was a good year for the other two high-speed trains. About 300,000 passengers chose to travel between St Petersburg and Helsinki by “Allegro”, and the company’s most profitable project “Sapsan” running between Moscow and St Petersburg was very popular. It carried more than 3.5 million people and even managed to steal passengers from air companies. According to Mikhail Akulov, all “Sapsans” were filled to 90-100% capacity. 
Summing up company’s work, Vladimir Yakunin also noted the importance of the agreement signed in December between RZD and Siemens for the supply of 8 additional “Sapsan” trains in 2014-2015. “It will help to carry out major repairs of trains and to increase passenger traffic,” he said. “We are completely ready to develop express and high-speed traffic in Russia in the future, according to the course of our Government”. Regarding other rolling stock investments, the company bought 447 modern passenger carriages.
Nowadays RZD is working on a “Concept for the Organisation of High-Speed Passenger Services during the 2018 World Cup”, which will be held in Russia. New routes will help football fans to travel between the points where games will be taking place. In particular new high-speed routes for trains, running at 400 kph between Moscow and St Petersburg, and also Nizhny Novgorod – Kazan are being discussed now.

Focusing on Innovations
RZD representatives presented a lot of great ideas last year. But, unfortunately, most of them are still not concrete. In particular, they spoke about the importance of creating a single regional transport area by organizing ground-based public transport approach routes. And about the law concerning combined transport, which will let passengers travel using a single document. But as for the most immediate actions, the company is going to invest in modernization of its infrastructure.
It is an open secret that the present condition of most of Russia’s railway stations, especially in suburbs, leaves much to be desired. Therefore RZD last year began to work on their reconstruction in earnest. Last year Sergey Abramov, the Head of the RZD's Directorate for Railway Stations, announced that major repair of 400 railway stations would be finished by 2015. In 2010 company needed about RUR 30 billion to do it, but last year they understood that construction of a logistics center in Ekaterinburg’s station alone will cost about RUR 10-30 billion. It is going to be a hard task without financial support from private investors. And, of course, without the Government. Last September RZD asked the Government to remove the restrictions on privatization of railway stations. But now they are talking only about the privatization of secondary space, used for commercial purposes, because those areas can generate maximum profit. Thus this year RZD will be completely focused on commuter services. In 2011, according to Maxim Shneider, head of the company's commuter service management, Russian Railways lost more than RUR 9 billion in this sphere, only 10 commuter companies became profitable. And this year company is going to do its best to make suburban traffic break even.
By Kristina Alexandrova 
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Outlying Areas in Need
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Last year rail transport reform came to its final stage, bringing great changes for the operation of passenger traffic. Now providing transport services is the responsibi­lity of Russian regions. They have to place orders for suburban passenger companies (there are 26 such structures), then local government provides all the necessary directions and compensate the losses using ta­riffs. According to Vladimir Yakunin, President of RZD, it meant that Russian suburban services became more modern and are now focused on loss-free operations.
Due to an efficient marketing po­licy and quality of service, the company finally managed to change the negative trend caused by a decrease in passenger traffic on long-distance destinations. But anyway it was not a great breakthrough. According to Vladimir Yakunin, the difficulties are still connected with the lack of budget. Therefore its subsidiary Federal Passenger Company had to limit the amount of transportation in berths and coach cars last year.
Also RZD received encouragement in the form RUR of 25 billion from the Government. But it seems that even that large sum of money was not enough to subsidize falling income. All regions of the Russian Federation needed RUR 14.5 billion last year to improve the situation. However, compensation from regional budgets was only RUR 6 billion, which certainly was not enough. Vladimirskaya and Kurganskaya districts were in an almost desperate situation.
It seems that RZD is paying too much attention to regional traffic nowadays. In previous years, the company was many times accused of acting to the detriment of suburban passengers and focusing too much on the development of high-speed trains. But it has now realized that commuter traffic is also important.
“Those areas where there is no falling income, should improve the quality of service. Both authorities and passengers should really see the renewal of rolling stock and railway stations,” said Vladimir Yakunin. “It’s important that last year we managed to lower ticket prices in most regions. Tariff levels have increased only by 3.2%, which is significantly below inflation”.
To improve the quality of passenger services, some new technologies were introduced. For example, it is now possible to order and pay for a ticket for suburban train travel via the official website of RZD. In addition to this, more than 1100 self-service machines were installed at railway stations. And up to 14% of train tickets are bought through them. To provide convenience, a new system of 49 season ticket types was also implemented.

Keen on Speed
Except for such a bad situation in suburban traffic, last year in general was very successful for RZD. Especially in high-speed movement. According to Mikhail Akulov, vice president of RZD and managing director of the Federal Passenger Company, the company is working on providing comfortable journeys and reducing travel times. Last spring he announced the new Moscow-Berlin-Paris train, which was launched in December. It became the second-longest route through Europe presented by company. 
Called the “Trans-European Express”, it runs three times a week during winter and five times a week in summer, taking 2 days and 1 night to get to the final destination. Launching this new high-speed train (200 km/h) Vladimir Yakunin said: “I’m convinced that it will become one of the most exciting and sought-after services in the Company’s portfolio. In any event, all the tickets until the New Year have already been sold out”. But it is too early to estimate the profitability of new route.
It was a good year for the other two high-speed trains. About 300,000 passengers chose to travel between St Petersburg and Helsinki by “Allegro”, and the company’s most profitable project “Sapsan” running between Moscow and St Petersburg was very popular. It carried more than 3.5 million people and even managed to steal passengers from air companies. According to Mikhail Akulov, all “Sapsans” were filled to 90-100% capacity. 
Summing up company’s work, Vladimir Yakunin also noted the importance of the agreement signed in December between RZD and Siemens for the supply of 8 additional “Sapsan” trains in 2014-2015. “It will help to carry out major repairs of trains and to increase passenger traffic,” he said. “We are completely ready to develop express and high-speed traffic in Russia in the future, according to the course of our Government”. Regarding other rolling stock investments, the company bought 447 modern passenger carriages.
Nowadays RZD is working on a “Concept for the Organisation of High-Speed Passenger Services during the 2018 World Cup”, which will be held in Russia. New routes will help football fans to travel between the points where games will be taking place. In particular new high-speed routes for trains, running at 400 kph between Moscow and St Petersburg, and also Nizhny Novgorod – Kazan are being discussed now.

Focusing on Innovations
RZD representatives presented a lot of great ideas last year. But, unfortunately, most of them are still not concrete. In particular, they spoke about the importance of creating a single regional transport area by organizing ground-based public transport approach routes. And about the law concerning combined transport, which will let passengers travel using a single document. But as for the most immediate actions, the company is going to invest in modernization of its infrastructure.
It is an open secret that the present condition of most of Russia’s railway stations, especially in suburbs, leaves much to be desired. Therefore RZD last year began to work on their reconstruction in earnest. Last year Sergey Abramov, the Head of the RZD's Directorate for Railway Stations, announced that major repair of 400 railway stations would be finished by 2015. In 2010 company needed about RUR 30 billion to do it, but last year they understood that construction of a logistics center in Ekaterinburg’s station alone will cost about RUR 10-30 billion. It is going to be a hard task without financial support from private investors. And, of course, without the Government. Last September RZD asked the Government to remove the restrictions on privatization of railway stations. But now they are talking only about the privatization of secondary space, used for commercial purposes, because those areas can generate maximum profit. Thus this year RZD will be completely focused on commuter services. In 2011, according to Maxim Shneider, head of the company's commuter service management, Russian Railways lost more than RUR 9 billion in this sphere, only 10 commuter companies became profitable. And this year company is going to do its best to make suburban traffic break even.
By Kristina Alexandrova 
    [~DETAIL_TEXT] => 
Outlying Areas in Need
Last year 992.4 million people were carried by RZD that is 4.8% more than in 2010. About 114.8 million of them were transported long-distance, which is down 0.1% on the previous year, and 886.6 million on commuter trains (+5.5%). Thus turnover rose by 0.6% and was estimated at 139.7 billion passengers/km.
Last year rail transport reform came to its final stage, bringing great changes for the operation of passenger traffic. Now providing transport services is the responsibi­lity of Russian regions. They have to place orders for suburban passenger companies (there are 26 such structures), then local government provides all the necessary directions and compensate the losses using ta­riffs. According to Vladimir Yakunin, President of RZD, it meant that Russian suburban services became more modern and are now focused on loss-free operations.
Due to an efficient marketing po­licy and quality of service, the company finally managed to change the negative trend caused by a decrease in passenger traffic on long-distance destinations. But anyway it was not a great breakthrough. According to Vladimir Yakunin, the difficulties are still connected with the lack of budget. Therefore its subsidiary Federal Passenger Company had to limit the amount of transportation in berths and coach cars last year.
Also RZD received encouragement in the form RUR of 25 billion from the Government. But it seems that even that large sum of money was not enough to subsidize falling income. All regions of the Russian Federation needed RUR 14.5 billion last year to improve the situation. However, compensation from regional budgets was only RUR 6 billion, which certainly was not enough. Vladimirskaya and Kurganskaya districts were in an almost desperate situation.
It seems that RZD is paying too much attention to regional traffic nowadays. In previous years, the company was many times accused of acting to the detriment of suburban passengers and focusing too much on the development of high-speed trains. But it has now realized that commuter traffic is also important.
“Those areas where there is no falling income, should improve the quality of service. Both authorities and passengers should really see the renewal of rolling stock and railway stations,” said Vladimir Yakunin. “It’s important that last year we managed to lower ticket prices in most regions. Tariff levels have increased only by 3.2%, which is significantly below inflation”.
To improve the quality of passenger services, some new technologies were introduced. For example, it is now possible to order and pay for a ticket for suburban train travel via the official website of RZD. In addition to this, more than 1100 self-service machines were installed at railway stations. And up to 14% of train tickets are bought through them. To provide convenience, a new system of 49 season ticket types was also implemented.

Keen on Speed
Except for such a bad situation in suburban traffic, last year in general was very successful for RZD. Especially in high-speed movement. According to Mikhail Akulov, vice president of RZD and managing director of the Federal Passenger Company, the company is working on providing comfortable journeys and reducing travel times. Last spring he announced the new Moscow-Berlin-Paris train, which was launched in December. It became the second-longest route through Europe presented by company. 
Called the “Trans-European Express”, it runs three times a week during winter and five times a week in summer, taking 2 days and 1 night to get to the final destination. Launching this new high-speed train (200 km/h) Vladimir Yakunin said: “I’m convinced that it will become one of the most exciting and sought-after services in the Company’s portfolio. In any event, all the tickets until the New Year have already been sold out”. But it is too early to estimate the profitability of new route.
It was a good year for the other two high-speed trains. About 300,000 passengers chose to travel between St Petersburg and Helsinki by “Allegro”, and the company’s most profitable project “Sapsan” running between Moscow and St Petersburg was very popular. It carried more than 3.5 million people and even managed to steal passengers from air companies. According to Mikhail Akulov, all “Sapsans” were filled to 90-100% capacity. 
Summing up company’s work, Vladimir Yakunin also noted the importance of the agreement signed in December between RZD and Siemens for the supply of 8 additional “Sapsan” trains in 2014-2015. “It will help to carry out major repairs of trains and to increase passenger traffic,” he said. “We are completely ready to develop express and high-speed traffic in Russia in the future, according to the course of our Government”. Regarding other rolling stock investments, the company bought 447 modern passenger carriages.
Nowadays RZD is working on a “Concept for the Organisation of High-Speed Passenger Services during the 2018 World Cup”, which will be held in Russia. New routes will help football fans to travel between the points where games will be taking place. In particular new high-speed routes for trains, running at 400 kph between Moscow and St Petersburg, and also Nizhny Novgorod – Kazan are being discussed now.

Focusing on Innovations
RZD representatives presented a lot of great ideas last year. But, unfortunately, most of them are still not concrete. In particular, they spoke about the importance of creating a single regional transport area by organizing ground-based public transport approach routes. And about the law concerning combined transport, which will let passengers travel using a single document. But as for the most immediate actions, the company is going to invest in modernization of its infrastructure.
It is an open secret that the present condition of most of Russia’s railway stations, especially in suburbs, leaves much to be desired. Therefore RZD last year began to work on their reconstruction in earnest. Last year Sergey Abramov, the Head of the RZD's Directorate for Railway Stations, announced that major repair of 400 railway stations would be finished by 2015. In 2010 company needed about RUR 30 billion to do it, but last year they understood that construction of a logistics center in Ekaterinburg’s station alone will cost about RUR 10-30 billion. It is going to be a hard task without financial support from private investors. And, of course, without the Government. Last September RZD asked the Government to remove the restrictions on privatization of railway stations. But now they are talking only about the privatization of secondary space, used for commercial purposes, because those areas can generate maximum profit. Thus this year RZD will be completely focused on commuter services. In 2011, according to Maxim Shneider, head of the company's commuter service management, Russian Railways lost more than RUR 9 billion in this sphere, only 10 commuter companies became profitable. And this year company is going to do its best to make suburban traffic break even.
By Kristina Alexandrova 
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Coal and Oil: Record Volumes of Extraction
The loading of RZD’s most massive cargo – coal – almost reached the level of 2008. Meanwhile, the month-on-month dynamics in January – September were not promising: there was a small but stable growth in comparison with the similar months of 2010 (except April, when there was a 2.1% decline), however, in absolute figures there was a cut by 2-3 million tons in comparison with 2008. Amid this trend, it turned out that there is some volume of coal that had not been transported from the Kuzbass (the Kuznetsk Basin) – a key coal region in Russia. This was why the governor of the Kemerovo Region applied to the RF President. 
Due to a close interaction bet­ween all participants of the transportation process, they managed to increase the average daily loading and succeeded in fulfilling the task. At the same time, evaluating its 2011 operation results, the largest coal mining company Kuzbassrazrezugol announced that it planned to cut coal extraction by 2-3 million tons in 2012 to sell the surplus that had appeared due to the problems with cargo removal. Also, the company decided to buy 2,500 gondola cars. These were the conclusions drawn by the coalmen from the difficulties they had faced.      
To be fair, 2011 was a record year for the Kuzbass region according to coal loading volumes in the history of Russian Railways. The volume amounted to 186.7 million tons (the entire volume of coal loaded on the West Siberian Railway was 189.3 million tons). The Kuzbass enterprises extracted 192.2 million tons of coal, which exceeded the forecasts. The volume of extraction grew by 7 million tons in comparison with 2010, the loading volume increased by 6.3 million tons.
336.1 million tons of coal was extracted in 2011 (a 4% increase in comparison with 2010), which became the maximum in the post-Soviet Russia. The total supply of Russian coal to customers was 305.1 million tons (+2.9% year-on-year). Of that, 296.2 million tons was carried by railways. A record volu­me of 117 million tons was exported. According to RZD, coal export transportation doubled in the last eight years, the share of coal in the cargo turnover increased from 28.4% to 34.1%. In 2004-2011, the level of trip routing at transportation of this cargo rose from 61.6% to 75.9%. 
The achieved results may be just the beginning of a more rapid growth in future. The RF Government approved the Programme of Coal Sector Development to 2030. According to it, coal extraction in Russia will increase to 430 million tons. 
The market of oil and petrochemicals transportation remained relatively stable in 2011. Russia became one of the world leaders of oil extraction again – its volume grew by 1.2% to 511.3 million tons (including gas condensate), which was a record in recent history. This result became possible due to the launch of new oil deposits in West Siberia. According to the statistics of the RF Ministry of Ener­gy, primary processing of crude oil at Russian refineries increased by 5.7 million tons to 254.2 million tons. However, this growth did not influence the results of oil and petrochemicals transportation by railways.
In 2011, the loading volume of this cargo fell by 1.1% on RZD’s network. First of all, it happened due to the redirection of Rosneft’s crude oil from railway transport to the Skovorodino – Daqin pipeline. As a result, the volume of oil and petrochemicals transportation had fallen by April. By the end of the year, the company managed to partially compensate for the losses in the loading volume by increasing the volume of fuel oil transportation. 
In early 2011, analysts forecast that petrochemicals exports by railway would increase due to oil fuel. However, the state adopted the course of selling this product of Russian refineries on the internal market. According to the new system of export dues calculation ,“60/66”, transportation of petroleum refinery products abroad became more expensive, and companies started to sell them more actively inside the count­ry. As a result, according to the data of the RZD Centre of Transport Service, export transportation of oil bulk in 2011 dropped by 5.8% in comparison with 2010 to 123.6 million tons, while domestic transportation of this cargo grew by 4% to 126.4 million tons. In the opinion of experts, there will be a similar situation in 2012. 

Factors of Growth  
In the first half of 2011, the year-on-year dynamics of grain transportation were negative every month. The most significant decline took place in March (-33.3% year-on-year). 6 million tons of grain was loaded in January-June 2011, 17.6% less than in the same period the previous year. Taking cereals into consideration, the volume was 7.65 million tons (-15%). The situation radically changed on July 1, 2011, when the ban on grain export was lifted. In July transportation of this cargo rose by 15%, and there was an 87.9% increase in August. In absolute figures, there was growth too. By autumn, the volume of loaded cargo amounted to almost 2 million tons. While the ban was in force, the sector lost about one third of road transport. This lorry fleet changed its specialization, and after the ban was lifted, it did not start to transport grain again. As a result, the rates for lorry rental increased by 30-40% on average. Due to this, the demand for railway transportation grew. Thus, their share rose by 20-25%.
In 2011, Russia exported 17.8 million tons of grain (18.5 million tons if we consider cereals as well). All this volume was carried in the second half of the year (in the first half of 2011, only flour was exported). The 2011 harvesting campaign was rather successful. According to the Federal State Statistics Service, 92.7 million tons of grain were gathered. The forecasts for 2012 are even more optimistic, so railwaymen may count on an increase in transportation of this cargo. Also, the number of countries importing Russian grain grew from 60 to almost 80 last year. Russian farmers expect that they will be able to extend the supply, particularly, at the expense of the Asian market. 
At first glance, the year of 2011 may be considered successful for construction materials transportation – the sector grew by 10.7% in comparison with 2010. If we analyse the structure of transportation in different regions, we will see that the situation was relatively good in the Krasnodar region (due to construction of Olympic facilities), the Moscow region, and oil-extracting regions. Suppliers and consumers of construction materials in other places turned out to be in a rather complicated situation that emerged because of the reforms on the Russian operator market and the rapid changes in tariffs which followed and were especially felt by owners of low-yielding freight. It is worth mentioning that export of construction materials plummeted by 19.7% compared with 2010. 
The increase in mineral fertilizers transportation slowed last year. There were several factors for the decline. First of all, the prices for mineral fertilizers recovered too fast, which impacted the demand later. Then, there was some adjustment on the market, and the dynamics of railway transportation of this cargo began to slow. Experts usually consider such a long decline in the growth rates as a sign of future stagnation. At the same time, it is possible to say that Russian producers managed to keep their position on the international market, where the major part of Russian mineral fertilizers is sold. The share of the RF in the world production volume of mineral fertilizers is 11% on average. 
Transportation of ferrous metals increased slightly. The situation was more or less optimistic in the first half of 2011, but the hopes of reaching pre-crisis transportation volumes were dashed by the year-end. Since July, the dynamics started to go down. Export fell by 4.2% in 2011. According to the data of the RF Federal Customs Service, there was a decline in exports of ferro-alloys, semi-finished products made of iron and non-alloy steel, as well as flat rolled products made of iron and non-alloy steel. There was a similar situation with transportation of ferrous metal scrap. There was a growth in the first half of the year, but on the whole, transportation of this cargo in 2011 fell by 3.6% (including export that reduced by 1.7%). Nevertheless, a number of large metallurgical enterprises expect that the production volume will increase in 2012, which means that the railway may get additional volume for transportation.
Timber transportation volume cut by 2% last year. Despite the growth in timber processing, transportation of logs from some regions of Russia exceeded that of wood products. Such a situation occurred because of the unprofitable tariffs for cargo owners. That is why they preferred to use other transport modes to carry their freight. In the opinion of experts, if the timber sector does not receive subsidies from budgets of different levels, the volume of transportation will reduce more dramatically.
Exports of timber by railway increased by 4.6%. Sawn wood and logs made the larger share of exports. Outbound volumes of plywood and pulp increased as well. Specialists forecast that due to realization of the Strategy of the RF Timber Sector Development to 2020, the volume of logging and processing will increase, which will positively influence railway transportation of this cargo.

Resume
Thus, the freight work of RZD in 2011 may be evaluated as positive. The major problem that had a negative impact on the transportation process was adjustment of the mechanisms of wagon parks management under new conditions where there was no public rolling stock. This factor influenced the situation over and over again. As a result, there were enough rolling stock on the network, but a lot of cargo owners lacked  cheaper rolling stock and sometimes failed to establish relations with private operators. RZD claims that in 2012 it will do its best to improve the situation, and the company’s basic function – transportation of all cargoes on time – will be fulfilled.
By Elena Ushkova
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Coal and Oil: Record Volumes of Extraction
The loading of RZD’s most massive cargo – coal – almost reached the level of 2008. Meanwhile, the month-on-month dynamics in January – September were not promising: there was a small but stable growth in comparison with the similar months of 2010 (except April, when there was a 2.1% decline), however, in absolute figures there was a cut by 2-3 million tons in comparison with 2008. Amid this trend, it turned out that there is some volume of coal that had not been transported from the Kuzbass (the Kuznetsk Basin) – a key coal region in Russia. This was why the governor of the Kemerovo Region applied to the RF President. 
Due to a close interaction bet­ween all participants of the transportation process, they managed to increase the average daily loading and succeeded in fulfilling the task. At the same time, evaluating its 2011 operation results, the largest coal mining company Kuzbassrazrezugol announced that it planned to cut coal extraction by 2-3 million tons in 2012 to sell the surplus that had appeared due to the problems with cargo removal. Also, the company decided to buy 2,500 gondola cars. These were the conclusions drawn by the coalmen from the difficulties they had faced.      
To be fair, 2011 was a record year for the Kuzbass region according to coal loading volumes in the history of Russian Railways. The volume amounted to 186.7 million tons (the entire volume of coal loaded on the West Siberian Railway was 189.3 million tons). The Kuzbass enterprises extracted 192.2 million tons of coal, which exceeded the forecasts. The volume of extraction grew by 7 million tons in comparison with 2010, the loading volume increased by 6.3 million tons.
336.1 million tons of coal was extracted in 2011 (a 4% increase in comparison with 2010), which became the maximum in the post-Soviet Russia. The total supply of Russian coal to customers was 305.1 million tons (+2.9% year-on-year). Of that, 296.2 million tons was carried by railways. A record volu­me of 117 million tons was exported. According to RZD, coal export transportation doubled in the last eight years, the share of coal in the cargo turnover increased from 28.4% to 34.1%. In 2004-2011, the level of trip routing at transportation of this cargo rose from 61.6% to 75.9%. 
The achieved results may be just the beginning of a more rapid growth in future. The RF Government approved the Programme of Coal Sector Development to 2030. According to it, coal extraction in Russia will increase to 430 million tons. 
The market of oil and petrochemicals transportation remained relatively stable in 2011. Russia became one of the world leaders of oil extraction again – its volume grew by 1.2% to 511.3 million tons (including gas condensate), which was a record in recent history. This result became possible due to the launch of new oil deposits in West Siberia. According to the statistics of the RF Ministry of Ener­gy, primary processing of crude oil at Russian refineries increased by 5.7 million tons to 254.2 million tons. However, this growth did not influence the results of oil and petrochemicals transportation by railways.
In 2011, the loading volume of this cargo fell by 1.1% on RZD’s network. First of all, it happened due to the redirection of Rosneft’s crude oil from railway transport to the Skovorodino – Daqin pipeline. As a result, the volume of oil and petrochemicals transportation had fallen by April. By the end of the year, the company managed to partially compensate for the losses in the loading volume by increasing the volume of fuel oil transportation. 
In early 2011, analysts forecast that petrochemicals exports by railway would increase due to oil fuel. However, the state adopted the course of selling this product of Russian refineries on the internal market. According to the new system of export dues calculation ,“60/66”, transportation of petroleum refinery products abroad became more expensive, and companies started to sell them more actively inside the count­ry. As a result, according to the data of the RZD Centre of Transport Service, export transportation of oil bulk in 2011 dropped by 5.8% in comparison with 2010 to 123.6 million tons, while domestic transportation of this cargo grew by 4% to 126.4 million tons. In the opinion of experts, there will be a similar situation in 2012. 

Factors of Growth  
In the first half of 2011, the year-on-year dynamics of grain transportation were negative every month. The most significant decline took place in March (-33.3% year-on-year). 6 million tons of grain was loaded in January-June 2011, 17.6% less than in the same period the previous year. Taking cereals into consideration, the volume was 7.65 million tons (-15%). The situation radically changed on July 1, 2011, when the ban on grain export was lifted. In July transportation of this cargo rose by 15%, and there was an 87.9% increase in August. In absolute figures, there was growth too. By autumn, the volume of loaded cargo amounted to almost 2 million tons. While the ban was in force, the sector lost about one third of road transport. This lorry fleet changed its specialization, and after the ban was lifted, it did not start to transport grain again. As a result, the rates for lorry rental increased by 30-40% on average. Due to this, the demand for railway transportation grew. Thus, their share rose by 20-25%.
In 2011, Russia exported 17.8 million tons of grain (18.5 million tons if we consider cereals as well). All this volume was carried in the second half of the year (in the first half of 2011, only flour was exported). The 2011 harvesting campaign was rather successful. According to the Federal State Statistics Service, 92.7 million tons of grain were gathered. The forecasts for 2012 are even more optimistic, so railwaymen may count on an increase in transportation of this cargo. Also, the number of countries importing Russian grain grew from 60 to almost 80 last year. Russian farmers expect that they will be able to extend the supply, particularly, at the expense of the Asian market. 
At first glance, the year of 2011 may be considered successful for construction materials transportation – the sector grew by 10.7% in comparison with 2010. If we analyse the structure of transportation in different regions, we will see that the situation was relatively good in the Krasnodar region (due to construction of Olympic facilities), the Moscow region, and oil-extracting regions. Suppliers and consumers of construction materials in other places turned out to be in a rather complicated situation that emerged because of the reforms on the Russian operator market and the rapid changes in tariffs which followed and were especially felt by owners of low-yielding freight. It is worth mentioning that export of construction materials plummeted by 19.7% compared with 2010. 
The increase in mineral fertilizers transportation slowed last year. There were several factors for the decline. First of all, the prices for mineral fertilizers recovered too fast, which impacted the demand later. Then, there was some adjustment on the market, and the dynamics of railway transportation of this cargo began to slow. Experts usually consider such a long decline in the growth rates as a sign of future stagnation. At the same time, it is possible to say that Russian producers managed to keep their position on the international market, where the major part of Russian mineral fertilizers is sold. The share of the RF in the world production volume of mineral fertilizers is 11% on average. 
Transportation of ferrous metals increased slightly. The situation was more or less optimistic in the first half of 2011, but the hopes of reaching pre-crisis transportation volumes were dashed by the year-end. Since July, the dynamics started to go down. Export fell by 4.2% in 2011. According to the data of the RF Federal Customs Service, there was a decline in exports of ferro-alloys, semi-finished products made of iron and non-alloy steel, as well as flat rolled products made of iron and non-alloy steel. There was a similar situation with transportation of ferrous metal scrap. There was a growth in the first half of the year, but on the whole, transportation of this cargo in 2011 fell by 3.6% (including export that reduced by 1.7%). Nevertheless, a number of large metallurgical enterprises expect that the production volume will increase in 2012, which means that the railway may get additional volume for transportation.
Timber transportation volume cut by 2% last year. Despite the growth in timber processing, transportation of logs from some regions of Russia exceeded that of wood products. Such a situation occurred because of the unprofitable tariffs for cargo owners. That is why they preferred to use other transport modes to carry their freight. In the opinion of experts, if the timber sector does not receive subsidies from budgets of different levels, the volume of transportation will reduce more dramatically.
Exports of timber by railway increased by 4.6%. Sawn wood and logs made the larger share of exports. Outbound volumes of plywood and pulp increased as well. Specialists forecast that due to realization of the Strategy of the RF Timber Sector Development to 2020, the volume of logging and processing will increase, which will positively influence railway transportation of this cargo.

Resume
Thus, the freight work of RZD in 2011 may be evaluated as positive. The major problem that had a negative impact on the transportation process was adjustment of the mechanisms of wagon parks management under new conditions where there was no public rolling stock. This factor influenced the situation over and over again. As a result, there were enough rolling stock on the network, but a lot of cargo owners lacked  cheaper rolling stock and sometimes failed to establish relations with private operators. RZD claims that in 2012 it will do its best to improve the situation, and the company’s basic function – transportation of all cargoes on time – will be fulfilled.
By Elena Ushkova
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Coal and Oil: Record Volumes of Extraction
The loading of RZD’s most massive cargo – coal – almost reached the level of 2008. Meanwhile, the month-on-month dynamics in January – September were not promising: there was a small but stable growth in comparison with the similar months of 2010 (except April, when there was a 2.1% decline), however, in absolute figures there was a cut by 2-3 million tons in comparison with 2008. Amid this trend, it turned out that there is some volume of coal that had not been transported from the Kuzbass (the Kuznetsk Basin) – a key coal region in Russia. This was why the governor of the Kemerovo Region applied to the RF President. 
Due to a close interaction bet­ween all participants of the transportation process, they managed to increase the average daily loading and succeeded in fulfilling the task. At the same time, evaluating its 2011 operation results, the largest coal mining company Kuzbassrazrezugol announced that it planned to cut coal extraction by 2-3 million tons in 2012 to sell the surplus that had appeared due to the problems with cargo removal. Also, the company decided to buy 2,500 gondola cars. These were the conclusions drawn by the coalmen from the difficulties they had faced.      
To be fair, 2011 was a record year for the Kuzbass region according to coal loading volumes in the history of Russian Railways. The volume amounted to 186.7 million tons (the entire volume of coal loaded on the West Siberian Railway was 189.3 million tons). The Kuzbass enterprises extracted 192.2 million tons of coal, which exceeded the forecasts. The volume of extraction grew by 7 million tons in comparison with 2010, the loading volume increased by 6.3 million tons.
336.1 million tons of coal was extracted in 2011 (a 4% increase in comparison with 2010), which became the maximum in the post-Soviet Russia. The total supply of Russian coal to customers was 305.1 million tons (+2.9% year-on-year). Of that, 296.2 million tons was carried by railways. A record volu­me of 117 million tons was exported. According to RZD, coal export transportation doubled in the last eight years, the share of coal in the cargo turnover increased from 28.4% to 34.1%. In 2004-2011, the level of trip routing at transportation of this cargo rose from 61.6% to 75.9%. 
The achieved results may be just the beginning of a more rapid growth in future. The RF Government approved the Programme of Coal Sector Development to 2030. According to it, coal extraction in Russia will increase to 430 million tons. 
The market of oil and petrochemicals transportation remained relatively stable in 2011. Russia became one of the world leaders of oil extraction again – its volume grew by 1.2% to 511.3 million tons (including gas condensate), which was a record in recent history. This result became possible due to the launch of new oil deposits in West Siberia. According to the statistics of the RF Ministry of Ener­gy, primary processing of crude oil at Russian refineries increased by 5.7 million tons to 254.2 million tons. However, this growth did not influence the results of oil and petrochemicals transportation by railways.
In 2011, the loading volume of this cargo fell by 1.1% on RZD’s network. First of all, it happened due to the redirection of Rosneft’s crude oil from railway transport to the Skovorodino – Daqin pipeline. As a result, the volume of oil and petrochemicals transportation had fallen by April. By the end of the year, the company managed to partially compensate for the losses in the loading volume by increasing the volume of fuel oil transportation. 
In early 2011, analysts forecast that petrochemicals exports by railway would increase due to oil fuel. However, the state adopted the course of selling this product of Russian refineries on the internal market. According to the new system of export dues calculation ,“60/66”, transportation of petroleum refinery products abroad became more expensive, and companies started to sell them more actively inside the count­ry. As a result, according to the data of the RZD Centre of Transport Service, export transportation of oil bulk in 2011 dropped by 5.8% in comparison with 2010 to 123.6 million tons, while domestic transportation of this cargo grew by 4% to 126.4 million tons. In the opinion of experts, there will be a similar situation in 2012. 

Factors of Growth  
In the first half of 2011, the year-on-year dynamics of grain transportation were negative every month. The most significant decline took place in March (-33.3% year-on-year). 6 million tons of grain was loaded in January-June 2011, 17.6% less than in the same period the previous year. Taking cereals into consideration, the volume was 7.65 million tons (-15%). The situation radically changed on July 1, 2011, when the ban on grain export was lifted. In July transportation of this cargo rose by 15%, and there was an 87.9% increase in August. In absolute figures, there was growth too. By autumn, the volume of loaded cargo amounted to almost 2 million tons. While the ban was in force, the sector lost about one third of road transport. This lorry fleet changed its specialization, and after the ban was lifted, it did not start to transport grain again. As a result, the rates for lorry rental increased by 30-40% on average. Due to this, the demand for railway transportation grew. Thus, their share rose by 20-25%.
In 2011, Russia exported 17.8 million tons of grain (18.5 million tons if we consider cereals as well). All this volume was carried in the second half of the year (in the first half of 2011, only flour was exported). The 2011 harvesting campaign was rather successful. According to the Federal State Statistics Service, 92.7 million tons of grain were gathered. The forecasts for 2012 are even more optimistic, so railwaymen may count on an increase in transportation of this cargo. Also, the number of countries importing Russian grain grew from 60 to almost 80 last year. Russian farmers expect that they will be able to extend the supply, particularly, at the expense of the Asian market. 
At first glance, the year of 2011 may be considered successful for construction materials transportation – the sector grew by 10.7% in comparison with 2010. If we analyse the structure of transportation in different regions, we will see that the situation was relatively good in the Krasnodar region (due to construction of Olympic facilities), the Moscow region, and oil-extracting regions. Suppliers and consumers of construction materials in other places turned out to be in a rather complicated situation that emerged because of the reforms on the Russian operator market and the rapid changes in tariffs which followed and were especially felt by owners of low-yielding freight. It is worth mentioning that export of construction materials plummeted by 19.7% compared with 2010. 
The increase in mineral fertilizers transportation slowed last year. There were several factors for the decline. First of all, the prices for mineral fertilizers recovered too fast, which impacted the demand later. Then, there was some adjustment on the market, and the dynamics of railway transportation of this cargo began to slow. Experts usually consider such a long decline in the growth rates as a sign of future stagnation. At the same time, it is possible to say that Russian producers managed to keep their position on the international market, where the major part of Russian mineral fertilizers is sold. The share of the RF in the world production volume of mineral fertilizers is 11% on average. 
Transportation of ferrous metals increased slightly. The situation was more or less optimistic in the first half of 2011, but the hopes of reaching pre-crisis transportation volumes were dashed by the year-end. Since July, the dynamics started to go down. Export fell by 4.2% in 2011. According to the data of the RF Federal Customs Service, there was a decline in exports of ferro-alloys, semi-finished products made of iron and non-alloy steel, as well as flat rolled products made of iron and non-alloy steel. There was a similar situation with transportation of ferrous metal scrap. There was a growth in the first half of the year, but on the whole, transportation of this cargo in 2011 fell by 3.6% (including export that reduced by 1.7%). Nevertheless, a number of large metallurgical enterprises expect that the production volume will increase in 2012, which means that the railway may get additional volume for transportation.
Timber transportation volume cut by 2% last year. Despite the growth in timber processing, transportation of logs from some regions of Russia exceeded that of wood products. Such a situation occurred because of the unprofitable tariffs for cargo owners. That is why they preferred to use other transport modes to carry their freight. In the opinion of experts, if the timber sector does not receive subsidies from budgets of different levels, the volume of transportation will reduce more dramatically.
Exports of timber by railway increased by 4.6%. Sawn wood and logs made the larger share of exports. Outbound volumes of plywood and pulp increased as well. Specialists forecast that due to realization of the Strategy of the RF Timber Sector Development to 2020, the volume of logging and processing will increase, which will positively influence railway transportation of this cargo.

Resume
Thus, the freight work of RZD in 2011 may be evaluated as positive. The major problem that had a negative impact on the transportation process was adjustment of the mechanisms of wagon parks management under new conditions where there was no public rolling stock. This factor influenced the situation over and over again. As a result, there were enough rolling stock on the network, but a lot of cargo owners lacked  cheaper rolling stock and sometimes failed to establish relations with private operators. RZD claims that in 2012 it will do its best to improve the situation, and the company’s basic function – transportation of all cargoes on time – will be fulfilled.
By Elena Ushkova
    [~DETAIL_TEXT] => 
Coal and Oil: Record Volumes of Extraction
The loading of RZD’s most massive cargo – coal – almost reached the level of 2008. Meanwhile, the month-on-month dynamics in January – September were not promising: there was a small but stable growth in comparison with the similar months of 2010 (except April, when there was a 2.1% decline), however, in absolute figures there was a cut by 2-3 million tons in comparison with 2008. Amid this trend, it turned out that there is some volume of coal that had not been transported from the Kuzbass (the Kuznetsk Basin) – a key coal region in Russia. This was why the governor of the Kemerovo Region applied to the RF President. 
Due to a close interaction bet­ween all participants of the transportation process, they managed to increase the average daily loading and succeeded in fulfilling the task. At the same time, evaluating its 2011 operation results, the largest coal mining company Kuzbassrazrezugol announced that it planned to cut coal extraction by 2-3 million tons in 2012 to sell the surplus that had appeared due to the problems with cargo removal. Also, the company decided to buy 2,500 gondola cars. These were the conclusions drawn by the coalmen from the difficulties they had faced.      
To be fair, 2011 was a record year for the Kuzbass region according to coal loading volumes in the history of Russian Railways. The volume amounted to 186.7 million tons (the entire volume of coal loaded on the West Siberian Railway was 189.3 million tons). The Kuzbass enterprises extracted 192.2 million tons of coal, which exceeded the forecasts. The volume of extraction grew by 7 million tons in comparison with 2010, the loading volume increased by 6.3 million tons.
336.1 million tons of coal was extracted in 2011 (a 4% increase in comparison with 2010), which became the maximum in the post-Soviet Russia. The total supply of Russian coal to customers was 305.1 million tons (+2.9% year-on-year). Of that, 296.2 million tons was carried by railways. A record volu­me of 117 million tons was exported. According to RZD, coal export transportation doubled in the last eight years, the share of coal in the cargo turnover increased from 28.4% to 34.1%. In 2004-2011, the level of trip routing at transportation of this cargo rose from 61.6% to 75.9%. 
The achieved results may be just the beginning of a more rapid growth in future. The RF Government approved the Programme of Coal Sector Development to 2030. According to it, coal extraction in Russia will increase to 430 million tons. 
The market of oil and petrochemicals transportation remained relatively stable in 2011. Russia became one of the world leaders of oil extraction again – its volume grew by 1.2% to 511.3 million tons (including gas condensate), which was a record in recent history. This result became possible due to the launch of new oil deposits in West Siberia. According to the statistics of the RF Ministry of Ener­gy, primary processing of crude oil at Russian refineries increased by 5.7 million tons to 254.2 million tons. However, this growth did not influence the results of oil and petrochemicals transportation by railways.
In 2011, the loading volume of this cargo fell by 1.1% on RZD’s network. First of all, it happened due to the redirection of Rosneft’s crude oil from railway transport to the Skovorodino – Daqin pipeline. As a result, the volume of oil and petrochemicals transportation had fallen by April. By the end of the year, the company managed to partially compensate for the losses in the loading volume by increasing the volume of fuel oil transportation. 
In early 2011, analysts forecast that petrochemicals exports by railway would increase due to oil fuel. However, the state adopted the course of selling this product of Russian refineries on the internal market. According to the new system of export dues calculation ,“60/66”, transportation of petroleum refinery products abroad became more expensive, and companies started to sell them more actively inside the count­ry. As a result, according to the data of the RZD Centre of Transport Service, export transportation of oil bulk in 2011 dropped by 5.8% in comparison with 2010 to 123.6 million tons, while domestic transportation of this cargo grew by 4% to 126.4 million tons. In the opinion of experts, there will be a similar situation in 2012. 

Factors of Growth  
In the first half of 2011, the year-on-year dynamics of grain transportation were negative every month. The most significant decline took place in March (-33.3% year-on-year). 6 million tons of grain was loaded in January-June 2011, 17.6% less than in the same period the previous year. Taking cereals into consideration, the volume was 7.65 million tons (-15%). The situation radically changed on July 1, 2011, when the ban on grain export was lifted. In July transportation of this cargo rose by 15%, and there was an 87.9% increase in August. In absolute figures, there was growth too. By autumn, the volume of loaded cargo amounted to almost 2 million tons. While the ban was in force, the sector lost about one third of road transport. This lorry fleet changed its specialization, and after the ban was lifted, it did not start to transport grain again. As a result, the rates for lorry rental increased by 30-40% on average. Due to this, the demand for railway transportation grew. Thus, their share rose by 20-25%.
In 2011, Russia exported 17.8 million tons of grain (18.5 million tons if we consider cereals as well). All this volume was carried in the second half of the year (in the first half of 2011, only flour was exported). The 2011 harvesting campaign was rather successful. According to the Federal State Statistics Service, 92.7 million tons of grain were gathered. The forecasts for 2012 are even more optimistic, so railwaymen may count on an increase in transportation of this cargo. Also, the number of countries importing Russian grain grew from 60 to almost 80 last year. Russian farmers expect that they will be able to extend the supply, particularly, at the expense of the Asian market. 
At first glance, the year of 2011 may be considered successful for construction materials transportation – the sector grew by 10.7% in comparison with 2010. If we analyse the structure of transportation in different regions, we will see that the situation was relatively good in the Krasnodar region (due to construction of Olympic facilities), the Moscow region, and oil-extracting regions. Suppliers and consumers of construction materials in other places turned out to be in a rather complicated situation that emerged because of the reforms on the Russian operator market and the rapid changes in tariffs which followed and were especially felt by owners of low-yielding freight. It is worth mentioning that export of construction materials plummeted by 19.7% compared with 2010. 
The increase in mineral fertilizers transportation slowed last year. There were several factors for the decline. First of all, the prices for mineral fertilizers recovered too fast, which impacted the demand later. Then, there was some adjustment on the market, and the dynamics of railway transportation of this cargo began to slow. Experts usually consider such a long decline in the growth rates as a sign of future stagnation. At the same time, it is possible to say that Russian producers managed to keep their position on the international market, where the major part of Russian mineral fertilizers is sold. The share of the RF in the world production volume of mineral fertilizers is 11% on average. 
Transportation of ferrous metals increased slightly. The situation was more or less optimistic in the first half of 2011, but the hopes of reaching pre-crisis transportation volumes were dashed by the year-end. Since July, the dynamics started to go down. Export fell by 4.2% in 2011. According to the data of the RF Federal Customs Service, there was a decline in exports of ferro-alloys, semi-finished products made of iron and non-alloy steel, as well as flat rolled products made of iron and non-alloy steel. There was a similar situation with transportation of ferrous metal scrap. There was a growth in the first half of the year, but on the whole, transportation of this cargo in 2011 fell by 3.6% (including export that reduced by 1.7%). Nevertheless, a number of large metallurgical enterprises expect that the production volume will increase in 2012, which means that the railway may get additional volume for transportation.
Timber transportation volume cut by 2% last year. Despite the growth in timber processing, transportation of logs from some regions of Russia exceeded that of wood products. Such a situation occurred because of the unprofitable tariffs for cargo owners. That is why they preferred to use other transport modes to carry their freight. In the opinion of experts, if the timber sector does not receive subsidies from budgets of different levels, the volume of transportation will reduce more dramatically.
Exports of timber by railway increased by 4.6%. Sawn wood and logs made the larger share of exports. Outbound volumes of plywood and pulp increased as well. Specialists forecast that due to realization of the Strategy of the RF Timber Sector Development to 2020, the volume of logging and processing will increase, which will positively influence railway transportation of this cargo.

Resume
Thus, the freight work of RZD in 2011 may be evaluated as positive. The major problem that had a negative impact on the transportation process was adjustment of the mechanisms of wagon parks management under new conditions where there was no public rolling stock. This factor influenced the situation over and over again. As a result, there were enough rolling stock on the network, but a lot of cargo owners lacked  cheaper rolling stock and sometimes failed to establish relations with private operators. RZD claims that in 2012 it will do its best to improve the situation, and the company’s basic function – transportation of all cargoes on time – will be fulfilled.
By Elena Ushkova
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Railway Line Adler – Sochi Airport to Be Commissioned in Q1 of 2012
In 2011, Russian Railways invested a total of RUR 2.3 billion in the construction of the railway line between Adler and Sochi Airport.
The line is currently open for the working movement of trains, which necessitated the construction of 2.8 km of track, two tunnels 180 metres and 336 metres long and three railway overpass trestles with a total length of 740 m.
Work is now underway on installing the engineering communications and other equipment and designing the architecture of the tunnel portals, as well as on restoring and landscaping the surrounding land. The facility is expected to be commissioned in the first quarter of 2012.
The total construction cost is estimated at RUR 9.8 billion.
The object of the project is to ensure transport of 60% of all air passengers (more than 86,000 people per day) during the 2014 Olympic Winter Games in Sochi and intermodal traffic on the route Sochi - Adler - Sochi Airport.

Ukrzaliznytsya Increased Tariffs on Freight Transportation
The State Administration of Ukrainian Railway Transport (Ukrzaliznytsya) has increased tariffs on freight transportation by 5.6% since March 1, 2012. 
“Starting from March 1, we plan to raise tariffs by 5.6%,” Petr Naumenko, Deputy CEO of Ukrzaliznytsya, told journalists.
Mr Naumenko said that Ukrzaliznytsya decided on a stage-by-stage increase in tariffs on cargo transportation in 2012. He added that at the end of December 2012 tariffs on cargo transportation would be 12.2% higher than those at the end of December 2011. 

SASCO and DVTG Launch a New Through Service
Sakhalin Shipping Company (SASCO) together with DVTG-Container have launched a new weekly container service. 
Large-capacity containers will be carried weekly by high-speed trains on the following lines: Moscow (Tuchkovo station) – Nakhodka (Marine Fishing Port) – Korsakov (Commercial Sea Port); Moscow (Tuchkovo station) – Nakhodka (Marine Fishing Port) – Petropavlovsk –
Kamchats­kiy (Commercial Sea Port). The first train with containers is to leave Tuchkovo station on March 15, 2012. High-speed trains will reduce time of cargo delivery from Moscow to the Far East region and SASCO vessels will guarantee an unbroken flow of supplies and cargoes from Nakhodka to Sakhalin and Kamchatka. Transit time to be 20 days from Moscow to Korsakov, 25 days from Moscow to Petropavlovsk – Kamchatskiy.

Ukraine Simplified Access to Its Inner Waterways
The Government of Ukraine has resolved the issue of access to inner waterways for foreign vessels. 
A respective decree was signed by Nikolay Azarov, Ukrainian Prime Minister, on February 29. According to the document, river ports are opened for non-military vessels flying the flags of countries with which Ukraine has agreements on shipping via inner waterways. Also, passenger vessels are admitted to the river areas (regardless of the existence of agreements mentioned above).
Commercial vessels (cargo ships) should have one-time-only authorization to access Ukrainian inner waterways. State Inspection for Sea and River Transport Safety is in charge of giving such authorizations. The procedure for the issuance of the authorizations is set by the Ukrainian Ministry of Infrastructure (under an agreement with the State Customs Service and the State Border Service of Ukraine).

In 2011 FESCO Increased Its Transportation Volume
Based on the results of January-December 2011, sea container trade volumes of FESCO Transportation Group reached 430,659 TEU, that is 15% more than in 2010. Of that, bilateral and domestic sea container trade accounted for 367,331 TEU and 63,328 TEU respectively.
In the period, intermodal transportation volumes increased by 40% amounting to 66,926 TEU, while freight forwarding grew by 43% (up to 121,007 TEU).
Rail container transportation demonstrated noticeable growth on the back of the increasing usage of the block-train service. In 2011, the Group’s rail container transportation volumes were 251,987 TEU, or 30% more than in 2010. Moreover, rail conventional cargo load added 4% to the previous year figure totalling 25.5 million tons. Rail cargo turnover decreased by 5% versus 2010 and stood at 33.5 billion ton-kilometers. This slight reduction was attributable to the decline in transportation distances.
In 2011, VMTP and VCT increased their total container cargo throughput by 27% (up to 432,062 TEU). On the other hand, VMTP general cargo handling decreased proportionally and amounted to 3.115 million tons. This goes in line with VMTP strategy of re-fitting the port for high value-added cargo such as containers and vehicles.

Freight Traffic via Volga-Balt Hits 10-Year High
The volume of cargo carried through the Volga-Baltic Canal during 2011 navigation reached 22 million tons, a record volume for the past 10 years and 20% up in comparison with last year’s navigational period, the Volga-Baltic Canal Authority statistics said.
 According to Vladimir Nikolayev, Head of the State Basin Department “Volga-Balt”, shipments of construction materials for the period increased by 50% on 2010’s figure, to 10.5 million tons, petroleum products traffic rose by 3.5% to 5.5 million tons, timber cargo volume increased by 11.2% to 1.55 million tons, ferrous metal transits decreased by 11.4% to 1.52 million tons, fluxes volume shrank by 30.1% up to 807,200 tons, of scrap metal - rose by 50% to 457,000 tons, fertilizer volumes were 13.5% down to 405,900 tons.
Transit navigation through the Volga-Baltic Canal was closed on November 16, 2011.

Freight One: Cargo Transportation Volume Grew by 0.5%
In 2011, Freight One (part of UCL Rail) shipped more than 284 million tons of various cargoes which is 0.5% more than the result of 2010.
Among main freight groups the volume of stone coal transportation amounted to 94 million tons, of oil and oil products – 68 million tons, of ore – 24 million tons, of ferrous metals – 18 million tons, of cement  15 million tons, of chemical and mineral fertilisers – 5 million tons. The most significant growth was demonstrated by the following cargo groups: transportation of construction materials increased by 80% (more than 30 million tons), timber freight – by 170% (about 4 million tons), metal products freight – by 240% (about 342,000 tons).
Last year the Freight One share in the total volume of transportation along the Russian railway network fell from 21.1% (without taking into account the Rusagrotrans share) to 20.5%. This is to do with the taking out of Freight One operation of 46,000 gondola cars, leased from Freight Two. 
In 2011, Freight One acquired 7,500 pieces of rolling stock of various types, including 6,200 gondola cars. The process of continuous wagon fleet renewal allowed the company to increase the number of working fleet wagons by 2.2% and to reduce the number of wagons under repair by 12%.

NTK Transported 72.4 Million Tons in 2011
Transportation volume of Independent Transportation Company (NTK) amounted to 72.4 million tons in 2011, a 32% increase in comparison with 2010.
There was a significant growth in transportation of coal and coke (increased to 20.7 million tons, +64% year-on-year), ore (19.8 million tons, +36%), and metal scrap (2.9 million tons, +26%). 
74% of the total volume (53.4 million tons) was the cargo of the company’s basic client – NLMK, a 13% increase on the previous year. Transportation for external clients grew by 160% to 2.9 million tons.
The volume of transportation in the company’s own rolling stock almost doubled – it rose from 31.1 million tons to 61.1 million tons. 

Throughput of Baltic Ports 10.4% Up in 2011
Last year, the throughput of Baltic ports increased by 10.4% in comparison with 2010 and amounted to 162.61 million tons.
42.3% of the total volume was handled by Latvian ports, 28% - by Lithuanian, and 29.7% – by Estonian.
In 2011, the throughput of Latvian ports grew by 7.66 million tons (+12.5%) year-on-year to 68.82 million tons. Lithuanian ports increased cargo handling by 5.23 million tons (+13%) to 45.52 million tons. Estonian ports handled 48.26 million tons, 2.41 million tons or 5.3% more than in 2010. 
The leader among the ports was the Klaipeda sea port which handled 36.59 million tons in 2011, a 17% increase on the previous year. Second was the port of Tallinn with 36.467 million tons (-0.5%), and third was Riga port with 34.054 million tons (+11.7%) 

Denmark – Finland – Russia Ferry Line Launched in Ust-Luga
Denmark – Finland – Russia ferry line was launched in the port of Ust-Luga in January 2012.
The line is managed by Finnlines, its Russian Agent is Trans-Log.
According to the plans of the investor, the new ferry loaded with cargo from Denmark, Sweden, Norway, and Finland will call at the port of Ust-Luga twice a month. In the opinion of experts, the new line may radically change freight flows between Russia and the European Union, especially taking into account the specifics of Denmark playing one of the leading roles in the container transportation market.
Nowadays, Ust-Luga is the only Russian port on the Baltic Sea coast able to service dry cargo vessels with a deadweight up to 75,000 tons and liquid bulk ships with carrying capacities of up to 120,000 tons. Last year, the port’s throughput practically doubled.
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Railway Line Adler – Sochi Airport to Be Commissioned in Q1 of 2012
In 2011, Russian Railways invested a total of RUR 2.3 billion in the construction of the railway line between Adler and Sochi Airport.
The line is currently open for the working movement of trains, which necessitated the construction of 2.8 km of track, two tunnels 180 metres and 336 metres long and three railway overpass trestles with a total length of 740 m.
Work is now underway on installing the engineering communications and other equipment and designing the architecture of the tunnel portals, as well as on restoring and landscaping the surrounding land. The facility is expected to be commissioned in the first quarter of 2012.
The total construction cost is estimated at RUR 9.8 billion.
The object of the project is to ensure transport of 60% of all air passengers (more than 86,000 people per day) during the 2014 Olympic Winter Games in Sochi and intermodal traffic on the route Sochi - Adler - Sochi Airport.

Ukrzaliznytsya Increased Tariffs on Freight Transportation
The State Administration of Ukrainian Railway Transport (Ukrzaliznytsya) has increased tariffs on freight transportation by 5.6% since March 1, 2012. 
“Starting from March 1, we plan to raise tariffs by 5.6%,” Petr Naumenko, Deputy CEO of Ukrzaliznytsya, told journalists.
Mr Naumenko said that Ukrzaliznytsya decided on a stage-by-stage increase in tariffs on cargo transportation in 2012. He added that at the end of December 2012 tariffs on cargo transportation would be 12.2% higher than those at the end of December 2011. 

SASCO and DVTG Launch a New Through Service
Sakhalin Shipping Company (SASCO) together with DVTG-Container have launched a new weekly container service. 
Large-capacity containers will be carried weekly by high-speed trains on the following lines: Moscow (Tuchkovo station) – Nakhodka (Marine Fishing Port) – Korsakov (Commercial Sea Port); Moscow (Tuchkovo station) – Nakhodka (Marine Fishing Port) – Petropavlovsk –
Kamchats­kiy (Commercial Sea Port). The first train with containers is to leave Tuchkovo station on March 15, 2012. High-speed trains will reduce time of cargo delivery from Moscow to the Far East region and SASCO vessels will guarantee an unbroken flow of supplies and cargoes from Nakhodka to Sakhalin and Kamchatka. Transit time to be 20 days from Moscow to Korsakov, 25 days from Moscow to Petropavlovsk – Kamchatskiy.

Ukraine Simplified Access to Its Inner Waterways
The Government of Ukraine has resolved the issue of access to inner waterways for foreign vessels. 
A respective decree was signed by Nikolay Azarov, Ukrainian Prime Minister, on February 29. According to the document, river ports are opened for non-military vessels flying the flags of countries with which Ukraine has agreements on shipping via inner waterways. Also, passenger vessels are admitted to the river areas (regardless of the existence of agreements mentioned above).
Commercial vessels (cargo ships) should have one-time-only authorization to access Ukrainian inner waterways. State Inspection for Sea and River Transport Safety is in charge of giving such authorizations. The procedure for the issuance of the authorizations is set by the Ukrainian Ministry of Infrastructure (under an agreement with the State Customs Service and the State Border Service of Ukraine).

In 2011 FESCO Increased Its Transportation Volume
Based on the results of January-December 2011, sea container trade volumes of FESCO Transportation Group reached 430,659 TEU, that is 15% more than in 2010. Of that, bilateral and domestic sea container trade accounted for 367,331 TEU and 63,328 TEU respectively.
In the period, intermodal transportation volumes increased by 40% amounting to 66,926 TEU, while freight forwarding grew by 43% (up to 121,007 TEU).
Rail container transportation demonstrated noticeable growth on the back of the increasing usage of the block-train service. In 2011, the Group’s rail container transportation volumes were 251,987 TEU, or 30% more than in 2010. Moreover, rail conventional cargo load added 4% to the previous year figure totalling 25.5 million tons. Rail cargo turnover decreased by 5% versus 2010 and stood at 33.5 billion ton-kilometers. This slight reduction was attributable to the decline in transportation distances.
In 2011, VMTP and VCT increased their total container cargo throughput by 27% (up to 432,062 TEU). On the other hand, VMTP general cargo handling decreased proportionally and amounted to 3.115 million tons. This goes in line with VMTP strategy of re-fitting the port for high value-added cargo such as containers and vehicles.

Freight Traffic via Volga-Balt Hits 10-Year High
The volume of cargo carried through the Volga-Baltic Canal during 2011 navigation reached 22 million tons, a record volume for the past 10 years and 20% up in comparison with last year’s navigational period, the Volga-Baltic Canal Authority statistics said.
 According to Vladimir Nikolayev, Head of the State Basin Department “Volga-Balt”, shipments of construction materials for the period increased by 50% on 2010’s figure, to 10.5 million tons, petroleum products traffic rose by 3.5% to 5.5 million tons, timber cargo volume increased by 11.2% to 1.55 million tons, ferrous metal transits decreased by 11.4% to 1.52 million tons, fluxes volume shrank by 30.1% up to 807,200 tons, of scrap metal - rose by 50% to 457,000 tons, fertilizer volumes were 13.5% down to 405,900 tons.
Transit navigation through the Volga-Baltic Canal was closed on November 16, 2011.

Freight One: Cargo Transportation Volume Grew by 0.5%
In 2011, Freight One (part of UCL Rail) shipped more than 284 million tons of various cargoes which is 0.5% more than the result of 2010.
Among main freight groups the volume of stone coal transportation amounted to 94 million tons, of oil and oil products – 68 million tons, of ore – 24 million tons, of ferrous metals – 18 million tons, of cement  15 million tons, of chemical and mineral fertilisers – 5 million tons. The most significant growth was demonstrated by the following cargo groups: transportation of construction materials increased by 80% (more than 30 million tons), timber freight – by 170% (about 4 million tons), metal products freight – by 240% (about 342,000 tons).
Last year the Freight One share in the total volume of transportation along the Russian railway network fell from 21.1% (without taking into account the Rusagrotrans share) to 20.5%. This is to do with the taking out of Freight One operation of 46,000 gondola cars, leased from Freight Two. 
In 2011, Freight One acquired 7,500 pieces of rolling stock of various types, including 6,200 gondola cars. The process of continuous wagon fleet renewal allowed the company to increase the number of working fleet wagons by 2.2% and to reduce the number of wagons under repair by 12%.

NTK Transported 72.4 Million Tons in 2011
Transportation volume of Independent Transportation Company (NTK) amounted to 72.4 million tons in 2011, a 32% increase in comparison with 2010.
There was a significant growth in transportation of coal and coke (increased to 20.7 million tons, +64% year-on-year), ore (19.8 million tons, +36%), and metal scrap (2.9 million tons, +26%). 
74% of the total volume (53.4 million tons) was the cargo of the company’s basic client – NLMK, a 13% increase on the previous year. Transportation for external clients grew by 160% to 2.9 million tons.
The volume of transportation in the company’s own rolling stock almost doubled – it rose from 31.1 million tons to 61.1 million tons. 

Throughput of Baltic Ports 10.4% Up in 2011
Last year, the throughput of Baltic ports increased by 10.4% in comparison with 2010 and amounted to 162.61 million tons.
42.3% of the total volume was handled by Latvian ports, 28% - by Lithuanian, and 29.7% – by Estonian.
In 2011, the throughput of Latvian ports grew by 7.66 million tons (+12.5%) year-on-year to 68.82 million tons. Lithuanian ports increased cargo handling by 5.23 million tons (+13%) to 45.52 million tons. Estonian ports handled 48.26 million tons, 2.41 million tons or 5.3% more than in 2010. 
The leader among the ports was the Klaipeda sea port which handled 36.59 million tons in 2011, a 17% increase on the previous year. Second was the port of Tallinn with 36.467 million tons (-0.5%), and third was Riga port with 34.054 million tons (+11.7%) 

Denmark – Finland – Russia Ferry Line Launched in Ust-Luga
Denmark – Finland – Russia ferry line was launched in the port of Ust-Luga in January 2012.
The line is managed by Finnlines, its Russian Agent is Trans-Log.
According to the plans of the investor, the new ferry loaded with cargo from Denmark, Sweden, Norway, and Finland will call at the port of Ust-Luga twice a month. In the opinion of experts, the new line may radically change freight flows between Russia and the European Union, especially taking into account the specifics of Denmark playing one of the leading roles in the container transportation market.
Nowadays, Ust-Luga is the only Russian port on the Baltic Sea coast able to service dry cargo vessels with a deadweight up to 75,000 tons and liquid bulk ships with carrying capacities of up to 120,000 tons. Last year, the port’s throughput practically doubled.
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Railway Line Adler – Sochi Airport to Be Commissioned in Q1 of 2012
In 2011, Russian Railways invested a total of RUR 2.3 billion in the construction of the railway line between Adler and Sochi Airport.
The line is currently open for the working movement of trains, which necessitated the construction of 2.8 km of track, two tunnels 180 metres and 336 metres long and three railway overpass trestles with a total length of 740 m.
Work is now underway on installing the engineering communications and other equipment and designing the architecture of the tunnel portals, as well as on restoring and landscaping the surrounding land. The facility is expected to be commissioned in the first quarter of 2012.
The total construction cost is estimated at RUR 9.8 billion.
The object of the project is to ensure transport of 60% of all air passengers (more than 86,000 people per day) during the 2014 Olympic Winter Games in Sochi and intermodal traffic on the route Sochi - Adler - Sochi Airport.

Ukrzaliznytsya Increased Tariffs on Freight Transportation
The State Administration of Ukrainian Railway Transport (Ukrzaliznytsya) has increased tariffs on freight transportation by 5.6% since March 1, 2012. 
“Starting from March 1, we plan to raise tariffs by 5.6%,” Petr Naumenko, Deputy CEO of Ukrzaliznytsya, told journalists.
Mr Naumenko said that Ukrzaliznytsya decided on a stage-by-stage increase in tariffs on cargo transportation in 2012. He added that at the end of December 2012 tariffs on cargo transportation would be 12.2% higher than those at the end of December 2011. 

SASCO and DVTG Launch a New Through Service
Sakhalin Shipping Company (SASCO) together with DVTG-Container have launched a new weekly container service. 
Large-capacity containers will be carried weekly by high-speed trains on the following lines: Moscow (Tuchkovo station) – Nakhodka (Marine Fishing Port) – Korsakov (Commercial Sea Port); Moscow (Tuchkovo station) – Nakhodka (Marine Fishing Port) – Petropavlovsk –
Kamchats­kiy (Commercial Sea Port). The first train with containers is to leave Tuchkovo station on March 15, 2012. High-speed trains will reduce time of cargo delivery from Moscow to the Far East region and SASCO vessels will guarantee an unbroken flow of supplies and cargoes from Nakhodka to Sakhalin and Kamchatka. Transit time to be 20 days from Moscow to Korsakov, 25 days from Moscow to Petropavlovsk – Kamchatskiy.

Ukraine Simplified Access to Its Inner Waterways
The Government of Ukraine has resolved the issue of access to inner waterways for foreign vessels. 
A respective decree was signed by Nikolay Azarov, Ukrainian Prime Minister, on February 29. According to the document, river ports are opened for non-military vessels flying the flags of countries with which Ukraine has agreements on shipping via inner waterways. Also, passenger vessels are admitted to the river areas (regardless of the existence of agreements mentioned above).
Commercial vessels (cargo ships) should have one-time-only authorization to access Ukrainian inner waterways. State Inspection for Sea and River Transport Safety is in charge of giving such authorizations. The procedure for the issuance of the authorizations is set by the Ukrainian Ministry of Infrastructure (under an agreement with the State Customs Service and the State Border Service of Ukraine).

In 2011 FESCO Increased Its Transportation Volume
Based on the results of January-December 2011, sea container trade volumes of FESCO Transportation Group reached 430,659 TEU, that is 15% more than in 2010. Of that, bilateral and domestic sea container trade accounted for 367,331 TEU and 63,328 TEU respectively.
In the period, intermodal transportation volumes increased by 40% amounting to 66,926 TEU, while freight forwarding grew by 43% (up to 121,007 TEU).
Rail container transportation demonstrated noticeable growth on the back of the increasing usage of the block-train service. In 2011, the Group’s rail container transportation volumes were 251,987 TEU, or 30% more than in 2010. Moreover, rail conventional cargo load added 4% to the previous year figure totalling 25.5 million tons. Rail cargo turnover decreased by 5% versus 2010 and stood at 33.5 billion ton-kilometers. This slight reduction was attributable to the decline in transportation distances.
In 2011, VMTP and VCT increased their total container cargo throughput by 27% (up to 432,062 TEU). On the other hand, VMTP general cargo handling decreased proportionally and amounted to 3.115 million tons. This goes in line with VMTP strategy of re-fitting the port for high value-added cargo such as containers and vehicles.

Freight Traffic via Volga-Balt Hits 10-Year High
The volume of cargo carried through the Volga-Baltic Canal during 2011 navigation reached 22 million tons, a record volume for the past 10 years and 20% up in comparison with last year’s navigational period, the Volga-Baltic Canal Authority statistics said.
 According to Vladimir Nikolayev, Head of the State Basin Department “Volga-Balt”, shipments of construction materials for the period increased by 50% on 2010’s figure, to 10.5 million tons, petroleum products traffic rose by 3.5% to 5.5 million tons, timber cargo volume increased by 11.2% to 1.55 million tons, ferrous metal transits decreased by 11.4% to 1.52 million tons, fluxes volume shrank by 30.1% up to 807,200 tons, of scrap metal - rose by 50% to 457,000 tons, fertilizer volumes were 13.5% down to 405,900 tons.
Transit navigation through the Volga-Baltic Canal was closed on November 16, 2011.

Freight One: Cargo Transportation Volume Grew by 0.5%
In 2011, Freight One (part of UCL Rail) shipped more than 284 million tons of various cargoes which is 0.5% more than the result of 2010.
Among main freight groups the volume of stone coal transportation amounted to 94 million tons, of oil and oil products – 68 million tons, of ore – 24 million tons, of ferrous metals – 18 million tons, of cement  15 million tons, of chemical and mineral fertilisers – 5 million tons. The most significant growth was demonstrated by the following cargo groups: transportation of construction materials increased by 80% (more than 30 million tons), timber freight – by 170% (about 4 million tons), metal products freight – by 240% (about 342,000 tons).
Last year the Freight One share in the total volume of transportation along the Russian railway network fell from 21.1% (without taking into account the Rusagrotrans share) to 20.5%. This is to do with the taking out of Freight One operation of 46,000 gondola cars, leased from Freight Two. 
In 2011, Freight One acquired 7,500 pieces of rolling stock of various types, including 6,200 gondola cars. The process of continuous wagon fleet renewal allowed the company to increase the number of working fleet wagons by 2.2% and to reduce the number of wagons under repair by 12%.

NTK Transported 72.4 Million Tons in 2011
Transportation volume of Independent Transportation Company (NTK) amounted to 72.4 million tons in 2011, a 32% increase in comparison with 2010.
There was a significant growth in transportation of coal and coke (increased to 20.7 million tons, +64% year-on-year), ore (19.8 million tons, +36%), and metal scrap (2.9 million tons, +26%). 
74% of the total volume (53.4 million tons) was the cargo of the company’s basic client – NLMK, a 13% increase on the previous year. Transportation for external clients grew by 160% to 2.9 million tons.
The volume of transportation in the company’s own rolling stock almost doubled – it rose from 31.1 million tons to 61.1 million tons. 

Throughput of Baltic Ports 10.4% Up in 2011
Last year, the throughput of Baltic ports increased by 10.4% in comparison with 2010 and amounted to 162.61 million tons.
42.3% of the total volume was handled by Latvian ports, 28% - by Lithuanian, and 29.7% – by Estonian.
In 2011, the throughput of Latvian ports grew by 7.66 million tons (+12.5%) year-on-year to 68.82 million tons. Lithuanian ports increased cargo handling by 5.23 million tons (+13%) to 45.52 million tons. Estonian ports handled 48.26 million tons, 2.41 million tons or 5.3% more than in 2010. 
The leader among the ports was the Klaipeda sea port which handled 36.59 million tons in 2011, a 17% increase on the previous year. Second was the port of Tallinn with 36.467 million tons (-0.5%), and third was Riga port with 34.054 million tons (+11.7%) 

Denmark – Finland – Russia Ferry Line Launched in Ust-Luga
Denmark – Finland – Russia ferry line was launched in the port of Ust-Luga in January 2012.
The line is managed by Finnlines, its Russian Agent is Trans-Log.
According to the plans of the investor, the new ferry loaded with cargo from Denmark, Sweden, Norway, and Finland will call at the port of Ust-Luga twice a month. In the opinion of experts, the new line may radically change freight flows between Russia and the European Union, especially taking into account the specifics of Denmark playing one of the leading roles in the container transportation market.
Nowadays, Ust-Luga is the only Russian port on the Baltic Sea coast able to service dry cargo vessels with a deadweight up to 75,000 tons and liquid bulk ships with carrying capacities of up to 120,000 tons. Last year, the port’s throughput practically doubled.
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Railway Line Adler – Sochi Airport to Be Commissioned in Q1 of 2012
In 2011, Russian Railways invested a total of RUR 2.3 billion in the construction of the railway line between Adler and Sochi Airport.
The line is currently open for the working movement of trains, which necessitated the construction of 2.8 km of track, two tunnels 180 metres and 336 metres long and three railway overpass trestles with a total length of 740 m.
Work is now underway on installing the engineering communications and other equipment and designing the architecture of the tunnel portals, as well as on restoring and landscaping the surrounding land. The facility is expected to be commissioned in the first quarter of 2012.
The total construction cost is estimated at RUR 9.8 billion.
The object of the project is to ensure transport of 60% of all air passengers (more than 86,000 people per day) during the 2014 Olympic Winter Games in Sochi and intermodal traffic on the route Sochi - Adler - Sochi Airport.

Ukrzaliznytsya Increased Tariffs on Freight Transportation
The State Administration of Ukrainian Railway Transport (Ukrzaliznytsya) has increased tariffs on freight transportation by 5.6% since March 1, 2012. 
“Starting from March 1, we plan to raise tariffs by 5.6%,” Petr Naumenko, Deputy CEO of Ukrzaliznytsya, told journalists.
Mr Naumenko said that Ukrzaliznytsya decided on a stage-by-stage increase in tariffs on cargo transportation in 2012. He added that at the end of December 2012 tariffs on cargo transportation would be 12.2% higher than those at the end of December 2011. 

SASCO and DVTG Launch a New Through Service
Sakhalin Shipping Company (SASCO) together with DVTG-Container have launched a new weekly container service. 
Large-capacity containers will be carried weekly by high-speed trains on the following lines: Moscow (Tuchkovo station) – Nakhodka (Marine Fishing Port) – Korsakov (Commercial Sea Port); Moscow (Tuchkovo station) – Nakhodka (Marine Fishing Port) – Petropavlovsk –
Kamchats­kiy (Commercial Sea Port). The first train with containers is to leave Tuchkovo station on March 15, 2012. High-speed trains will reduce time of cargo delivery from Moscow to the Far East region and SASCO vessels will guarantee an unbroken flow of supplies and cargoes from Nakhodka to Sakhalin and Kamchatka. Transit time to be 20 days from Moscow to Korsakov, 25 days from Moscow to Petropavlovsk – Kamchatskiy.

Ukraine Simplified Access to Its Inner Waterways
The Government of Ukraine has resolved the issue of access to inner waterways for foreign vessels. 
A respective decree was signed by Nikolay Azarov, Ukrainian Prime Minister, on February 29. According to the document, river ports are opened for non-military vessels flying the flags of countries with which Ukraine has agreements on shipping via inner waterways. Also, passenger vessels are admitted to the river areas (regardless of the existence of agreements mentioned above).
Commercial vessels (cargo ships) should have one-time-only authorization to access Ukrainian inner waterways. State Inspection for Sea and River Transport Safety is in charge of giving such authorizations. The procedure for the issuance of the authorizations is set by the Ukrainian Ministry of Infrastructure (under an agreement with the State Customs Service and the State Border Service of Ukraine).

In 2011 FESCO Increased Its Transportation Volume
Based on the results of January-December 2011, sea container trade volumes of FESCO Transportation Group reached 430,659 TEU, that is 15% more than in 2010. Of that, bilateral and domestic sea container trade accounted for 367,331 TEU and 63,328 TEU respectively.
In the period, intermodal transportation volumes increased by 40% amounting to 66,926 TEU, while freight forwarding grew by 43% (up to 121,007 TEU).
Rail container transportation demonstrated noticeable growth on the back of the increasing usage of the block-train service. In 2011, the Group’s rail container transportation volumes were 251,987 TEU, or 30% more than in 2010. Moreover, rail conventional cargo load added 4% to the previous year figure totalling 25.5 million tons. Rail cargo turnover decreased by 5% versus 2010 and stood at 33.5 billion ton-kilometers. This slight reduction was attributable to the decline in transportation distances.
In 2011, VMTP and VCT increased their total container cargo throughput by 27% (up to 432,062 TEU). On the other hand, VMTP general cargo handling decreased proportionally and amounted to 3.115 million tons. This goes in line with VMTP strategy of re-fitting the port for high value-added cargo such as containers and vehicles.

Freight Traffic via Volga-Balt Hits 10-Year High
The volume of cargo carried through the Volga-Baltic Canal during 2011 navigation reached 22 million tons, a record volume for the past 10 years and 20% up in comparison with last year’s navigational period, the Volga-Baltic Canal Authority statistics said.
 According to Vladimir Nikolayev, Head of the State Basin Department “Volga-Balt”, shipments of construction materials for the period increased by 50% on 2010’s figure, to 10.5 million tons, petroleum products traffic rose by 3.5% to 5.5 million tons, timber cargo volume increased by 11.2% to 1.55 million tons, ferrous metal transits decreased by 11.4% to 1.52 million tons, fluxes volume shrank by 30.1% up to 807,200 tons, of scrap metal - rose by 50% to 457,000 tons, fertilizer volumes were 13.5% down to 405,900 tons.
Transit navigation through the Volga-Baltic Canal was closed on November 16, 2011.

Freight One: Cargo Transportation Volume Grew by 0.5%
In 2011, Freight One (part of UCL Rail) shipped more than 284 million tons of various cargoes which is 0.5% more than the result of 2010.
Among main freight groups the volume of stone coal transportation amounted to 94 million tons, of oil and oil products – 68 million tons, of ore – 24 million tons, of ferrous metals – 18 million tons, of cement  15 million tons, of chemical and mineral fertilisers – 5 million tons. The most significant growth was demonstrated by the following cargo groups: transportation of construction materials increased by 80% (more than 30 million tons), timber freight – by 170% (about 4 million tons), metal products freight – by 240% (about 342,000 tons).
Last year the Freight One share in the total volume of transportation along the Russian railway network fell from 21.1% (without taking into account the Rusagrotrans share) to 20.5%. This is to do with the taking out of Freight One operation of 46,000 gondola cars, leased from Freight Two. 
In 2011, Freight One acquired 7,500 pieces of rolling stock of various types, including 6,200 gondola cars. The process of continuous wagon fleet renewal allowed the company to increase the number of working fleet wagons by 2.2% and to reduce the number of wagons under repair by 12%.

NTK Transported 72.4 Million Tons in 2011
Transportation volume of Independent Transportation Company (NTK) amounted to 72.4 million tons in 2011, a 32% increase in comparison with 2010.
There was a significant growth in transportation of coal and coke (increased to 20.7 million tons, +64% year-on-year), ore (19.8 million tons, +36%), and metal scrap (2.9 million tons, +26%). 
74% of the total volume (53.4 million tons) was the cargo of the company’s basic client – NLMK, a 13% increase on the previous year. Transportation for external clients grew by 160% to 2.9 million tons.
The volume of transportation in the company’s own rolling stock almost doubled – it rose from 31.1 million tons to 61.1 million tons. 

Throughput of Baltic Ports 10.4% Up in 2011
Last year, the throughput of Baltic ports increased by 10.4% in comparison with 2010 and amounted to 162.61 million tons.
42.3% of the total volume was handled by Latvian ports, 28% - by Lithuanian, and 29.7% – by Estonian.
In 2011, the throughput of Latvian ports grew by 7.66 million tons (+12.5%) year-on-year to 68.82 million tons. Lithuanian ports increased cargo handling by 5.23 million tons (+13%) to 45.52 million tons. Estonian ports handled 48.26 million tons, 2.41 million tons or 5.3% more than in 2010. 
The leader among the ports was the Klaipeda sea port which handled 36.59 million tons in 2011, a 17% increase on the previous year. Second was the port of Tallinn with 36.467 million tons (-0.5%), and third was Riga port with 34.054 million tons (+11.7%) 

Denmark – Finland – Russia Ferry Line Launched in Ust-Luga
Denmark – Finland – Russia ferry line was launched in the port of Ust-Luga in January 2012.
The line is managed by Finnlines, its Russian Agent is Trans-Log.
According to the plans of the investor, the new ferry loaded with cargo from Denmark, Sweden, Norway, and Finland will call at the port of Ust-Luga twice a month. In the opinion of experts, the new line may radically change freight flows between Russia and the European Union, especially taking into account the specifics of Denmark playing one of the leading roles in the container transportation market.
Nowadays, Ust-Luga is the only Russian port on the Baltic Sea coast able to service dry cargo vessels with a deadweight up to 75,000 tons and liquid bulk ships with carrying capacities of up to 120,000 tons. Last year, the port’s throughput practically doubled.
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    [DETAIL_TEXT] => – What was the work of the CDI based on in the first year of operation? 

– The work of the Central Directorate of Infrastructure in 2011 was based on the qualitative and full implementation of the scheduled plans, primarily focusing on the recovery of track complex, modernization and upgrading of power supply facilities, automation and remote control and rolling stock. 

– Was the Directorate able to invest the whole sum planned according to the budget?

– At the end of last year all of the allocated funds were 100% utilized. It paid for reconstruction of 347 km of contact system, installation of more than 13 km of reinforcing wire, replacement of more than a thousand miles of worn contact wire and carrying cable. Speaking about the latest achievement - it is as much as 20% more than the figures of 2010. In addition we managed to replace more than 460,000 old insulators and to update the devices of electrical centralization at 13 stations. We also equipped 178 km of railroad network with the continuously operating device of two-way autolock. At the same time there was the modernization of 2,710 sq km of road and 356 controlling devices were set up, etc. 

–  What were the results of work on the improvement of track infrastructure? 

– We managed to raise passenger train speed through stages, main routes and stations over 2,300  km of road, and freight train speed over 2,330 km of road. And in both cases we have exceeded one-fifth of the job. This work allowed us to increase the length of the concrete sleepers road to 3,200 km. In addition, we have increased the length of the welded road by 2,750 sq km and at the end of this year its length along the main routes will be 65% of the expanded length. One good performance indicator of the work done is the elimination of four limiting power supply zones of a total length of 140 km that will ensure the passage of cargo traffic on the railway infrastructure of the Eastern landfill of Transsiberian and Baikal-Amur Railroads. Another thing that is worth mentioning is the installation of more than 100 interrailway warranty sectors (a section of a railway line between adjacent railway affiliates of RZD with a maintenance depot on the both ends. These depots must guarantee that there will be no failures of rolling stock during the train’s trip between them). The average length of such sectors is 1,149 km, which is 26 km more than in 2010 on the main directions across the whole network. 

– How is the formation of a property complex of the CDI going? 

– To form the property complex, the appropriate criteria for determining the technological and industrial needs of a specific object have to be developed. Due to these criteria the final decision is made: either to keep the object in a property management complex or drag it into civil circulation with its transfer, retirement or sale. At present, these criteria are being worked out at the property complex of Gorky Railway. The results as a whole will form the basis for the formation of a property complex of the CDI.

– What put the brakes on the formation of a property complex of the CDI? 

– It is the transfer of assets from vertically integrated business structures, which were separated from railway affiliates of RZD, to the Directorate’s property. Here I am talking about the Central Directorate of traction, the Central Directorate of Traffic Management and others. Subsequently, this will require the better usage of the criteria while receiving objects onto the balance of the Central Directorate of infrastructure. Speaking about general assets, I have given my managers the task of preparing and sending instructions across the rail network about the approaches to the formation of a complex property of the Central Directorate of Infrastructure. 
Of course, it is necessary to get rid of old and inefficient equipment and machinery that is being used at the moment. Already today, a program approved by RZD management that involves putting the space of technical buildings into civil usage has been implemented in the company. It is planned for 2011-13. Implementation of this program will optimize the composition of the property complex of the CDI.

– Is interaction between the CDI staff and its colleagues from other directorates efficient at all levels? 

– Regulations on interaction on a linear level are determined by appropriate instructions. They are performed at a sufficiently high level, although anything can happen. As for the level of interaction between the central directorates, they are defined by regulations, and life will show the gaps to be filled. 

– Specialists of the Central Directorate of Road Repair are working very closely with railwaymen from the CDI. Is this interaction carried out on a basis of general principles? 

– It is based on the Interaction Rules imposed by an order of RZD dated December 30, 2011. The current planning of route and track works is made by the CDI through the management of  road and facilities on the basis of applications of railways and divisions of RZD. The Regulations set specific procedures and timeframes for this work, ranging from the formation of rates of volume of roadway repair and finishing to the coordination of the provision of «windows» at the CDI level. In its turn, the material and technical support of works is carried out in accordance with the «Rules of the Organization of the Material and Technical Support of RZD and Its Subsidiaries». 

– Is there a problem with employing people in the infrastructure? Are there enough people? 

– There are about 400,000 people working in infrastructure. This is, of course, a large number and there is a need to trim this down. But technical support and smart structural solutions are needed. In my opinion, the most efficient measures are to increase the rates of infrastructure repair, and to mechanize maintenance work. 

– What internal resources can be used, in your opinion, to reduce costs and increase revenues from the infrastructure activities of RZD? Do you consider it is necessary and possible to involve private capital in the development of railway infrastructure? 

– The issue of cost reduction should be considered through the introduction of modern technologies to prolong the life cycle of general assets and, first and last, of the permanent way. Throughout 2011 the company introduced innovative solutions aimed at strengthening the construction of the permanent way and extending its useful life period. I can speak about some of them. For example, there are long-welded rails on concrete sleepers with elastic fastenings in the curves of ultra-small radius on the Moscow and the East Siberian railroads, it includes rails with increased resistance to shear, and with a treatment of ballast layer with composite materials. Sleepers for curves with a radius of less than 350 meters are also designed and made. There are shuttle and the bridge sleepers. By the way, these sleepers already have the certificates for ARC fastening and they will get certificates for ZBR fastening not later than April 2012. 

– What can be expected from the infrastructure complex this year? 

– Completion of the formation of the CDI, transferral of the road Directorates to it and assumption of the duties and responsibilities for managing the technological complex of the railway infrastructure can be expected. In addition, according to the results of a pilot project on a complex system of spatial data on the  infrastructure of railway transport (CSSPIRT) at the Moscow, St Petersburg – Buslovskaya landfill during 2012 there will be a need to spread the project to other areas of the network. It will involve at least 2,200 km. We also plan to complete the reorganization of the maintenance system of engineering structures through the creation of specialized distances for engineering structures (new subdivisions of railways-affiliates of RZD responsible for engineering structures construction, maintenance, and repair located on the area of respective railways) at all railroads in 2012. Great works are planned on the track complex. So there will be enough work in the coming year.

– What development programs are planned for 2012 in the facilities of industry? What are the characteristics of the investment budget?

– The 2012 investment budget of CDI exceeds last-year one by 20%. It is more than RUR 110 billion. Regardless the cost of works fulfilled by the Directorate’s own forces, the percentage of concluded contracts is 36% of the quota for 2012. In the framework of contracts between CDI and the Directorate of Complex Construction and Reconstruction of Railways, and those between CDI and the Directorate of Communication Network Construction, not all planned sub-contracts on equipment supply and design estimate documentation on track modernization have been concluded yet. 
We must receive all orders before March 1, 2012, and funding will be opened in full before April 1, 2012.  
An active work is under way to form necessary packs of documents to put amendments to the corporate order made by subsidiaries of RZD, and to receive a permission from RZD to purchase equipment at some definite prices.  
Interviewed by Vladislav Kukresh
    [~DETAIL_TEXT] => – What was the work of the CDI based on in the first year of operation? 

– The work of the Central Directorate of Infrastructure in 2011 was based on the qualitative and full implementation of the scheduled plans, primarily focusing on the recovery of track complex, modernization and upgrading of power supply facilities, automation and remote control and rolling stock. 

– Was the Directorate able to invest the whole sum planned according to the budget?

– At the end of last year all of the allocated funds were 100% utilized. It paid for reconstruction of 347 km of contact system, installation of more than 13 km of reinforcing wire, replacement of more than a thousand miles of worn contact wire and carrying cable. Speaking about the latest achievement - it is as much as 20% more than the figures of 2010. In addition we managed to replace more than 460,000 old insulators and to update the devices of electrical centralization at 13 stations. We also equipped 178 km of railroad network with the continuously operating device of two-way autolock. At the same time there was the modernization of 2,710 sq km of road and 356 controlling devices were set up, etc. 

–  What were the results of work on the improvement of track infrastructure? 

– We managed to raise passenger train speed through stages, main routes and stations over 2,300  km of road, and freight train speed over 2,330 km of road. And in both cases we have exceeded one-fifth of the job. This work allowed us to increase the length of the concrete sleepers road to 3,200 km. In addition, we have increased the length of the welded road by 2,750 sq km and at the end of this year its length along the main routes will be 65% of the expanded length. One good performance indicator of the work done is the elimination of four limiting power supply zones of a total length of 140 km that will ensure the passage of cargo traffic on the railway infrastructure of the Eastern landfill of Transsiberian and Baikal-Amur Railroads. Another thing that is worth mentioning is the installation of more than 100 interrailway warranty sectors (a section of a railway line between adjacent railway affiliates of RZD with a maintenance depot on the both ends. These depots must guarantee that there will be no failures of rolling stock during the train’s trip between them). The average length of such sectors is 1,149 km, which is 26 km more than in 2010 on the main directions across the whole network. 

– How is the formation of a property complex of the CDI going? 

– To form the property complex, the appropriate criteria for determining the technological and industrial needs of a specific object have to be developed. Due to these criteria the final decision is made: either to keep the object in a property management complex or drag it into civil circulation with its transfer, retirement or sale. At present, these criteria are being worked out at the property complex of Gorky Railway. The results as a whole will form the basis for the formation of a property complex of the CDI.

– What put the brakes on the formation of a property complex of the CDI? 

– It is the transfer of assets from vertically integrated business structures, which were separated from railway affiliates of RZD, to the Directorate’s property. Here I am talking about the Central Directorate of traction, the Central Directorate of Traffic Management and others. Subsequently, this will require the better usage of the criteria while receiving objects onto the balance of the Central Directorate of infrastructure. Speaking about general assets, I have given my managers the task of preparing and sending instructions across the rail network about the approaches to the formation of a complex property of the Central Directorate of Infrastructure. 
Of course, it is necessary to get rid of old and inefficient equipment and machinery that is being used at the moment. Already today, a program approved by RZD management that involves putting the space of technical buildings into civil usage has been implemented in the company. It is planned for 2011-13. Implementation of this program will optimize the composition of the property complex of the CDI.

– Is interaction between the CDI staff and its colleagues from other directorates efficient at all levels? 

– Regulations on interaction on a linear level are determined by appropriate instructions. They are performed at a sufficiently high level, although anything can happen. As for the level of interaction between the central directorates, they are defined by regulations, and life will show the gaps to be filled. 

– Specialists of the Central Directorate of Road Repair are working very closely with railwaymen from the CDI. Is this interaction carried out on a basis of general principles? 

– It is based on the Interaction Rules imposed by an order of RZD dated December 30, 2011. The current planning of route and track works is made by the CDI through the management of  road and facilities on the basis of applications of railways and divisions of RZD. The Regulations set specific procedures and timeframes for this work, ranging from the formation of rates of volume of roadway repair and finishing to the coordination of the provision of «windows» at the CDI level. In its turn, the material and technical support of works is carried out in accordance with the «Rules of the Organization of the Material and Technical Support of RZD and Its Subsidiaries». 

– Is there a problem with employing people in the infrastructure? Are there enough people? 

– There are about 400,000 people working in infrastructure. This is, of course, a large number and there is a need to trim this down. But technical support and smart structural solutions are needed. In my opinion, the most efficient measures are to increase the rates of infrastructure repair, and to mechanize maintenance work. 

– What internal resources can be used, in your opinion, to reduce costs and increase revenues from the infrastructure activities of RZD? Do you consider it is necessary and possible to involve private capital in the development of railway infrastructure? 

– The issue of cost reduction should be considered through the introduction of modern technologies to prolong the life cycle of general assets and, first and last, of the permanent way. Throughout 2011 the company introduced innovative solutions aimed at strengthening the construction of the permanent way and extending its useful life period. I can speak about some of them. For example, there are long-welded rails on concrete sleepers with elastic fastenings in the curves of ultra-small radius on the Moscow and the East Siberian railroads, it includes rails with increased resistance to shear, and with a treatment of ballast layer with composite materials. Sleepers for curves with a radius of less than 350 meters are also designed and made. There are shuttle and the bridge sleepers. By the way, these sleepers already have the certificates for ARC fastening and they will get certificates for ZBR fastening not later than April 2012. 

– What can be expected from the infrastructure complex this year? 

– Completion of the formation of the CDI, transferral of the road Directorates to it and assumption of the duties and responsibilities for managing the technological complex of the railway infrastructure can be expected. In addition, according to the results of a pilot project on a complex system of spatial data on the  infrastructure of railway transport (CSSPIRT) at the Moscow, St Petersburg – Buslovskaya landfill during 2012 there will be a need to spread the project to other areas of the network. It will involve at least 2,200 km. We also plan to complete the reorganization of the maintenance system of engineering structures through the creation of specialized distances for engineering structures (new subdivisions of railways-affiliates of RZD responsible for engineering structures construction, maintenance, and repair located on the area of respective railways) at all railroads in 2012. Great works are planned on the track complex. So there will be enough work in the coming year.

– What development programs are planned for 2012 in the facilities of industry? What are the characteristics of the investment budget?

– The 2012 investment budget of CDI exceeds last-year one by 20%. It is more than RUR 110 billion. Regardless the cost of works fulfilled by the Directorate’s own forces, the percentage of concluded contracts is 36% of the quota for 2012. In the framework of contracts between CDI and the Directorate of Complex Construction and Reconstruction of Railways, and those between CDI and the Directorate of Communication Network Construction, not all planned sub-contracts on equipment supply and design estimate documentation on track modernization have been concluded yet. 
We must receive all orders before March 1, 2012, and funding will be opened in full before April 1, 2012.  
An active work is under way to form necessary packs of documents to put amendments to the corporate order made by subsidiaries of RZD, and to receive a permission from RZD to purchase equipment at some definite prices.  
Interviewed by Vladislav Kukresh
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    [~PREVIEW_TEXT] => Vladimir Vorobyov, Vice President of RZD responsible for managing the track facilities and road infrastructure of the company, has spoken about the intermediate results of the formation of the largest structural unit of the company – the Central Directorate of Infrastructure (CDI), which includes the departments of automation and remote control, electrification and power supply, control of mechanization, etc.
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            [SECTION_META_DESCRIPTION] => <img src="/ufiles/image/rus/inter/2012/1/6.jpg" border="1" alt=" " hspace="5" width="200" height="234" align="left" />Vladimir Vorobyov, Vice President of RZD responsible for managing the track facilities and road infrastructure of the company, has spoken about the intermediate results of the formation of the largest structural unit of the company – the Central Directorate of Infrastructure (CDI), which includes the departments of automation and remote control, electrification and power supply, control of mechanization, etc.
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            [ELEMENT_META_DESCRIPTION] => <img src="/ufiles/image/rus/inter/2012/1/6.jpg" border="1" alt=" " hspace="5" width="200" height="234" align="left" />Vladimir Vorobyov, Vice President of RZD responsible for managing the track facilities and road infrastructure of the company, has spoken about the intermediate results of the formation of the largest structural unit of the company – the Central Directorate of Infrastructure (CDI), which includes the departments of automation and remote control, electrification and power supply, control of mechanization, etc.
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    [DETAIL_TEXT] => – What was the work of the CDI based on in the first year of operation? 

– The work of the Central Directorate of Infrastructure in 2011 was based on the qualitative and full implementation of the scheduled plans, primarily focusing on the recovery of track complex, modernization and upgrading of power supply facilities, automation and remote control and rolling stock. 

– Was the Directorate able to invest the whole sum planned according to the budget?

– At the end of last year all of the allocated funds were 100% utilized. It paid for reconstruction of 347 km of contact system, installation of more than 13 km of reinforcing wire, replacement of more than a thousand miles of worn contact wire and carrying cable. Speaking about the latest achievement - it is as much as 20% more than the figures of 2010. In addition we managed to replace more than 460,000 old insulators and to update the devices of electrical centralization at 13 stations. We also equipped 178 km of railroad network with the continuously operating device of two-way autolock. At the same time there was the modernization of 2,710 sq km of road and 356 controlling devices were set up, etc. 

–  What were the results of work on the improvement of track infrastructure? 

– We managed to raise passenger train speed through stages, main routes and stations over 2,300  km of road, and freight train speed over 2,330 km of road. And in both cases we have exceeded one-fifth of the job. This work allowed us to increase the length of the concrete sleepers road to 3,200 km. In addition, we have increased the length of the welded road by 2,750 sq km and at the end of this year its length along the main routes will be 65% of the expanded length. One good performance indicator of the work done is the elimination of four limiting power supply zones of a total length of 140 km that will ensure the passage of cargo traffic on the railway infrastructure of the Eastern landfill of Transsiberian and Baikal-Amur Railroads. Another thing that is worth mentioning is the installation of more than 100 interrailway warranty sectors (a section of a railway line between adjacent railway affiliates of RZD with a maintenance depot on the both ends. These depots must guarantee that there will be no failures of rolling stock during the train’s trip between them). The average length of such sectors is 1,149 km, which is 26 km more than in 2010 on the main directions across the whole network. 

– How is the formation of a property complex of the CDI going? 

– To form the property complex, the appropriate criteria for determining the technological and industrial needs of a specific object have to be developed. Due to these criteria the final decision is made: either to keep the object in a property management complex or drag it into civil circulation with its transfer, retirement or sale. At present, these criteria are being worked out at the property complex of Gorky Railway. The results as a whole will form the basis for the formation of a property complex of the CDI.

– What put the brakes on the formation of a property complex of the CDI? 

– It is the transfer of assets from vertically integrated business structures, which were separated from railway affiliates of RZD, to the Directorate’s property. Here I am talking about the Central Directorate of traction, the Central Directorate of Traffic Management and others. Subsequently, this will require the better usage of the criteria while receiving objects onto the balance of the Central Directorate of infrastructure. Speaking about general assets, I have given my managers the task of preparing and sending instructions across the rail network about the approaches to the formation of a complex property of the Central Directorate of Infrastructure. 
Of course, it is necessary to get rid of old and inefficient equipment and machinery that is being used at the moment. Already today, a program approved by RZD management that involves putting the space of technical buildings into civil usage has been implemented in the company. It is planned for 2011-13. Implementation of this program will optimize the composition of the property complex of the CDI.

– Is interaction between the CDI staff and its colleagues from other directorates efficient at all levels? 

– Regulations on interaction on a linear level are determined by appropriate instructions. They are performed at a sufficiently high level, although anything can happen. As for the level of interaction between the central directorates, they are defined by regulations, and life will show the gaps to be filled. 

– Specialists of the Central Directorate of Road Repair are working very closely with railwaymen from the CDI. Is this interaction carried out on a basis of general principles? 

– It is based on the Interaction Rules imposed by an order of RZD dated December 30, 2011. The current planning of route and track works is made by the CDI through the management of  road and facilities on the basis of applications of railways and divisions of RZD. The Regulations set specific procedures and timeframes for this work, ranging from the formation of rates of volume of roadway repair and finishing to the coordination of the provision of «windows» at the CDI level. In its turn, the material and technical support of works is carried out in accordance with the «Rules of the Organization of the Material and Technical Support of RZD and Its Subsidiaries». 

– Is there a problem with employing people in the infrastructure? Are there enough people? 

– There are about 400,000 people working in infrastructure. This is, of course, a large number and there is a need to trim this down. But technical support and smart structural solutions are needed. In my opinion, the most efficient measures are to increase the rates of infrastructure repair, and to mechanize maintenance work. 

– What internal resources can be used, in your opinion, to reduce costs and increase revenues from the infrastructure activities of RZD? Do you consider it is necessary and possible to involve private capital in the development of railway infrastructure? 

– The issue of cost reduction should be considered through the introduction of modern technologies to prolong the life cycle of general assets and, first and last, of the permanent way. Throughout 2011 the company introduced innovative solutions aimed at strengthening the construction of the permanent way and extending its useful life period. I can speak about some of them. For example, there are long-welded rails on concrete sleepers with elastic fastenings in the curves of ultra-small radius on the Moscow and the East Siberian railroads, it includes rails with increased resistance to shear, and with a treatment of ballast layer with composite materials. Sleepers for curves with a radius of less than 350 meters are also designed and made. There are shuttle and the bridge sleepers. By the way, these sleepers already have the certificates for ARC fastening and they will get certificates for ZBR fastening not later than April 2012. 

– What can be expected from the infrastructure complex this year? 

– Completion of the formation of the CDI, transferral of the road Directorates to it and assumption of the duties and responsibilities for managing the technological complex of the railway infrastructure can be expected. In addition, according to the results of a pilot project on a complex system of spatial data on the  infrastructure of railway transport (CSSPIRT) at the Moscow, St Petersburg – Buslovskaya landfill during 2012 there will be a need to spread the project to other areas of the network. It will involve at least 2,200 km. We also plan to complete the reorganization of the maintenance system of engineering structures through the creation of specialized distances for engineering structures (new subdivisions of railways-affiliates of RZD responsible for engineering structures construction, maintenance, and repair located on the area of respective railways) at all railroads in 2012. Great works are planned on the track complex. So there will be enough work in the coming year.

– What development programs are planned for 2012 in the facilities of industry? What are the characteristics of the investment budget?

– The 2012 investment budget of CDI exceeds last-year one by 20%. It is more than RUR 110 billion. Regardless the cost of works fulfilled by the Directorate’s own forces, the percentage of concluded contracts is 36% of the quota for 2012. In the framework of contracts between CDI and the Directorate of Complex Construction and Reconstruction of Railways, and those between CDI and the Directorate of Communication Network Construction, not all planned sub-contracts on equipment supply and design estimate documentation on track modernization have been concluded yet. 
We must receive all orders before March 1, 2012, and funding will be opened in full before April 1, 2012.  
An active work is under way to form necessary packs of documents to put amendments to the corporate order made by subsidiaries of RZD, and to receive a permission from RZD to purchase equipment at some definite prices.  
Interviewed by Vladislav Kukresh
    [~DETAIL_TEXT] => – What was the work of the CDI based on in the first year of operation? 

– The work of the Central Directorate of Infrastructure in 2011 was based on the qualitative and full implementation of the scheduled plans, primarily focusing on the recovery of track complex, modernization and upgrading of power supply facilities, automation and remote control and rolling stock. 

– Was the Directorate able to invest the whole sum planned according to the budget?

– At the end of last year all of the allocated funds were 100% utilized. It paid for reconstruction of 347 km of contact system, installation of more than 13 km of reinforcing wire, replacement of more than a thousand miles of worn contact wire and carrying cable. Speaking about the latest achievement - it is as much as 20% more than the figures of 2010. In addition we managed to replace more than 460,000 old insulators and to update the devices of electrical centralization at 13 stations. We also equipped 178 km of railroad network with the continuously operating device of two-way autolock. At the same time there was the modernization of 2,710 sq km of road and 356 controlling devices were set up, etc. 

–  What were the results of work on the improvement of track infrastructure? 

– We managed to raise passenger train speed through stages, main routes and stations over 2,300  km of road, and freight train speed over 2,330 km of road. And in both cases we have exceeded one-fifth of the job. This work allowed us to increase the length of the concrete sleepers road to 3,200 km. In addition, we have increased the length of the welded road by 2,750 sq km and at the end of this year its length along the main routes will be 65% of the expanded length. One good performance indicator of the work done is the elimination of four limiting power supply zones of a total length of 140 km that will ensure the passage of cargo traffic on the railway infrastructure of the Eastern landfill of Transsiberian and Baikal-Amur Railroads. Another thing that is worth mentioning is the installation of more than 100 interrailway warranty sectors (a section of a railway line between adjacent railway affiliates of RZD with a maintenance depot on the both ends. These depots must guarantee that there will be no failures of rolling stock during the train’s trip between them). The average length of such sectors is 1,149 km, which is 26 km more than in 2010 on the main directions across the whole network. 

– How is the formation of a property complex of the CDI going? 

– To form the property complex, the appropriate criteria for determining the technological and industrial needs of a specific object have to be developed. Due to these criteria the final decision is made: either to keep the object in a property management complex or drag it into civil circulation with its transfer, retirement or sale. At present, these criteria are being worked out at the property complex of Gorky Railway. The results as a whole will form the basis for the formation of a property complex of the CDI.

– What put the brakes on the formation of a property complex of the CDI? 

– It is the transfer of assets from vertically integrated business structures, which were separated from railway affiliates of RZD, to the Directorate’s property. Here I am talking about the Central Directorate of traction, the Central Directorate of Traffic Management and others. Subsequently, this will require the better usage of the criteria while receiving objects onto the balance of the Central Directorate of infrastructure. Speaking about general assets, I have given my managers the task of preparing and sending instructions across the rail network about the approaches to the formation of a complex property of the Central Directorate of Infrastructure. 
Of course, it is necessary to get rid of old and inefficient equipment and machinery that is being used at the moment. Already today, a program approved by RZD management that involves putting the space of technical buildings into civil usage has been implemented in the company. It is planned for 2011-13. Implementation of this program will optimize the composition of the property complex of the CDI.

– Is interaction between the CDI staff and its colleagues from other directorates efficient at all levels? 

– Regulations on interaction on a linear level are determined by appropriate instructions. They are performed at a sufficiently high level, although anything can happen. As for the level of interaction between the central directorates, they are defined by regulations, and life will show the gaps to be filled. 

– Specialists of the Central Directorate of Road Repair are working very closely with railwaymen from the CDI. Is this interaction carried out on a basis of general principles? 

– It is based on the Interaction Rules imposed by an order of RZD dated December 30, 2011. The current planning of route and track works is made by the CDI through the management of  road and facilities on the basis of applications of railways and divisions of RZD. The Regulations set specific procedures and timeframes for this work, ranging from the formation of rates of volume of roadway repair and finishing to the coordination of the provision of «windows» at the CDI level. In its turn, the material and technical support of works is carried out in accordance with the «Rules of the Organization of the Material and Technical Support of RZD and Its Subsidiaries». 

– Is there a problem with employing people in the infrastructure? Are there enough people? 

– There are about 400,000 people working in infrastructure. This is, of course, a large number and there is a need to trim this down. But technical support and smart structural solutions are needed. In my opinion, the most efficient measures are to increase the rates of infrastructure repair, and to mechanize maintenance work. 

– What internal resources can be used, in your opinion, to reduce costs and increase revenues from the infrastructure activities of RZD? Do you consider it is necessary and possible to involve private capital in the development of railway infrastructure? 

– The issue of cost reduction should be considered through the introduction of modern technologies to prolong the life cycle of general assets and, first and last, of the permanent way. Throughout 2011 the company introduced innovative solutions aimed at strengthening the construction of the permanent way and extending its useful life period. I can speak about some of them. For example, there are long-welded rails on concrete sleepers with elastic fastenings in the curves of ultra-small radius on the Moscow and the East Siberian railroads, it includes rails with increased resistance to shear, and with a treatment of ballast layer with composite materials. Sleepers for curves with a radius of less than 350 meters are also designed and made. There are shuttle and the bridge sleepers. By the way, these sleepers already have the certificates for ARC fastening and they will get certificates for ZBR fastening not later than April 2012. 

– What can be expected from the infrastructure complex this year? 

– Completion of the formation of the CDI, transferral of the road Directorates to it and assumption of the duties and responsibilities for managing the technological complex of the railway infrastructure can be expected. In addition, according to the results of a pilot project on a complex system of spatial data on the  infrastructure of railway transport (CSSPIRT) at the Moscow, St Petersburg – Buslovskaya landfill during 2012 there will be a need to spread the project to other areas of the network. It will involve at least 2,200 km. We also plan to complete the reorganization of the maintenance system of engineering structures through the creation of specialized distances for engineering structures (new subdivisions of railways-affiliates of RZD responsible for engineering structures construction, maintenance, and repair located on the area of respective railways) at all railroads in 2012. Great works are planned on the track complex. So there will be enough work in the coming year.

– What development programs are planned for 2012 in the facilities of industry? What are the characteristics of the investment budget?

– The 2012 investment budget of CDI exceeds last-year one by 20%. It is more than RUR 110 billion. Regardless the cost of works fulfilled by the Directorate’s own forces, the percentage of concluded contracts is 36% of the quota for 2012. In the framework of contracts between CDI and the Directorate of Complex Construction and Reconstruction of Railways, and those between CDI and the Directorate of Communication Network Construction, not all planned sub-contracts on equipment supply and design estimate documentation on track modernization have been concluded yet. 
We must receive all orders before March 1, 2012, and funding will be opened in full before April 1, 2012.  
An active work is under way to form necessary packs of documents to put amendments to the corporate order made by subsidiaries of RZD, and to receive a permission from RZD to purchase equipment at some definite prices.  
Interviewed by Vladislav Kukresh
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            [SECTION_META_DESCRIPTION] => <img src="/ufiles/image/rus/inter/2012/1/6.jpg" border="1" alt=" " hspace="5" width="200" height="234" align="left" />Vladimir Vorobyov, Vice President of RZD responsible for managing the track facilities and road infrastructure of the company, has spoken about the intermediate results of the formation of the largest structural unit of the company – the Central Directorate of Infrastructure (CDI), which includes the departments of automation and remote control, electrification and power supply, control of mechanization, etc.
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Eesti Raudtee Increases Speed
To finance infrastructure, railway enterprises of the Baltic states use their own finance as well as means from the structural fund of the European Union. The latter are spent on capital repair of the railway and projects in the passenger transportation sector. 
The Estonian Railway invested approximately €33 million into infrastructure renewal in 2010, and €82 million in 2011. Out of the new large projects, two may be highlighted. The first is the capital repair of main railways between Tallinn and Tartu in the framework of the Rail Baltica project. It is now practically completed. Besides the capital repair of all main lines approaching Tallinn from east and south, the speed has been increased on this section of the railway, which positively influences its carrying capacity. Moreover, during the reconstruction, tracks were prepared to service long trains in future (over 57 nominal railcars). 
The second, and perhaps more important project, is the opening of the Koidula station, which is on the border between Estonia and Russia. The station was launched in September 2011. Investments into the project exceeded €70 million, which were given in equal proportions by the state, Eesti Raudtee, and state real estate company Riigi Kannisvara. It took three years to construct an up-to-date railway hub with ten receiving and departure tracks, the station and other technical facilities. The presence of services of customs, veterinarian and phytosanitary control allows trains with practically all types of cargoes to pass via the station. Also, there appeared the opportunity to transport refrigerated goods from Estonia to Russia. In the opinion of experts, Koidula may become the central point to receive cargo from the RF, and passengers will get an opportunity to leave it for Moscow, St Petersburg, and Riga. 
Nowadays, preparatory work is under way to launch new regular trains on the Estonian railway in 2013. Hence all passenger platforms are being rebuilt, the overhead wiring is being reconstructed, and the capital repair is being carried out at diverging branch lines to the west of Tallinn, etc. Simultaneously, due to the increase in freight transportation volume, stations are being extended and additional station tracks are being constructed in some places. 
The most immediate investment plans of Eesti Raudtee envisage two infrastructure directions. The first is to increase train traffic speed up to 120 kph on the sections where the capital repair was held, in the framework of Rail Baltica project. Realisation of this programme is almost completed. Then, the speed is supposed to increase to 160 kph.
The second goal is to prepare the Estonian railway infrastructure to service the new park of passenger trains (both diesel and electric ones). 
Lietuvos Gelezinkeliai Improves Efficiency
In Lithuania, Klaipeda railway hub is being reconstructed and upgraded intensively – the railway stations Draugiste, Klaipeda, and Rimkai are being extended to enlarge their capacities (total investments will exceed €115 million). The carrying capacity of the railway line to the Klaipeda port is forecasted to reach 70 million tons per annum in 2015, which is double today’s capacity. To carry out the set task, double-track inserted sections will be built on some stretches of the Kaišiadorys – Klaipeda line (planned investment is €150 million). This will enlarge the carrying capacity, improve the conditions of transportation management as well as the efficiency of the transportation process in the Klaipeda direction. 
Also, Lithuanian Railways pays a lot of attention to another important direction – the Kaliningrad port. Signalling and track facilities are being upgraded on the Kaunas – Kibartai section (investment is approximately €50 million).
The project of equipping the Traffic Control Centre, which is being carried out now, takes a special place in improving the efficiency of the transportation process (the sum of investments exceeds €20 million). The Centre is to be put into operation in 2014. By that time, systems to control some separate stations will have been re-equipped, and it will be possible to manage almost all network signalling facilities on the Lithuanian railway.
In cooperation with Belarusian Railways, Lietuvos Gelezinkeliai is carrying out the project of organising fast (up to 160 kph) passenger communication between Minsk and Vilnius. In its framework, it is planned to electrify the Molodechno – N. Vilnya line (investment is about €30 million). Thus, when the electrification is completed there, up-to-date electric trains will run on the Minsk – Vilnius section at the end of 2014. Moreover, its neighbours will also feel the positive economic and ecological effect of realisation of this project – the diesel haulage on the Molodechno – the state border – Kyana section will be replaced by more technically efficient, cleaner, and cheaper electric alternatives. 
For a faster arrangement of cargo train traffic and a decrease in air pollution, Vilnius plans to reconstruct a by-passing one-track section and build the second track (investment is about €80 million), using trains that have arrived from Belarus or have been formed to run to Belarus. They will be able to move directly to/from Vaidotai railway yard. Moreover, the construction of the Vilnius Public Logistics Centre, which lies near the railway yard, is to be completed by 2014 (investment sum is €40 million). 
The most ambitious and largest project according to investments is the construction of the Rail Baltica railway line with a 1435 mm wide gauge from the state border with the Republic of Poland to Kaunas. It envisages reconstruction of the existing 1520 mm gauge (the sum of investments is almost €200 million). Besides, it is planned to complete the construction of the Kaunas Public Logistics Centre near Palemonas station by 2014 (the sum of investment is about €30 million). Specialists at Lithuanian Railways consider that by 2015 these two projects, together with the development of new transport cargo corridor №8 Rotterdam – Berlin – Warsaw – Kaunas, will create good prerequisites to attract to the railways the cargo now  carried by road haulage between the states of Western and Central Europe and the countries of the Baltic region and the RF. 
The total volume of the investment programme of Lietuvos Gelezinkeliai in 2011 amounted to €155 million. Of that, €107 million was invested into infrastructure development and modernisation. To compare, investments in 2008 amounted to €226 million (of that, €85 million was invested in infrastructure), in 2009 – €138 million (and €68 million respectively), in 2010 – €184 million (€107 million respectively). 
In the framework of infrastructure renewal, second tracks are being constructed in Lithuania, station tracks are being extended, and basic crossings and stations are being reconstructed. To reach these goals, the railway administration of Lithuania received significant EU funding – €1.5 billion. The projects to develop passenger communication and increase speed are on the list too. 

LDz Enlarges Carrying Capacity
The investment programme of Latvian Railway broadens constantly. The company’s investments amounted to €59 million in 2008, €65 million in 2009, €80 million in 2010, and €107 million in 2011. Naturally, LDz strives to use each opportunity to get support from the funds of the EU. Thus, the participation of the Cohesion fund is 60-75% of the total cost of Latvian projects, while the volume of financial instruments of European Transport Network (TEN-T) amounts to 27% of the project expenses. 
Reconstruction and development of separate sections of TEN-T on the Latvian railway is financed by the Cohesion fund. The total sum is €130.5 million. This is one large programme envisaging construction of a second track on the Skriveri – Krustpils section and three projects of reconstruction at the Riga railway node.
Specialists at the Department of Investments, in the Latvian Ministry of Railways, said that two railway projects, connected with Rail Baltica, have been approved in the budget of TEN-T. The first is a research project. It is to be carried out by the Ministry of Railways. The expenditure on it is estimated at €2.2 million, a 50-50 split from funds of TEN-T and the Latvian budget. The first stage of the project was completed on May 31, 2011, when the feasibility study of construction of a new railway line with a 1435 mm wide gauge on the Rail Baltica line on the territory of Latvia was conducted. On this basis, the governments of the Baltic states are to make a common decision on realisation of the next step – detailed technical research. To get adjusted results, the Baltic states cooperated to make the feasibility study. The project is supposed to be completed before the end of 2012. 
The second project is the reconstruction of the existing line. Planned expenditure is €43.48 million. Of that, €10.07 million is financed by TEN-T, and the rest by the state budget. LDz  pays the VAT. This money is supposed to be spent developing the engineering design and reconstructing the Jugla – Valmiera, Elgava – the border with Lithuania, and Valmiera – Valka sections. This project was suspended for some time (on agreement with the European Commission) and recommenced in May 2011. Works are to be completed in the first quarter of 2012.
LDz considers that its nearest target is the extension of railway infrastructure capacity in accordance with growing demand. A significant step here was made due to cooperation with Byelorussian colleagues, when the second track on the Indra – Bigosovo section was put into operation in spring 2010. This project allowed the increase of turnover of trains on this section and enlarged the volume of transported cargo by 6.8 million tons per annum. The cost of the project was more than €5.5 million, most of which was given by LDz. Also, means were provided from the state budget and the Cohesion fund.
One of the latest large projects is construction of the second track on the Skriveri – Krustpils section (a part of Riga – Krustpils line). As a result, the carrying capacity of the section increased significantly. The total cost of the project is €93.41 million. The European Commission has already approved the decision to give €65.55 million from the Cohesion fund to co-finance the project. The rest, €27.86 million, is from LDz.
It is planned to construct a 52-kilometre railway line and reconstruct the railway stations of Skriveri, Aizkraukle, Koknese, Plavinas, and Krustpils before 2013. New bridges over the Aiviekste and the Perse will be built, the existing water conduits, river crossings and crossroads will be repaired. In the framework of the project, it is planned to modernise railway signalling, telecommunications, and power supply systems. Before the end of 2013, the high-tech project to upgrade the gravity hump yard at Shkirotava station in Riga is to be completed. This will simplify and speed up the process of train formation.
The total cost of the above-mentioned projects exceeds €185 million. Such large investments will help to improve the efficiency and competitiveness of the railway enterprise, and make the transit corridor via Latvia more attractive.

Belarusian Railway Being Upgraded
In 2011, the Belarusian Railway started to carry out a number of large-scale projects envisaged by the State Programme of Railways Development in the Republic of Belarus in 2011-2015. Among them is the implementation of a new format of passenger transportation, the purchase of high-tech rolling stock, electrification of international transport corridor IX on the Osipovichi – Gomel section, implementation of up-to-date information technologies, and infrastructure development. 
Active work is now under way to reconstruct a number of railway stations to increase their carrying capacity. Last September, the first stage of reconstruction of one of the largest stations on Belarusian Railway – Sitnitsa – was completed, which increased its average daily loading capacity.
In 2010, the second track on the Bigosovo (Belarus) – Indra (Latvia) section was put into operation, which increased the carrying capacity of the Polotsk – Bigosovo – state border between Belarus and Latvia section. Nowadays, the second track on the Polotsk – Ropnyanskaya section is being designed. It will help to unload the Polotsk railway station.
Nowadays, the Railway develops infrastructure, carrying out such investment projects as development of fast interregional passenger transportation, electrification of railway lines, modernisation of the Minsk railway hub, etc.
The priorities for 2012 are infrastructure development and renewal, especially in major transit and export directions; increases in the rate of modern rolling stock purchase, electrification of railway lines in the framework of international transport corridor IX, implementation of new innovative technologies, improvement of cargo and passenger transportation and the quality of services provided to customers. Work will be continued to create infrastructure for fast transportation in the framework of international transport corridor II, implementation of up-to-date systems to control passenger and cargo traffic, and to develop the Belarusian railway technically.

Ukrzaliznytsya Needs Reform
Railways of Ukraine, according to its own evaluations, needs investment in railway infrastructure development and modernisation to 2020. The sum of required investments is almost €19 billion. Without it, all discussions about modernisation and increases in the competitiveness of the national economy will remain just words, because the physical deterioration of the basic assets of the Ukrainian railway sector exceeds 80% today. Moreover, the realisation of plans is impossible without a radical modernisation of the locomotive and wagon fleet. 
The desired volume of investments to reach these goals is almost €5 billion over five years, but in practice, it will depend on the availability of financing. Ukrzaliznytsya intends to add 500 locomotives and 34,500 gondola cars to its park by 2017. Already in 2012, it is planned to buy at least 5,000 gondola cars. It is Ukrzaliznytsya’s demand for investment to renew rolling stock and infrastructure that is one of most important motives to reform the Ukrainian railway sector. According to experts, in this aspect, Ukrzaliznytsya has significantly fallen behind its neighbours. Approximately €1.1 – 1.4 billion is needed to be invested into rolling stock per annum, another €0.75 billion into infrastructure, while the present-day capacity of the Railway is about €0.5-0.6 billion. 
The basic aims of the state target programme of railway transport reform to 2019 appear in the Decree of the Cabinet of Ministers of Ukraine dated October 26, 2011. The reform will be carried out in three stages by creating a vertically integrated system to manage the sector. Ukrzaliznytsya says that these measures will allow it to extend the company’s investment opportunities. 

Kazakhstan Temir Zholy Opens Two New Lines
In December 2011, two large infrastructure projects were completed in Kazakhstan: the Uzen– state border with Turkmenistan line (investments exceeded €330 million), and Korgas – Zhetygen line (the cost was about €840 million).
At the moment, the Programme of Transport Infrastructure Development in Kazakhstan in 2010-2014 is being carried out in the Republic. According to this, the following actions are to be realised in 2012: further development of the Dostyk station, modernisation of the railway superstructure, the increase of train traffic safety, construction, renewal, and modernisation of infrastructure. According to the reports of Kazakhstan Temir Zholy, there is now a shortage of means to carry out the investment programme as well as a significant deterioration of rolling stock. 
At the expense of the increase in tariffs on mainline network services (the above-mentioned programme envisages a 15% growth in railway tariffs per annum), Kazakhstan Temir Zholy plans to complete electrification of 46 kilometres of tracks on the Kostanai – Zhelezorudnaya section, to purchase 134 locomotives and 2,699 cargo wagons, and to provide the capital repair of more than 600 kilometres of railway.
Thus, the investment programmes of the railway administrations of countries in the 1520 space are increasing, so it is possible to count on the systematic strengthening of infrastructure.   
By Elena Ushkova
    [~DETAIL_TEXT] => 
Eesti Raudtee Increases Speed
To finance infrastructure, railway enterprises of the Baltic states use their own finance as well as means from the structural fund of the European Union. The latter are spent on capital repair of the railway and projects in the passenger transportation sector. 
The Estonian Railway invested approximately €33 million into infrastructure renewal in 2010, and €82 million in 2011. Out of the new large projects, two may be highlighted. The first is the capital repair of main railways between Tallinn and Tartu in the framework of the Rail Baltica project. It is now practically completed. Besides the capital repair of all main lines approaching Tallinn from east and south, the speed has been increased on this section of the railway, which positively influences its carrying capacity. Moreover, during the reconstruction, tracks were prepared to service long trains in future (over 57 nominal railcars). 
The second, and perhaps more important project, is the opening of the Koidula station, which is on the border between Estonia and Russia. The station was launched in September 2011. Investments into the project exceeded €70 million, which were given in equal proportions by the state, Eesti Raudtee, and state real estate company Riigi Kannisvara. It took three years to construct an up-to-date railway hub with ten receiving and departure tracks, the station and other technical facilities. The presence of services of customs, veterinarian and phytosanitary control allows trains with practically all types of cargoes to pass via the station. Also, there appeared the opportunity to transport refrigerated goods from Estonia to Russia. In the opinion of experts, Koidula may become the central point to receive cargo from the RF, and passengers will get an opportunity to leave it for Moscow, St Petersburg, and Riga. 
Nowadays, preparatory work is under way to launch new regular trains on the Estonian railway in 2013. Hence all passenger platforms are being rebuilt, the overhead wiring is being reconstructed, and the capital repair is being carried out at diverging branch lines to the west of Tallinn, etc. Simultaneously, due to the increase in freight transportation volume, stations are being extended and additional station tracks are being constructed in some places. 
The most immediate investment plans of Eesti Raudtee envisage two infrastructure directions. The first is to increase train traffic speed up to 120 kph on the sections where the capital repair was held, in the framework of Rail Baltica project. Realisation of this programme is almost completed. Then, the speed is supposed to increase to 160 kph.
The second goal is to prepare the Estonian railway infrastructure to service the new park of passenger trains (both diesel and electric ones). 
Lietuvos Gelezinkeliai Improves Efficiency
In Lithuania, Klaipeda railway hub is being reconstructed and upgraded intensively – the railway stations Draugiste, Klaipeda, and Rimkai are being extended to enlarge their capacities (total investments will exceed €115 million). The carrying capacity of the railway line to the Klaipeda port is forecasted to reach 70 million tons per annum in 2015, which is double today’s capacity. To carry out the set task, double-track inserted sections will be built on some stretches of the Kaišiadorys – Klaipeda line (planned investment is €150 million). This will enlarge the carrying capacity, improve the conditions of transportation management as well as the efficiency of the transportation process in the Klaipeda direction. 
Also, Lithuanian Railways pays a lot of attention to another important direction – the Kaliningrad port. Signalling and track facilities are being upgraded on the Kaunas – Kibartai section (investment is approximately €50 million).
The project of equipping the Traffic Control Centre, which is being carried out now, takes a special place in improving the efficiency of the transportation process (the sum of investments exceeds €20 million). The Centre is to be put into operation in 2014. By that time, systems to control some separate stations will have been re-equipped, and it will be possible to manage almost all network signalling facilities on the Lithuanian railway.
In cooperation with Belarusian Railways, Lietuvos Gelezinkeliai is carrying out the project of organising fast (up to 160 kph) passenger communication between Minsk and Vilnius. In its framework, it is planned to electrify the Molodechno – N. Vilnya line (investment is about €30 million). Thus, when the electrification is completed there, up-to-date electric trains will run on the Minsk – Vilnius section at the end of 2014. Moreover, its neighbours will also feel the positive economic and ecological effect of realisation of this project – the diesel haulage on the Molodechno – the state border – Kyana section will be replaced by more technically efficient, cleaner, and cheaper electric alternatives. 
For a faster arrangement of cargo train traffic and a decrease in air pollution, Vilnius plans to reconstruct a by-passing one-track section and build the second track (investment is about €80 million), using trains that have arrived from Belarus or have been formed to run to Belarus. They will be able to move directly to/from Vaidotai railway yard. Moreover, the construction of the Vilnius Public Logistics Centre, which lies near the railway yard, is to be completed by 2014 (investment sum is €40 million). 
The most ambitious and largest project according to investments is the construction of the Rail Baltica railway line with a 1435 mm wide gauge from the state border with the Republic of Poland to Kaunas. It envisages reconstruction of the existing 1520 mm gauge (the sum of investments is almost €200 million). Besides, it is planned to complete the construction of the Kaunas Public Logistics Centre near Palemonas station by 2014 (the sum of investment is about €30 million). Specialists at Lithuanian Railways consider that by 2015 these two projects, together with the development of new transport cargo corridor №8 Rotterdam – Berlin – Warsaw – Kaunas, will create good prerequisites to attract to the railways the cargo now  carried by road haulage between the states of Western and Central Europe and the countries of the Baltic region and the RF. 
The total volume of the investment programme of Lietuvos Gelezinkeliai in 2011 amounted to €155 million. Of that, €107 million was invested into infrastructure development and modernisation. To compare, investments in 2008 amounted to €226 million (of that, €85 million was invested in infrastructure), in 2009 – €138 million (and €68 million respectively), in 2010 – €184 million (€107 million respectively). 
In the framework of infrastructure renewal, second tracks are being constructed in Lithuania, station tracks are being extended, and basic crossings and stations are being reconstructed. To reach these goals, the railway administration of Lithuania received significant EU funding – €1.5 billion. The projects to develop passenger communication and increase speed are on the list too. 

LDz Enlarges Carrying Capacity
The investment programme of Latvian Railway broadens constantly. The company’s investments amounted to €59 million in 2008, €65 million in 2009, €80 million in 2010, and €107 million in 2011. Naturally, LDz strives to use each opportunity to get support from the funds of the EU. Thus, the participation of the Cohesion fund is 60-75% of the total cost of Latvian projects, while the volume of financial instruments of European Transport Network (TEN-T) amounts to 27% of the project expenses. 
Reconstruction and development of separate sections of TEN-T on the Latvian railway is financed by the Cohesion fund. The total sum is €130.5 million. This is one large programme envisaging construction of a second track on the Skriveri – Krustpils section and three projects of reconstruction at the Riga railway node.
Specialists at the Department of Investments, in the Latvian Ministry of Railways, said that two railway projects, connected with Rail Baltica, have been approved in the budget of TEN-T. The first is a research project. It is to be carried out by the Ministry of Railways. The expenditure on it is estimated at €2.2 million, a 50-50 split from funds of TEN-T and the Latvian budget. The first stage of the project was completed on May 31, 2011, when the feasibility study of construction of a new railway line with a 1435 mm wide gauge on the Rail Baltica line on the territory of Latvia was conducted. On this basis, the governments of the Baltic states are to make a common decision on realisation of the next step – detailed technical research. To get adjusted results, the Baltic states cooperated to make the feasibility study. The project is supposed to be completed before the end of 2012. 
The second project is the reconstruction of the existing line. Planned expenditure is €43.48 million. Of that, €10.07 million is financed by TEN-T, and the rest by the state budget. LDz  pays the VAT. This money is supposed to be spent developing the engineering design and reconstructing the Jugla – Valmiera, Elgava – the border with Lithuania, and Valmiera – Valka sections. This project was suspended for some time (on agreement with the European Commission) and recommenced in May 2011. Works are to be completed in the first quarter of 2012.
LDz considers that its nearest target is the extension of railway infrastructure capacity in accordance with growing demand. A significant step here was made due to cooperation with Byelorussian colleagues, when the second track on the Indra – Bigosovo section was put into operation in spring 2010. This project allowed the increase of turnover of trains on this section and enlarged the volume of transported cargo by 6.8 million tons per annum. The cost of the project was more than €5.5 million, most of which was given by LDz. Also, means were provided from the state budget and the Cohesion fund.
One of the latest large projects is construction of the second track on the Skriveri – Krustpils section (a part of Riga – Krustpils line). As a result, the carrying capacity of the section increased significantly. The total cost of the project is €93.41 million. The European Commission has already approved the decision to give €65.55 million from the Cohesion fund to co-finance the project. The rest, €27.86 million, is from LDz.
It is planned to construct a 52-kilometre railway line and reconstruct the railway stations of Skriveri, Aizkraukle, Koknese, Plavinas, and Krustpils before 2013. New bridges over the Aiviekste and the Perse will be built, the existing water conduits, river crossings and crossroads will be repaired. In the framework of the project, it is planned to modernise railway signalling, telecommunications, and power supply systems. Before the end of 2013, the high-tech project to upgrade the gravity hump yard at Shkirotava station in Riga is to be completed. This will simplify and speed up the process of train formation.
The total cost of the above-mentioned projects exceeds €185 million. Such large investments will help to improve the efficiency and competitiveness of the railway enterprise, and make the transit corridor via Latvia more attractive.

Belarusian Railway Being Upgraded
In 2011, the Belarusian Railway started to carry out a number of large-scale projects envisaged by the State Programme of Railways Development in the Republic of Belarus in 2011-2015. Among them is the implementation of a new format of passenger transportation, the purchase of high-tech rolling stock, electrification of international transport corridor IX on the Osipovichi – Gomel section, implementation of up-to-date information technologies, and infrastructure development. 
Active work is now under way to reconstruct a number of railway stations to increase their carrying capacity. Last September, the first stage of reconstruction of one of the largest stations on Belarusian Railway – Sitnitsa – was completed, which increased its average daily loading capacity.
In 2010, the second track on the Bigosovo (Belarus) – Indra (Latvia) section was put into operation, which increased the carrying capacity of the Polotsk – Bigosovo – state border between Belarus and Latvia section. Nowadays, the second track on the Polotsk – Ropnyanskaya section is being designed. It will help to unload the Polotsk railway station.
Nowadays, the Railway develops infrastructure, carrying out such investment projects as development of fast interregional passenger transportation, electrification of railway lines, modernisation of the Minsk railway hub, etc.
The priorities for 2012 are infrastructure development and renewal, especially in major transit and export directions; increases in the rate of modern rolling stock purchase, electrification of railway lines in the framework of international transport corridor IX, implementation of new innovative technologies, improvement of cargo and passenger transportation and the quality of services provided to customers. Work will be continued to create infrastructure for fast transportation in the framework of international transport corridor II, implementation of up-to-date systems to control passenger and cargo traffic, and to develop the Belarusian railway technically.

Ukrzaliznytsya Needs Reform
Railways of Ukraine, according to its own evaluations, needs investment in railway infrastructure development and modernisation to 2020. The sum of required investments is almost €19 billion. Without it, all discussions about modernisation and increases in the competitiveness of the national economy will remain just words, because the physical deterioration of the basic assets of the Ukrainian railway sector exceeds 80% today. Moreover, the realisation of plans is impossible without a radical modernisation of the locomotive and wagon fleet. 
The desired volume of investments to reach these goals is almost €5 billion over five years, but in practice, it will depend on the availability of financing. Ukrzaliznytsya intends to add 500 locomotives and 34,500 gondola cars to its park by 2017. Already in 2012, it is planned to buy at least 5,000 gondola cars. It is Ukrzaliznytsya’s demand for investment to renew rolling stock and infrastructure that is one of most important motives to reform the Ukrainian railway sector. According to experts, in this aspect, Ukrzaliznytsya has significantly fallen behind its neighbours. Approximately €1.1 – 1.4 billion is needed to be invested into rolling stock per annum, another €0.75 billion into infrastructure, while the present-day capacity of the Railway is about €0.5-0.6 billion. 
The basic aims of the state target programme of railway transport reform to 2019 appear in the Decree of the Cabinet of Ministers of Ukraine dated October 26, 2011. The reform will be carried out in three stages by creating a vertically integrated system to manage the sector. Ukrzaliznytsya says that these measures will allow it to extend the company’s investment opportunities. 

Kazakhstan Temir Zholy Opens Two New Lines
In December 2011, two large infrastructure projects were completed in Kazakhstan: the Uzen– state border with Turkmenistan line (investments exceeded €330 million), and Korgas – Zhetygen line (the cost was about €840 million).
At the moment, the Programme of Transport Infrastructure Development in Kazakhstan in 2010-2014 is being carried out in the Republic. According to this, the following actions are to be realised in 2012: further development of the Dostyk station, modernisation of the railway superstructure, the increase of train traffic safety, construction, renewal, and modernisation of infrastructure. According to the reports of Kazakhstan Temir Zholy, there is now a shortage of means to carry out the investment programme as well as a significant deterioration of rolling stock. 
At the expense of the increase in tariffs on mainline network services (the above-mentioned programme envisages a 15% growth in railway tariffs per annum), Kazakhstan Temir Zholy plans to complete electrification of 46 kilometres of tracks on the Kostanai – Zhelezorudnaya section, to purchase 134 locomotives and 2,699 cargo wagons, and to provide the capital repair of more than 600 kilometres of railway.
Thus, the investment programmes of the railway administrations of countries in the 1520 space are increasing, so it is possible to count on the systematic strengthening of infrastructure.   
By Elena Ushkova
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Eesti Raudtee Increases Speed
To finance infrastructure, railway enterprises of the Baltic states use their own finance as well as means from the structural fund of the European Union. The latter are spent on capital repair of the railway and projects in the passenger transportation sector. 
The Estonian Railway invested approximately €33 million into infrastructure renewal in 2010, and €82 million in 2011. Out of the new large projects, two may be highlighted. The first is the capital repair of main railways between Tallinn and Tartu in the framework of the Rail Baltica project. It is now practically completed. Besides the capital repair of all main lines approaching Tallinn from east and south, the speed has been increased on this section of the railway, which positively influences its carrying capacity. Moreover, during the reconstruction, tracks were prepared to service long trains in future (over 57 nominal railcars). 
The second, and perhaps more important project, is the opening of the Koidula station, which is on the border between Estonia and Russia. The station was launched in September 2011. Investments into the project exceeded €70 million, which were given in equal proportions by the state, Eesti Raudtee, and state real estate company Riigi Kannisvara. It took three years to construct an up-to-date railway hub with ten receiving and departure tracks, the station and other technical facilities. The presence of services of customs, veterinarian and phytosanitary control allows trains with practically all types of cargoes to pass via the station. Also, there appeared the opportunity to transport refrigerated goods from Estonia to Russia. In the opinion of experts, Koidula may become the central point to receive cargo from the RF, and passengers will get an opportunity to leave it for Moscow, St Petersburg, and Riga. 
Nowadays, preparatory work is under way to launch new regular trains on the Estonian railway in 2013. Hence all passenger platforms are being rebuilt, the overhead wiring is being reconstructed, and the capital repair is being carried out at diverging branch lines to the west of Tallinn, etc. Simultaneously, due to the increase in freight transportation volume, stations are being extended and additional station tracks are being constructed in some places. 
The most immediate investment plans of Eesti Raudtee envisage two infrastructure directions. The first is to increase train traffic speed up to 120 kph on the sections where the capital repair was held, in the framework of Rail Baltica project. Realisation of this programme is almost completed. Then, the speed is supposed to increase to 160 kph.
The second goal is to prepare the Estonian railway infrastructure to service the new park of passenger trains (both diesel and electric ones). 
Lietuvos Gelezinkeliai Improves Efficiency
In Lithuania, Klaipeda railway hub is being reconstructed and upgraded intensively – the railway stations Draugiste, Klaipeda, and Rimkai are being extended to enlarge their capacities (total investments will exceed €115 million). The carrying capacity of the railway line to the Klaipeda port is forecasted to reach 70 million tons per annum in 2015, which is double today’s capacity. To carry out the set task, double-track inserted sections will be built on some stretches of the Kaišiadorys – Klaipeda line (planned investment is €150 million). This will enlarge the carrying capacity, improve the conditions of transportation management as well as the efficiency of the transportation process in the Klaipeda direction. 
Also, Lithuanian Railways pays a lot of attention to another important direction – the Kaliningrad port. Signalling and track facilities are being upgraded on the Kaunas – Kibartai section (investment is approximately €50 million).
The project of equipping the Traffic Control Centre, which is being carried out now, takes a special place in improving the efficiency of the transportation process (the sum of investments exceeds €20 million). The Centre is to be put into operation in 2014. By that time, systems to control some separate stations will have been re-equipped, and it will be possible to manage almost all network signalling facilities on the Lithuanian railway.
In cooperation with Belarusian Railways, Lietuvos Gelezinkeliai is carrying out the project of organising fast (up to 160 kph) passenger communication between Minsk and Vilnius. In its framework, it is planned to electrify the Molodechno – N. Vilnya line (investment is about €30 million). Thus, when the electrification is completed there, up-to-date electric trains will run on the Minsk – Vilnius section at the end of 2014. Moreover, its neighbours will also feel the positive economic and ecological effect of realisation of this project – the diesel haulage on the Molodechno – the state border – Kyana section will be replaced by more technically efficient, cleaner, and cheaper electric alternatives. 
For a faster arrangement of cargo train traffic and a decrease in air pollution, Vilnius plans to reconstruct a by-passing one-track section and build the second track (investment is about €80 million), using trains that have arrived from Belarus or have been formed to run to Belarus. They will be able to move directly to/from Vaidotai railway yard. Moreover, the construction of the Vilnius Public Logistics Centre, which lies near the railway yard, is to be completed by 2014 (investment sum is €40 million). 
The most ambitious and largest project according to investments is the construction of the Rail Baltica railway line with a 1435 mm wide gauge from the state border with the Republic of Poland to Kaunas. It envisages reconstruction of the existing 1520 mm gauge (the sum of investments is almost €200 million). Besides, it is planned to complete the construction of the Kaunas Public Logistics Centre near Palemonas station by 2014 (the sum of investment is about €30 million). Specialists at Lithuanian Railways consider that by 2015 these two projects, together with the development of new transport cargo corridor №8 Rotterdam – Berlin – Warsaw – Kaunas, will create good prerequisites to attract to the railways the cargo now  carried by road haulage between the states of Western and Central Europe and the countries of the Baltic region and the RF. 
The total volume of the investment programme of Lietuvos Gelezinkeliai in 2011 amounted to €155 million. Of that, €107 million was invested into infrastructure development and modernisation. To compare, investments in 2008 amounted to €226 million (of that, €85 million was invested in infrastructure), in 2009 – €138 million (and €68 million respectively), in 2010 – €184 million (€107 million respectively). 
In the framework of infrastructure renewal, second tracks are being constructed in Lithuania, station tracks are being extended, and basic crossings and stations are being reconstructed. To reach these goals, the railway administration of Lithuania received significant EU funding – €1.5 billion. The projects to develop passenger communication and increase speed are on the list too. 

LDz Enlarges Carrying Capacity
The investment programme of Latvian Railway broadens constantly. The company’s investments amounted to €59 million in 2008, €65 million in 2009, €80 million in 2010, and €107 million in 2011. Naturally, LDz strives to use each opportunity to get support from the funds of the EU. Thus, the participation of the Cohesion fund is 60-75% of the total cost of Latvian projects, while the volume of financial instruments of European Transport Network (TEN-T) amounts to 27% of the project expenses. 
Reconstruction and development of separate sections of TEN-T on the Latvian railway is financed by the Cohesion fund. The total sum is €130.5 million. This is one large programme envisaging construction of a second track on the Skriveri – Krustpils section and three projects of reconstruction at the Riga railway node.
Specialists at the Department of Investments, in the Latvian Ministry of Railways, said that two railway projects, connected with Rail Baltica, have been approved in the budget of TEN-T. The first is a research project. It is to be carried out by the Ministry of Railways. The expenditure on it is estimated at €2.2 million, a 50-50 split from funds of TEN-T and the Latvian budget. The first stage of the project was completed on May 31, 2011, when the feasibility study of construction of a new railway line with a 1435 mm wide gauge on the Rail Baltica line on the territory of Latvia was conducted. On this basis, the governments of the Baltic states are to make a common decision on realisation of the next step – detailed technical research. To get adjusted results, the Baltic states cooperated to make the feasibility study. The project is supposed to be completed before the end of 2012. 
The second project is the reconstruction of the existing line. Planned expenditure is €43.48 million. Of that, €10.07 million is financed by TEN-T, and the rest by the state budget. LDz  pays the VAT. This money is supposed to be spent developing the engineering design and reconstructing the Jugla – Valmiera, Elgava – the border with Lithuania, and Valmiera – Valka sections. This project was suspended for some time (on agreement with the European Commission) and recommenced in May 2011. Works are to be completed in the first quarter of 2012.
LDz considers that its nearest target is the extension of railway infrastructure capacity in accordance with growing demand. A significant step here was made due to cooperation with Byelorussian colleagues, when the second track on the Indra – Bigosovo section was put into operation in spring 2010. This project allowed the increase of turnover of trains on this section and enlarged the volume of transported cargo by 6.8 million tons per annum. The cost of the project was more than €5.5 million, most of which was given by LDz. Also, means were provided from the state budget and the Cohesion fund.
One of the latest large projects is construction of the second track on the Skriveri – Krustpils section (a part of Riga – Krustpils line). As a result, the carrying capacity of the section increased significantly. The total cost of the project is €93.41 million. The European Commission has already approved the decision to give €65.55 million from the Cohesion fund to co-finance the project. The rest, €27.86 million, is from LDz.
It is planned to construct a 52-kilometre railway line and reconstruct the railway stations of Skriveri, Aizkraukle, Koknese, Plavinas, and Krustpils before 2013. New bridges over the Aiviekste and the Perse will be built, the existing water conduits, river crossings and crossroads will be repaired. In the framework of the project, it is planned to modernise railway signalling, telecommunications, and power supply systems. Before the end of 2013, the high-tech project to upgrade the gravity hump yard at Shkirotava station in Riga is to be completed. This will simplify and speed up the process of train formation.
The total cost of the above-mentioned projects exceeds €185 million. Such large investments will help to improve the efficiency and competitiveness of the railway enterprise, and make the transit corridor via Latvia more attractive.

Belarusian Railway Being Upgraded
In 2011, the Belarusian Railway started to carry out a number of large-scale projects envisaged by the State Programme of Railways Development in the Republic of Belarus in 2011-2015. Among them is the implementation of a new format of passenger transportation, the purchase of high-tech rolling stock, electrification of international transport corridor IX on the Osipovichi – Gomel section, implementation of up-to-date information technologies, and infrastructure development. 
Active work is now under way to reconstruct a number of railway stations to increase their carrying capacity. Last September, the first stage of reconstruction of one of the largest stations on Belarusian Railway – Sitnitsa – was completed, which increased its average daily loading capacity.
In 2010, the second track on the Bigosovo (Belarus) – Indra (Latvia) section was put into operation, which increased the carrying capacity of the Polotsk – Bigosovo – state border between Belarus and Latvia section. Nowadays, the second track on the Polotsk – Ropnyanskaya section is being designed. It will help to unload the Polotsk railway station.
Nowadays, the Railway develops infrastructure, carrying out such investment projects as development of fast interregional passenger transportation, electrification of railway lines, modernisation of the Minsk railway hub, etc.
The priorities for 2012 are infrastructure development and renewal, especially in major transit and export directions; increases in the rate of modern rolling stock purchase, electrification of railway lines in the framework of international transport corridor IX, implementation of new innovative technologies, improvement of cargo and passenger transportation and the quality of services provided to customers. Work will be continued to create infrastructure for fast transportation in the framework of international transport corridor II, implementation of up-to-date systems to control passenger and cargo traffic, and to develop the Belarusian railway technically.

Ukrzaliznytsya Needs Reform
Railways of Ukraine, according to its own evaluations, needs investment in railway infrastructure development and modernisation to 2020. The sum of required investments is almost €19 billion. Without it, all discussions about modernisation and increases in the competitiveness of the national economy will remain just words, because the physical deterioration of the basic assets of the Ukrainian railway sector exceeds 80% today. Moreover, the realisation of plans is impossible without a radical modernisation of the locomotive and wagon fleet. 
The desired volume of investments to reach these goals is almost €5 billion over five years, but in practice, it will depend on the availability of financing. Ukrzaliznytsya intends to add 500 locomotives and 34,500 gondola cars to its park by 2017. Already in 2012, it is planned to buy at least 5,000 gondola cars. It is Ukrzaliznytsya’s demand for investment to renew rolling stock and infrastructure that is one of most important motives to reform the Ukrainian railway sector. According to experts, in this aspect, Ukrzaliznytsya has significantly fallen behind its neighbours. Approximately €1.1 – 1.4 billion is needed to be invested into rolling stock per annum, another €0.75 billion into infrastructure, while the present-day capacity of the Railway is about €0.5-0.6 billion. 
The basic aims of the state target programme of railway transport reform to 2019 appear in the Decree of the Cabinet of Ministers of Ukraine dated October 26, 2011. The reform will be carried out in three stages by creating a vertically integrated system to manage the sector. Ukrzaliznytsya says that these measures will allow it to extend the company’s investment opportunities. 

Kazakhstan Temir Zholy Opens Two New Lines
In December 2011, two large infrastructure projects were completed in Kazakhstan: the Uzen– state border with Turkmenistan line (investments exceeded €330 million), and Korgas – Zhetygen line (the cost was about €840 million).
At the moment, the Programme of Transport Infrastructure Development in Kazakhstan in 2010-2014 is being carried out in the Republic. According to this, the following actions are to be realised in 2012: further development of the Dostyk station, modernisation of the railway superstructure, the increase of train traffic safety, construction, renewal, and modernisation of infrastructure. According to the reports of Kazakhstan Temir Zholy, there is now a shortage of means to carry out the investment programme as well as a significant deterioration of rolling stock. 
At the expense of the increase in tariffs on mainline network services (the above-mentioned programme envisages a 15% growth in railway tariffs per annum), Kazakhstan Temir Zholy plans to complete electrification of 46 kilometres of tracks on the Kostanai – Zhelezorudnaya section, to purchase 134 locomotives and 2,699 cargo wagons, and to provide the capital repair of more than 600 kilometres of railway.
Thus, the investment programmes of the railway administrations of countries in the 1520 space are increasing, so it is possible to count on the systematic strengthening of infrastructure.   
By Elena Ushkova
    [~DETAIL_TEXT] => 
Eesti Raudtee Increases Speed
To finance infrastructure, railway enterprises of the Baltic states use their own finance as well as means from the structural fund of the European Union. The latter are spent on capital repair of the railway and projects in the passenger transportation sector. 
The Estonian Railway invested approximately €33 million into infrastructure renewal in 2010, and €82 million in 2011. Out of the new large projects, two may be highlighted. The first is the capital repair of main railways between Tallinn and Tartu in the framework of the Rail Baltica project. It is now practically completed. Besides the capital repair of all main lines approaching Tallinn from east and south, the speed has been increased on this section of the railway, which positively influences its carrying capacity. Moreover, during the reconstruction, tracks were prepared to service long trains in future (over 57 nominal railcars). 
The second, and perhaps more important project, is the opening of the Koidula station, which is on the border between Estonia and Russia. The station was launched in September 2011. Investments into the project exceeded €70 million, which were given in equal proportions by the state, Eesti Raudtee, and state real estate company Riigi Kannisvara. It took three years to construct an up-to-date railway hub with ten receiving and departure tracks, the station and other technical facilities. The presence of services of customs, veterinarian and phytosanitary control allows trains with practically all types of cargoes to pass via the station. Also, there appeared the opportunity to transport refrigerated goods from Estonia to Russia. In the opinion of experts, Koidula may become the central point to receive cargo from the RF, and passengers will get an opportunity to leave it for Moscow, St Petersburg, and Riga. 
Nowadays, preparatory work is under way to launch new regular trains on the Estonian railway in 2013. Hence all passenger platforms are being rebuilt, the overhead wiring is being reconstructed, and the capital repair is being carried out at diverging branch lines to the west of Tallinn, etc. Simultaneously, due to the increase in freight transportation volume, stations are being extended and additional station tracks are being constructed in some places. 
The most immediate investment plans of Eesti Raudtee envisage two infrastructure directions. The first is to increase train traffic speed up to 120 kph on the sections where the capital repair was held, in the framework of Rail Baltica project. Realisation of this programme is almost completed. Then, the speed is supposed to increase to 160 kph.
The second goal is to prepare the Estonian railway infrastructure to service the new park of passenger trains (both diesel and electric ones). 
Lietuvos Gelezinkeliai Improves Efficiency
In Lithuania, Klaipeda railway hub is being reconstructed and upgraded intensively – the railway stations Draugiste, Klaipeda, and Rimkai are being extended to enlarge their capacities (total investments will exceed €115 million). The carrying capacity of the railway line to the Klaipeda port is forecasted to reach 70 million tons per annum in 2015, which is double today’s capacity. To carry out the set task, double-track inserted sections will be built on some stretches of the Kaišiadorys – Klaipeda line (planned investment is €150 million). This will enlarge the carrying capacity, improve the conditions of transportation management as well as the efficiency of the transportation process in the Klaipeda direction. 
Also, Lithuanian Railways pays a lot of attention to another important direction – the Kaliningrad port. Signalling and track facilities are being upgraded on the Kaunas – Kibartai section (investment is approximately €50 million).
The project of equipping the Traffic Control Centre, which is being carried out now, takes a special place in improving the efficiency of the transportation process (the sum of investments exceeds €20 million). The Centre is to be put into operation in 2014. By that time, systems to control some separate stations will have been re-equipped, and it will be possible to manage almost all network signalling facilities on the Lithuanian railway.
In cooperation with Belarusian Railways, Lietuvos Gelezinkeliai is carrying out the project of organising fast (up to 160 kph) passenger communication between Minsk and Vilnius. In its framework, it is planned to electrify the Molodechno – N. Vilnya line (investment is about €30 million). Thus, when the electrification is completed there, up-to-date electric trains will run on the Minsk – Vilnius section at the end of 2014. Moreover, its neighbours will also feel the positive economic and ecological effect of realisation of this project – the diesel haulage on the Molodechno – the state border – Kyana section will be replaced by more technically efficient, cleaner, and cheaper electric alternatives. 
For a faster arrangement of cargo train traffic and a decrease in air pollution, Vilnius plans to reconstruct a by-passing one-track section and build the second track (investment is about €80 million), using trains that have arrived from Belarus or have been formed to run to Belarus. They will be able to move directly to/from Vaidotai railway yard. Moreover, the construction of the Vilnius Public Logistics Centre, which lies near the railway yard, is to be completed by 2014 (investment sum is €40 million). 
The most ambitious and largest project according to investments is the construction of the Rail Baltica railway line with a 1435 mm wide gauge from the state border with the Republic of Poland to Kaunas. It envisages reconstruction of the existing 1520 mm gauge (the sum of investments is almost €200 million). Besides, it is planned to complete the construction of the Kaunas Public Logistics Centre near Palemonas station by 2014 (the sum of investment is about €30 million). Specialists at Lithuanian Railways consider that by 2015 these two projects, together with the development of new transport cargo corridor №8 Rotterdam – Berlin – Warsaw – Kaunas, will create good prerequisites to attract to the railways the cargo now  carried by road haulage between the states of Western and Central Europe and the countries of the Baltic region and the RF. 
The total volume of the investment programme of Lietuvos Gelezinkeliai in 2011 amounted to €155 million. Of that, €107 million was invested into infrastructure development and modernisation. To compare, investments in 2008 amounted to €226 million (of that, €85 million was invested in infrastructure), in 2009 – €138 million (and €68 million respectively), in 2010 – €184 million (€107 million respectively). 
In the framework of infrastructure renewal, second tracks are being constructed in Lithuania, station tracks are being extended, and basic crossings and stations are being reconstructed. To reach these goals, the railway administration of Lithuania received significant EU funding – €1.5 billion. The projects to develop passenger communication and increase speed are on the list too. 

LDz Enlarges Carrying Capacity
The investment programme of Latvian Railway broadens constantly. The company’s investments amounted to €59 million in 2008, €65 million in 2009, €80 million in 2010, and €107 million in 2011. Naturally, LDz strives to use each opportunity to get support from the funds of the EU. Thus, the participation of the Cohesion fund is 60-75% of the total cost of Latvian projects, while the volume of financial instruments of European Transport Network (TEN-T) amounts to 27% of the project expenses. 
Reconstruction and development of separate sections of TEN-T on the Latvian railway is financed by the Cohesion fund. The total sum is €130.5 million. This is one large programme envisaging construction of a second track on the Skriveri – Krustpils section and three projects of reconstruction at the Riga railway node.
Specialists at the Department of Investments, in the Latvian Ministry of Railways, said that two railway projects, connected with Rail Baltica, have been approved in the budget of TEN-T. The first is a research project. It is to be carried out by the Ministry of Railways. The expenditure on it is estimated at €2.2 million, a 50-50 split from funds of TEN-T and the Latvian budget. The first stage of the project was completed on May 31, 2011, when the feasibility study of construction of a new railway line with a 1435 mm wide gauge on the Rail Baltica line on the territory of Latvia was conducted. On this basis, the governments of the Baltic states are to make a common decision on realisation of the next step – detailed technical research. To get adjusted results, the Baltic states cooperated to make the feasibility study. The project is supposed to be completed before the end of 2012. 
The second project is the reconstruction of the existing line. Planned expenditure is €43.48 million. Of that, €10.07 million is financed by TEN-T, and the rest by the state budget. LDz  pays the VAT. This money is supposed to be spent developing the engineering design and reconstructing the Jugla – Valmiera, Elgava – the border with Lithuania, and Valmiera – Valka sections. This project was suspended for some time (on agreement with the European Commission) and recommenced in May 2011. Works are to be completed in the first quarter of 2012.
LDz considers that its nearest target is the extension of railway infrastructure capacity in accordance with growing demand. A significant step here was made due to cooperation with Byelorussian colleagues, when the second track on the Indra – Bigosovo section was put into operation in spring 2010. This project allowed the increase of turnover of trains on this section and enlarged the volume of transported cargo by 6.8 million tons per annum. The cost of the project was more than €5.5 million, most of which was given by LDz. Also, means were provided from the state budget and the Cohesion fund.
One of the latest large projects is construction of the second track on the Skriveri – Krustpils section (a part of Riga – Krustpils line). As a result, the carrying capacity of the section increased significantly. The total cost of the project is €93.41 million. The European Commission has already approved the decision to give €65.55 million from the Cohesion fund to co-finance the project. The rest, €27.86 million, is from LDz.
It is planned to construct a 52-kilometre railway line and reconstruct the railway stations of Skriveri, Aizkraukle, Koknese, Plavinas, and Krustpils before 2013. New bridges over the Aiviekste and the Perse will be built, the existing water conduits, river crossings and crossroads will be repaired. In the framework of the project, it is planned to modernise railway signalling, telecommunications, and power supply systems. Before the end of 2013, the high-tech project to upgrade the gravity hump yard at Shkirotava station in Riga is to be completed. This will simplify and speed up the process of train formation.
The total cost of the above-mentioned projects exceeds €185 million. Such large investments will help to improve the efficiency and competitiveness of the railway enterprise, and make the transit corridor via Latvia more attractive.

Belarusian Railway Being Upgraded
In 2011, the Belarusian Railway started to carry out a number of large-scale projects envisaged by the State Programme of Railways Development in the Republic of Belarus in 2011-2015. Among them is the implementation of a new format of passenger transportation, the purchase of high-tech rolling stock, electrification of international transport corridor IX on the Osipovichi – Gomel section, implementation of up-to-date information technologies, and infrastructure development. 
Active work is now under way to reconstruct a number of railway stations to increase their carrying capacity. Last September, the first stage of reconstruction of one of the largest stations on Belarusian Railway – Sitnitsa – was completed, which increased its average daily loading capacity.
In 2010, the second track on the Bigosovo (Belarus) – Indra (Latvia) section was put into operation, which increased the carrying capacity of the Polotsk – Bigosovo – state border between Belarus and Latvia section. Nowadays, the second track on the Polotsk – Ropnyanskaya section is being designed. It will help to unload the Polotsk railway station.
Nowadays, the Railway develops infrastructure, carrying out such investment projects as development of fast interregional passenger transportation, electrification of railway lines, modernisation of the Minsk railway hub, etc.
The priorities for 2012 are infrastructure development and renewal, especially in major transit and export directions; increases in the rate of modern rolling stock purchase, electrification of railway lines in the framework of international transport corridor IX, implementation of new innovative technologies, improvement of cargo and passenger transportation and the quality of services provided to customers. Work will be continued to create infrastructure for fast transportation in the framework of international transport corridor II, implementation of up-to-date systems to control passenger and cargo traffic, and to develop the Belarusian railway technically.

Ukrzaliznytsya Needs Reform
Railways of Ukraine, according to its own evaluations, needs investment in railway infrastructure development and modernisation to 2020. The sum of required investments is almost €19 billion. Without it, all discussions about modernisation and increases in the competitiveness of the national economy will remain just words, because the physical deterioration of the basic assets of the Ukrainian railway sector exceeds 80% today. Moreover, the realisation of plans is impossible without a radical modernisation of the locomotive and wagon fleet. 
The desired volume of investments to reach these goals is almost €5 billion over five years, but in practice, it will depend on the availability of financing. Ukrzaliznytsya intends to add 500 locomotives and 34,500 gondola cars to its park by 2017. Already in 2012, it is planned to buy at least 5,000 gondola cars. It is Ukrzaliznytsya’s demand for investment to renew rolling stock and infrastructure that is one of most important motives to reform the Ukrainian railway sector. According to experts, in this aspect, Ukrzaliznytsya has significantly fallen behind its neighbours. Approximately €1.1 – 1.4 billion is needed to be invested into rolling stock per annum, another €0.75 billion into infrastructure, while the present-day capacity of the Railway is about €0.5-0.6 billion. 
The basic aims of the state target programme of railway transport reform to 2019 appear in the Decree of the Cabinet of Ministers of Ukraine dated October 26, 2011. The reform will be carried out in three stages by creating a vertically integrated system to manage the sector. Ukrzaliznytsya says that these measures will allow it to extend the company’s investment opportunities. 

Kazakhstan Temir Zholy Opens Two New Lines
In December 2011, two large infrastructure projects were completed in Kazakhstan: the Uzen– state border with Turkmenistan line (investments exceeded €330 million), and Korgas – Zhetygen line (the cost was about €840 million).
At the moment, the Programme of Transport Infrastructure Development in Kazakhstan in 2010-2014 is being carried out in the Republic. According to this, the following actions are to be realised in 2012: further development of the Dostyk station, modernisation of the railway superstructure, the increase of train traffic safety, construction, renewal, and modernisation of infrastructure. According to the reports of Kazakhstan Temir Zholy, there is now a shortage of means to carry out the investment programme as well as a significant deterioration of rolling stock. 
At the expense of the increase in tariffs on mainline network services (the above-mentioned programme envisages a 15% growth in railway tariffs per annum), Kazakhstan Temir Zholy plans to complete electrification of 46 kilometres of tracks on the Kostanai – Zhelezorudnaya section, to purchase 134 locomotives and 2,699 cargo wagons, and to provide the capital repair of more than 600 kilometres of railway.
Thus, the investment programmes of the railway administrations of countries in the 1520 space are increasing, so it is possible to count on the systematic strengthening of infrastructure.   
By Elena Ushkova
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The Decision Should Be Acceptable
Valery Reshetnikov, Senior Vice President of RZD, announced at a plenary discussion of the Transport Service Market: cooperation and partnership IX International Conference  that pilot projects in five railway sectors have been prepared in order to develop a mechanism for a network contract and to specify its parameters. These sectors are different because of their parameters and they represent examples of different types of rail roads - from freight intensive roads to roads with very little traffic on it. Pilot projects are supposed to provide funding of infrastructure within target orders. 
Together with this invested costs will be compared with resulting efficiency to see how the mechanisms of disbursement of funds work, to clarify the parameters of capability provision  of  cargo traffic on the route and to evaluate the effectiveness of investments. Different schemes of investment are planned to be used on different sections. It depends on transportation volumes and profitability of routes. State money, as well as private capital can be invested into traffic-intensive routes, a development that is interesting for commercial structures. Evaluating the effectiveness of the pilot projects will take two or three years. And it will take about two years to analyze summary indicators and to spread the achieved result over the whole network of RZD. Thereby, the formation of a network contract will take four years minimum. It means that the contract will appear only in 2015.
The network contract should answer many questions that are asked by all participants in the process of cargo transportation: government, investors, cargo owners, transporters and owners of infrastructure.  And the main question is: what parameters should the investing project have in order to meet the demand for rail transportation?
This will allow RZD to get target funds for a program of development for the rail network. As Vladimir Yakunin, President of RZD, said the program doesn’t have enough funding at the moment, as there is lack of 400-450 billion rubles in the budget of RZD till 2015. And if lost revenue from the failure to introduce the investment component in the rail fare is added to this amount then the loss can be estimated to be greater.
In its turn, the state government wants to be sure that the amount of its investment in the projects will not be more than necessary, and the funds will be used as efficiently as possible. Customers are wishing to get assurances on the absence of delays in the movement of cars. And investors want to know when the project will be completely repaid.
In addition, the network contract will help to understand the extent to which  it is suitable for the state to subsidize the development of railway infrastructure and other sectors in order to compensate losses from the increased pressure because of the tariff policy of the Russian Railways (if this pressure, as is said in Ministry of Economic Development, will restrain the growth in output of domestic enterprises).
“In any case,” said Svetlava Zinovieva, Deputy Head of the Control of Transport and Communications of the FAS, “attention should be paid to the balance of interests of all parties that are focused on the growth of the rail market. This does not mean that there will be any dissatisfied parties. But the solution should be acceptable to all of them.”

Transfer to a Regulatory Contract
The model of the network contract that is proposed in the RF corresponds to the regulatory agreements that are used in European countries and concluded with infrastructure companies. Their common principles: transportation projects selected according to their multiplicative effect, then their costs are calculated and the share of state investment, which is enough to achieve planned parameters, is fixed. Everything that is added is considered as a sphere of private capital. The state entrusts the control over the execution of regulatory contract to independent auditors. According to Yuri Saakyan, General Director of Institute of Problem of Natural Monopolies, practice shows that the main risk that such models of funding have is connected with the inaccuracy of macroeconomic forecasting. And, for example, if it turns out that the implementation of commitments taken by partners is impossible. As a result additional decisions have to be made in this case.
There are regulatory contracts on the East and within the borders of individual countries. A special feature of such contracts is that the government covers risks of funding. It is important in case real cost turns out bigger than the cost that has been calculated while the owner of infrastructure is drawing funds. In this case infrastructure company can be accused of getting extra profit. According to the plan it should be confiscated. But nobody will do this if the profit is ploughed back into the program.

There are Examples
There is experience of making  regulatory agreements in the RF as well. For example, there are general schemes of development of rail roads in several big transport hubs. First of all, there are Moscow and Saint-Petersburg. However, they didn’t correspond in terms of funding and zoning of territories. 
At the moment RZD is trying to update these general schemes and to add new content to them, which, in fact, makes the content a part of the new network contract. But as Alexey Bakirey, Chairman of the Committee on Transport and Transit Politics of St. Petersburg, said the main complication here is that forecasts of freight volume at railway hubs depend on the capacity of roads that are going from other regions, and zoning is spreading across the territory of the Leningrad region.
When realising infrastructure projects, all parameters of hub development and funding sources should be  clearly delineated. Mr Bakirey added that it should be taken into the account that if cargo owners and stevedores are interested in cargo volumes increasing then the government of a major city is going to restrain the flow of dangerous cargoes to St. Petersburg and to encourage a transfer towards an ecologically friendly approach.   
This shows how the conditions of network contract can be different in different regions. Any cargo can be handled in the Far East, because there is a need to increase the transshipment volumes. And that influences on the development of Mezhdurechensk – Taishet railway route. This route is one of those five that have been chosen to be a test pilot for a network contract, as it requires substantial modernization. The reason is that there will be an increase in transportation via this route, especially of cargoes from the ports of the Far East.
RZD plans to use public-private partnerships for the pilot project of this route. And there are other possible combinations of public and private investment in rail infrastructure. However, co-financing of big infrastructure projects by state and business is a difficult question. Russian legislation does not provide possibilities for investment of private funds into  routes of common use and the legislation requires correction.
It means that there is a need to categorise the network of RZD. In other words, there is a need to identify those objects that are off-limits in terms of attracting private capital, and those, in which the state finds private participation impossible because of a number of reasons. As for the sectors with little traffic on it, then Mr Yakunin says there are different opinions. But if the state needs the rail line for social or military needs then it should invest into its development.

There are Special Features
The term «network contract» has been introduced by consultants of McKinsey & Company during the preparation of the Target model of rail freight market by 2015.
At the beginning of 2011, this document was approved by the state government. And together with it the term has been legalized. As Yuri Elizariev, General Director of Integrated Transport Systems LLC (the company that developed the concept of the project at the request of RZD JSC), said that the network contract is, in fact, an agreement on mutual obligations between the state and RZD. Together with this there are a number of special features in it. First of all, the network contract is intended to be comprehensive,  that is to gather all key projects. Secondly, it will provide not only technical but also commercial options for infrastructure development. Thirdly, it must contain zoning of the territories. It will have to be done with the participation of the Russian Federation regions and the Federal Agency for Railway Transport, whose powers in the field of land and property relations in 2011 have been expanded. Previously, the Federal Property Management Agency had a full range of powers for the management of federal territory funds for rail transport. Now, all questions relating to siting of lands are the responsibility of the Federal Agency for Railway Transport. That is why reservation of lands for railway facilities can  now be overseen in federal programs relating to infrastructure development, and in the network contract. 
Zoning of territories that are adjacent to the landfill of RZD will help to avoid speculation on the land, which RZD or the state will have to buy to develop the railway infrastructure, and thereby to reduce the cost of projects. The Federal Agency for Railway Transport is obliged to analyse programs on attraction of additional funds for investment through transactions with the assets of RZD. In particular, in 2011 the Federal Agency for Railway Transport prepared 12 conclusions on the property of RZD in terms of putting them in pledge and sale. There are also conclusions on the transferral of ownership, seven of which have already been approved by  orders of the Russian government. Fourthly, the network contract should govern the basic directions of innovations. Fifthly, the network contract should include measures for the protection of nature.
Their costs  often become a part of the investment programs. For example, it was necessary to release into the water more than two million fish fry to compensate for the possible damage to nature during the construction of the railway bridge towers over the river near the site of the 2014 Sochi Olympic Games. In another case, planting of 145,000 trees has been factored into the cost of the project to construct a road.

Let’s Follow WTO Rules
Increased attention to the network contract appeared at the end of 2011, when it became clear that Russia was going to join the World Trade Organization. Previously, RZD used subsidies to solve some of its strategic problems. However, according to international law, this mechanism can be used only in exceptional cases and it should not be a systemic source of  profit for any private company. As Andrey Timofeev, partner of The Boston Consulting Group, noticed it is not possible to put money that is given to develop the infrastructure into a common pot according to international standards. It is possible to do this only using target model and all costs should be controlled. Taking this into account, the Russian government has taken a decision on the need to use such  tools as  regulatory agreement. Experts believe that it is important for the network contract to appear no later than 2015. That is the date determined by government for admission to the network of RZD of carriers from Kazakhstan and Belarus (within the  Customs Union of Russia with these two countries). According to the words of Mrs Zinovieva if in 2011 the privatization of rolling stock turned into overloading of the Russian railway infrastructure in the domestic market, then the emergence of local carriers may put additional barriers even in a way of  international flows of Russian trade. These concerns are shared by cargo owners.  
By Andrey Lazarev
    [~DETAIL_TEXT] => 
The Decision Should Be Acceptable
Valery Reshetnikov, Senior Vice President of RZD, announced at a plenary discussion of the Transport Service Market: cooperation and partnership IX International Conference  that pilot projects in five railway sectors have been prepared in order to develop a mechanism for a network contract and to specify its parameters. These sectors are different because of their parameters and they represent examples of different types of rail roads - from freight intensive roads to roads with very little traffic on it. Pilot projects are supposed to provide funding of infrastructure within target orders. 
Together with this invested costs will be compared with resulting efficiency to see how the mechanisms of disbursement of funds work, to clarify the parameters of capability provision  of  cargo traffic on the route and to evaluate the effectiveness of investments. Different schemes of investment are planned to be used on different sections. It depends on transportation volumes and profitability of routes. State money, as well as private capital can be invested into traffic-intensive routes, a development that is interesting for commercial structures. Evaluating the effectiveness of the pilot projects will take two or three years. And it will take about two years to analyze summary indicators and to spread the achieved result over the whole network of RZD. Thereby, the formation of a network contract will take four years minimum. It means that the contract will appear only in 2015.
The network contract should answer many questions that are asked by all participants in the process of cargo transportation: government, investors, cargo owners, transporters and owners of infrastructure.  And the main question is: what parameters should the investing project have in order to meet the demand for rail transportation?
This will allow RZD to get target funds for a program of development for the rail network. As Vladimir Yakunin, President of RZD, said the program doesn’t have enough funding at the moment, as there is lack of 400-450 billion rubles in the budget of RZD till 2015. And if lost revenue from the failure to introduce the investment component in the rail fare is added to this amount then the loss can be estimated to be greater.
In its turn, the state government wants to be sure that the amount of its investment in the projects will not be more than necessary, and the funds will be used as efficiently as possible. Customers are wishing to get assurances on the absence of delays in the movement of cars. And investors want to know when the project will be completely repaid.
In addition, the network contract will help to understand the extent to which  it is suitable for the state to subsidize the development of railway infrastructure and other sectors in order to compensate losses from the increased pressure because of the tariff policy of the Russian Railways (if this pressure, as is said in Ministry of Economic Development, will restrain the growth in output of domestic enterprises).
“In any case,” said Svetlava Zinovieva, Deputy Head of the Control of Transport and Communications of the FAS, “attention should be paid to the balance of interests of all parties that are focused on the growth of the rail market. This does not mean that there will be any dissatisfied parties. But the solution should be acceptable to all of them.”

Transfer to a Regulatory Contract
The model of the network contract that is proposed in the RF corresponds to the regulatory agreements that are used in European countries and concluded with infrastructure companies. Their common principles: transportation projects selected according to their multiplicative effect, then their costs are calculated and the share of state investment, which is enough to achieve planned parameters, is fixed. Everything that is added is considered as a sphere of private capital. The state entrusts the control over the execution of regulatory contract to independent auditors. According to Yuri Saakyan, General Director of Institute of Problem of Natural Monopolies, practice shows that the main risk that such models of funding have is connected with the inaccuracy of macroeconomic forecasting. And, for example, if it turns out that the implementation of commitments taken by partners is impossible. As a result additional decisions have to be made in this case.
There are regulatory contracts on the East and within the borders of individual countries. A special feature of such contracts is that the government covers risks of funding. It is important in case real cost turns out bigger than the cost that has been calculated while the owner of infrastructure is drawing funds. In this case infrastructure company can be accused of getting extra profit. According to the plan it should be confiscated. But nobody will do this if the profit is ploughed back into the program.

There are Examples
There is experience of making  regulatory agreements in the RF as well. For example, there are general schemes of development of rail roads in several big transport hubs. First of all, there are Moscow and Saint-Petersburg. However, they didn’t correspond in terms of funding and zoning of territories. 
At the moment RZD is trying to update these general schemes and to add new content to them, which, in fact, makes the content a part of the new network contract. But as Alexey Bakirey, Chairman of the Committee on Transport and Transit Politics of St. Petersburg, said the main complication here is that forecasts of freight volume at railway hubs depend on the capacity of roads that are going from other regions, and zoning is spreading across the territory of the Leningrad region.
When realising infrastructure projects, all parameters of hub development and funding sources should be  clearly delineated. Mr Bakirey added that it should be taken into the account that if cargo owners and stevedores are interested in cargo volumes increasing then the government of a major city is going to restrain the flow of dangerous cargoes to St. Petersburg and to encourage a transfer towards an ecologically friendly approach.   
This shows how the conditions of network contract can be different in different regions. Any cargo can be handled in the Far East, because there is a need to increase the transshipment volumes. And that influences on the development of Mezhdurechensk – Taishet railway route. This route is one of those five that have been chosen to be a test pilot for a network contract, as it requires substantial modernization. The reason is that there will be an increase in transportation via this route, especially of cargoes from the ports of the Far East.
RZD plans to use public-private partnerships for the pilot project of this route. And there are other possible combinations of public and private investment in rail infrastructure. However, co-financing of big infrastructure projects by state and business is a difficult question. Russian legislation does not provide possibilities for investment of private funds into  routes of common use and the legislation requires correction.
It means that there is a need to categorise the network of RZD. In other words, there is a need to identify those objects that are off-limits in terms of attracting private capital, and those, in which the state finds private participation impossible because of a number of reasons. As for the sectors with little traffic on it, then Mr Yakunin says there are different opinions. But if the state needs the rail line for social or military needs then it should invest into its development.

There are Special Features
The term «network contract» has been introduced by consultants of McKinsey & Company during the preparation of the Target model of rail freight market by 2015.
At the beginning of 2011, this document was approved by the state government. And together with it the term has been legalized. As Yuri Elizariev, General Director of Integrated Transport Systems LLC (the company that developed the concept of the project at the request of RZD JSC), said that the network contract is, in fact, an agreement on mutual obligations between the state and RZD. Together with this there are a number of special features in it. First of all, the network contract is intended to be comprehensive,  that is to gather all key projects. Secondly, it will provide not only technical but also commercial options for infrastructure development. Thirdly, it must contain zoning of the territories. It will have to be done with the participation of the Russian Federation regions and the Federal Agency for Railway Transport, whose powers in the field of land and property relations in 2011 have been expanded. Previously, the Federal Property Management Agency had a full range of powers for the management of federal territory funds for rail transport. Now, all questions relating to siting of lands are the responsibility of the Federal Agency for Railway Transport. That is why reservation of lands for railway facilities can  now be overseen in federal programs relating to infrastructure development, and in the network contract. 
Zoning of territories that are adjacent to the landfill of RZD will help to avoid speculation on the land, which RZD or the state will have to buy to develop the railway infrastructure, and thereby to reduce the cost of projects. The Federal Agency for Railway Transport is obliged to analyse programs on attraction of additional funds for investment through transactions with the assets of RZD. In particular, in 2011 the Federal Agency for Railway Transport prepared 12 conclusions on the property of RZD in terms of putting them in pledge and sale. There are also conclusions on the transferral of ownership, seven of which have already been approved by  orders of the Russian government. Fourthly, the network contract should govern the basic directions of innovations. Fifthly, the network contract should include measures for the protection of nature.
Their costs  often become a part of the investment programs. For example, it was necessary to release into the water more than two million fish fry to compensate for the possible damage to nature during the construction of the railway bridge towers over the river near the site of the 2014 Sochi Olympic Games. In another case, planting of 145,000 trees has been factored into the cost of the project to construct a road.

Let’s Follow WTO Rules
Increased attention to the network contract appeared at the end of 2011, when it became clear that Russia was going to join the World Trade Organization. Previously, RZD used subsidies to solve some of its strategic problems. However, according to international law, this mechanism can be used only in exceptional cases and it should not be a systemic source of  profit for any private company. As Andrey Timofeev, partner of The Boston Consulting Group, noticed it is not possible to put money that is given to develop the infrastructure into a common pot according to international standards. It is possible to do this only using target model and all costs should be controlled. Taking this into account, the Russian government has taken a decision on the need to use such  tools as  regulatory agreement. Experts believe that it is important for the network contract to appear no later than 2015. That is the date determined by government for admission to the network of RZD of carriers from Kazakhstan and Belarus (within the  Customs Union of Russia with these two countries). According to the words of Mrs Zinovieva if in 2011 the privatization of rolling stock turned into overloading of the Russian railway infrastructure in the domestic market, then the emergence of local carriers may put additional barriers even in a way of  international flows of Russian trade. These concerns are shared by cargo owners.  
By Andrey Lazarev
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The Decision Should Be Acceptable
Valery Reshetnikov, Senior Vice President of RZD, announced at a plenary discussion of the Transport Service Market: cooperation and partnership IX International Conference  that pilot projects in five railway sectors have been prepared in order to develop a mechanism for a network contract and to specify its parameters. These sectors are different because of their parameters and they represent examples of different types of rail roads - from freight intensive roads to roads with very little traffic on it. Pilot projects are supposed to provide funding of infrastructure within target orders. 
Together with this invested costs will be compared with resulting efficiency to see how the mechanisms of disbursement of funds work, to clarify the parameters of capability provision  of  cargo traffic on the route and to evaluate the effectiveness of investments. Different schemes of investment are planned to be used on different sections. It depends on transportation volumes and profitability of routes. State money, as well as private capital can be invested into traffic-intensive routes, a development that is interesting for commercial structures. Evaluating the effectiveness of the pilot projects will take two or three years. And it will take about two years to analyze summary indicators and to spread the achieved result over the whole network of RZD. Thereby, the formation of a network contract will take four years minimum. It means that the contract will appear only in 2015.
The network contract should answer many questions that are asked by all participants in the process of cargo transportation: government, investors, cargo owners, transporters and owners of infrastructure.  And the main question is: what parameters should the investing project have in order to meet the demand for rail transportation?
This will allow RZD to get target funds for a program of development for the rail network. As Vladimir Yakunin, President of RZD, said the program doesn’t have enough funding at the moment, as there is lack of 400-450 billion rubles in the budget of RZD till 2015. And if lost revenue from the failure to introduce the investment component in the rail fare is added to this amount then the loss can be estimated to be greater.
In its turn, the state government wants to be sure that the amount of its investment in the projects will not be more than necessary, and the funds will be used as efficiently as possible. Customers are wishing to get assurances on the absence of delays in the movement of cars. And investors want to know when the project will be completely repaid.
In addition, the network contract will help to understand the extent to which  it is suitable for the state to subsidize the development of railway infrastructure and other sectors in order to compensate losses from the increased pressure because of the tariff policy of the Russian Railways (if this pressure, as is said in Ministry of Economic Development, will restrain the growth in output of domestic enterprises).
“In any case,” said Svetlava Zinovieva, Deputy Head of the Control of Transport and Communications of the FAS, “attention should be paid to the balance of interests of all parties that are focused on the growth of the rail market. This does not mean that there will be any dissatisfied parties. But the solution should be acceptable to all of them.”

Transfer to a Regulatory Contract
The model of the network contract that is proposed in the RF corresponds to the regulatory agreements that are used in European countries and concluded with infrastructure companies. Their common principles: transportation projects selected according to their multiplicative effect, then their costs are calculated and the share of state investment, which is enough to achieve planned parameters, is fixed. Everything that is added is considered as a sphere of private capital. The state entrusts the control over the execution of regulatory contract to independent auditors. According to Yuri Saakyan, General Director of Institute of Problem of Natural Monopolies, practice shows that the main risk that such models of funding have is connected with the inaccuracy of macroeconomic forecasting. And, for example, if it turns out that the implementation of commitments taken by partners is impossible. As a result additional decisions have to be made in this case.
There are regulatory contracts on the East and within the borders of individual countries. A special feature of such contracts is that the government covers risks of funding. It is important in case real cost turns out bigger than the cost that has been calculated while the owner of infrastructure is drawing funds. In this case infrastructure company can be accused of getting extra profit. According to the plan it should be confiscated. But nobody will do this if the profit is ploughed back into the program.

There are Examples
There is experience of making  regulatory agreements in the RF as well. For example, there are general schemes of development of rail roads in several big transport hubs. First of all, there are Moscow and Saint-Petersburg. However, they didn’t correspond in terms of funding and zoning of territories. 
At the moment RZD is trying to update these general schemes and to add new content to them, which, in fact, makes the content a part of the new network contract. But as Alexey Bakirey, Chairman of the Committee on Transport and Transit Politics of St. Petersburg, said the main complication here is that forecasts of freight volume at railway hubs depend on the capacity of roads that are going from other regions, and zoning is spreading across the territory of the Leningrad region.
When realising infrastructure projects, all parameters of hub development and funding sources should be  clearly delineated. Mr Bakirey added that it should be taken into the account that if cargo owners and stevedores are interested in cargo volumes increasing then the government of a major city is going to restrain the flow of dangerous cargoes to St. Petersburg and to encourage a transfer towards an ecologically friendly approach.   
This shows how the conditions of network contract can be different in different regions. Any cargo can be handled in the Far East, because there is a need to increase the transshipment volumes. And that influences on the development of Mezhdurechensk – Taishet railway route. This route is one of those five that have been chosen to be a test pilot for a network contract, as it requires substantial modernization. The reason is that there will be an increase in transportation via this route, especially of cargoes from the ports of the Far East.
RZD plans to use public-private partnerships for the pilot project of this route. And there are other possible combinations of public and private investment in rail infrastructure. However, co-financing of big infrastructure projects by state and business is a difficult question. Russian legislation does not provide possibilities for investment of private funds into  routes of common use and the legislation requires correction.
It means that there is a need to categorise the network of RZD. In other words, there is a need to identify those objects that are off-limits in terms of attracting private capital, and those, in which the state finds private participation impossible because of a number of reasons. As for the sectors with little traffic on it, then Mr Yakunin says there are different opinions. But if the state needs the rail line for social or military needs then it should invest into its development.

There are Special Features
The term «network contract» has been introduced by consultants of McKinsey & Company during the preparation of the Target model of rail freight market by 2015.
At the beginning of 2011, this document was approved by the state government. And together with it the term has been legalized. As Yuri Elizariev, General Director of Integrated Transport Systems LLC (the company that developed the concept of the project at the request of RZD JSC), said that the network contract is, in fact, an agreement on mutual obligations between the state and RZD. Together with this there are a number of special features in it. First of all, the network contract is intended to be comprehensive,  that is to gather all key projects. Secondly, it will provide not only technical but also commercial options for infrastructure development. Thirdly, it must contain zoning of the territories. It will have to be done with the participation of the Russian Federation regions and the Federal Agency for Railway Transport, whose powers in the field of land and property relations in 2011 have been expanded. Previously, the Federal Property Management Agency had a full range of powers for the management of federal territory funds for rail transport. Now, all questions relating to siting of lands are the responsibility of the Federal Agency for Railway Transport. That is why reservation of lands for railway facilities can  now be overseen in federal programs relating to infrastructure development, and in the network contract. 
Zoning of territories that are adjacent to the landfill of RZD will help to avoid speculation on the land, which RZD or the state will have to buy to develop the railway infrastructure, and thereby to reduce the cost of projects. The Federal Agency for Railway Transport is obliged to analyse programs on attraction of additional funds for investment through transactions with the assets of RZD. In particular, in 2011 the Federal Agency for Railway Transport prepared 12 conclusions on the property of RZD in terms of putting them in pledge and sale. There are also conclusions on the transferral of ownership, seven of which have already been approved by  orders of the Russian government. Fourthly, the network contract should govern the basic directions of innovations. Fifthly, the network contract should include measures for the protection of nature.
Their costs  often become a part of the investment programs. For example, it was necessary to release into the water more than two million fish fry to compensate for the possible damage to nature during the construction of the railway bridge towers over the river near the site of the 2014 Sochi Olympic Games. In another case, planting of 145,000 trees has been factored into the cost of the project to construct a road.

Let’s Follow WTO Rules
Increased attention to the network contract appeared at the end of 2011, when it became clear that Russia was going to join the World Trade Organization. Previously, RZD used subsidies to solve some of its strategic problems. However, according to international law, this mechanism can be used only in exceptional cases and it should not be a systemic source of  profit for any private company. As Andrey Timofeev, partner of The Boston Consulting Group, noticed it is not possible to put money that is given to develop the infrastructure into a common pot according to international standards. It is possible to do this only using target model and all costs should be controlled. Taking this into account, the Russian government has taken a decision on the need to use such  tools as  regulatory agreement. Experts believe that it is important for the network contract to appear no later than 2015. That is the date determined by government for admission to the network of RZD of carriers from Kazakhstan and Belarus (within the  Customs Union of Russia with these two countries). According to the words of Mrs Zinovieva if in 2011 the privatization of rolling stock turned into overloading of the Russian railway infrastructure in the domestic market, then the emergence of local carriers may put additional barriers even in a way of  international flows of Russian trade. These concerns are shared by cargo owners.  
By Andrey Lazarev
    [~DETAIL_TEXT] => 
The Decision Should Be Acceptable
Valery Reshetnikov, Senior Vice President of RZD, announced at a plenary discussion of the Transport Service Market: cooperation and partnership IX International Conference  that pilot projects in five railway sectors have been prepared in order to develop a mechanism for a network contract and to specify its parameters. These sectors are different because of their parameters and they represent examples of different types of rail roads - from freight intensive roads to roads with very little traffic on it. Pilot projects are supposed to provide funding of infrastructure within target orders. 
Together with this invested costs will be compared with resulting efficiency to see how the mechanisms of disbursement of funds work, to clarify the parameters of capability provision  of  cargo traffic on the route and to evaluate the effectiveness of investments. Different schemes of investment are planned to be used on different sections. It depends on transportation volumes and profitability of routes. State money, as well as private capital can be invested into traffic-intensive routes, a development that is interesting for commercial structures. Evaluating the effectiveness of the pilot projects will take two or three years. And it will take about two years to analyze summary indicators and to spread the achieved result over the whole network of RZD. Thereby, the formation of a network contract will take four years minimum. It means that the contract will appear only in 2015.
The network contract should answer many questions that are asked by all participants in the process of cargo transportation: government, investors, cargo owners, transporters and owners of infrastructure.  And the main question is: what parameters should the investing project have in order to meet the demand for rail transportation?
This will allow RZD to get target funds for a program of development for the rail network. As Vladimir Yakunin, President of RZD, said the program doesn’t have enough funding at the moment, as there is lack of 400-450 billion rubles in the budget of RZD till 2015. And if lost revenue from the failure to introduce the investment component in the rail fare is added to this amount then the loss can be estimated to be greater.
In its turn, the state government wants to be sure that the amount of its investment in the projects will not be more than necessary, and the funds will be used as efficiently as possible. Customers are wishing to get assurances on the absence of delays in the movement of cars. And investors want to know when the project will be completely repaid.
In addition, the network contract will help to understand the extent to which  it is suitable for the state to subsidize the development of railway infrastructure and other sectors in order to compensate losses from the increased pressure because of the tariff policy of the Russian Railways (if this pressure, as is said in Ministry of Economic Development, will restrain the growth in output of domestic enterprises).
“In any case,” said Svetlava Zinovieva, Deputy Head of the Control of Transport and Communications of the FAS, “attention should be paid to the balance of interests of all parties that are focused on the growth of the rail market. This does not mean that there will be any dissatisfied parties. But the solution should be acceptable to all of them.”

Transfer to a Regulatory Contract
The model of the network contract that is proposed in the RF corresponds to the regulatory agreements that are used in European countries and concluded with infrastructure companies. Their common principles: transportation projects selected according to their multiplicative effect, then their costs are calculated and the share of state investment, which is enough to achieve planned parameters, is fixed. Everything that is added is considered as a sphere of private capital. The state entrusts the control over the execution of regulatory contract to independent auditors. According to Yuri Saakyan, General Director of Institute of Problem of Natural Monopolies, practice shows that the main risk that such models of funding have is connected with the inaccuracy of macroeconomic forecasting. And, for example, if it turns out that the implementation of commitments taken by partners is impossible. As a result additional decisions have to be made in this case.
There are regulatory contracts on the East and within the borders of individual countries. A special feature of such contracts is that the government covers risks of funding. It is important in case real cost turns out bigger than the cost that has been calculated while the owner of infrastructure is drawing funds. In this case infrastructure company can be accused of getting extra profit. According to the plan it should be confiscated. But nobody will do this if the profit is ploughed back into the program.

There are Examples
There is experience of making  regulatory agreements in the RF as well. For example, there are general schemes of development of rail roads in several big transport hubs. First of all, there are Moscow and Saint-Petersburg. However, they didn’t correspond in terms of funding and zoning of territories. 
At the moment RZD is trying to update these general schemes and to add new content to them, which, in fact, makes the content a part of the new network contract. But as Alexey Bakirey, Chairman of the Committee on Transport and Transit Politics of St. Petersburg, said the main complication here is that forecasts of freight volume at railway hubs depend on the capacity of roads that are going from other regions, and zoning is spreading across the territory of the Leningrad region.
When realising infrastructure projects, all parameters of hub development and funding sources should be  clearly delineated. Mr Bakirey added that it should be taken into the account that if cargo owners and stevedores are interested in cargo volumes increasing then the government of a major city is going to restrain the flow of dangerous cargoes to St. Petersburg and to encourage a transfer towards an ecologically friendly approach.   
This shows how the conditions of network contract can be different in different regions. Any cargo can be handled in the Far East, because there is a need to increase the transshipment volumes. And that influences on the development of Mezhdurechensk – Taishet railway route. This route is one of those five that have been chosen to be a test pilot for a network contract, as it requires substantial modernization. The reason is that there will be an increase in transportation via this route, especially of cargoes from the ports of the Far East.
RZD plans to use public-private partnerships for the pilot project of this route. And there are other possible combinations of public and private investment in rail infrastructure. However, co-financing of big infrastructure projects by state and business is a difficult question. Russian legislation does not provide possibilities for investment of private funds into  routes of common use and the legislation requires correction.
It means that there is a need to categorise the network of RZD. In other words, there is a need to identify those objects that are off-limits in terms of attracting private capital, and those, in which the state finds private participation impossible because of a number of reasons. As for the sectors with little traffic on it, then Mr Yakunin says there are different opinions. But if the state needs the rail line for social or military needs then it should invest into its development.

There are Special Features
The term «network contract» has been introduced by consultants of McKinsey & Company during the preparation of the Target model of rail freight market by 2015.
At the beginning of 2011, this document was approved by the state government. And together with it the term has been legalized. As Yuri Elizariev, General Director of Integrated Transport Systems LLC (the company that developed the concept of the project at the request of RZD JSC), said that the network contract is, in fact, an agreement on mutual obligations between the state and RZD. Together with this there are a number of special features in it. First of all, the network contract is intended to be comprehensive,  that is to gather all key projects. Secondly, it will provide not only technical but also commercial options for infrastructure development. Thirdly, it must contain zoning of the territories. It will have to be done with the participation of the Russian Federation regions and the Federal Agency for Railway Transport, whose powers in the field of land and property relations in 2011 have been expanded. Previously, the Federal Property Management Agency had a full range of powers for the management of federal territory funds for rail transport. Now, all questions relating to siting of lands are the responsibility of the Federal Agency for Railway Transport. That is why reservation of lands for railway facilities can  now be overseen in federal programs relating to infrastructure development, and in the network contract. 
Zoning of territories that are adjacent to the landfill of RZD will help to avoid speculation on the land, which RZD or the state will have to buy to develop the railway infrastructure, and thereby to reduce the cost of projects. The Federal Agency for Railway Transport is obliged to analyse programs on attraction of additional funds for investment through transactions with the assets of RZD. In particular, in 2011 the Federal Agency for Railway Transport prepared 12 conclusions on the property of RZD in terms of putting them in pledge and sale. There are also conclusions on the transferral of ownership, seven of which have already been approved by  orders of the Russian government. Fourthly, the network contract should govern the basic directions of innovations. Fifthly, the network contract should include measures for the protection of nature.
Their costs  often become a part of the investment programs. For example, it was necessary to release into the water more than two million fish fry to compensate for the possible damage to nature during the construction of the railway bridge towers over the river near the site of the 2014 Sochi Olympic Games. In another case, planting of 145,000 trees has been factored into the cost of the project to construct a road.

Let’s Follow WTO Rules
Increased attention to the network contract appeared at the end of 2011, when it became clear that Russia was going to join the World Trade Organization. Previously, RZD used subsidies to solve some of its strategic problems. However, according to international law, this mechanism can be used only in exceptional cases and it should not be a systemic source of  profit for any private company. As Andrey Timofeev, partner of The Boston Consulting Group, noticed it is not possible to put money that is given to develop the infrastructure into a common pot according to international standards. It is possible to do this only using target model and all costs should be controlled. Taking this into account, the Russian government has taken a decision on the need to use such  tools as  regulatory agreement. Experts believe that it is important for the network contract to appear no later than 2015. That is the date determined by government for admission to the network of RZD of carriers from Kazakhstan and Belarus (within the  Customs Union of Russia with these two countries). According to the words of Mrs Zinovieva if in 2011 the privatization of rolling stock turned into overloading of the Russian railway infrastructure in the domestic market, then the emergence of local carriers may put additional barriers even in a way of  international flows of Russian trade. These concerns are shared by cargo owners.  
By Andrey Lazarev
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Construction of High-Speed Railway Lines in Russia May Cost RUR 3 Trillion
Construction of high-speed railway lines in Russia will cost RUR 3 trillion ($102.4 billion), “Vedomosti” newspaper wrote referring to Russian Transport Minister Igor Levitin’s letter to Vladimir Putin, the RF Prime Minister. 
The document runs that the following high-speed railway lines are to be constructed: Moscow – St Petersburg, Moscow –
Nizhny Novgorod – Kazan – Yekaterinburg. These projects are to be carried out before 2020. Also, the Transport Ministry suggests to construct a high-speed railway line in the Russian Southern region, in the Far East, to Ukraine and Belarus, and to European countries. These projects are to be carried out before 2030. 
According to the newspaper, the estimated cost of the Moscow – St Petersburg line is RUR 1.12 trillion ($38.2 billion). Thus, RUR 966 million ($32.9 million) is planned to be spent on one kilometer of the new line. The final project of the high-speed railway line has not been approved yet.
“Kommersant” newspaper noted that St Petersburg – Moscow high-speed line construction will be financed by a private investor, who will invest RUR 202-505 billion, and by the state. The private participant in the project has not been chosen yet. The Ministry of Transport is supposed to guarantee it the minimum profitability of investments.
Trains will run on the high-speed lines at speeds up to 400 kph. A specially launched subsidiary of RZD – Skorostnye Magistrali (High-Speed Mainlines) will develop the project and carry it out later. 

BAM Upgrading to Become a Priority
Upgrading the Baikal-Amur Mainline (BAM) will be one of the priorities of the state programme of the Far East and Zabaykalsky Region. The RF Ministry of Economic Development is developing the programme, the realization of which is supposed to start in 2013. 
The BAM-2 project envisages construction of the branch lines of the BAM, electrification of some sections, and rolling stock replacement. The need for transportation via the BAM will amount to approximately 100 million tons of cargo by 2025. The carrying capacity of the BAM is now about 12 million tons.　In the framework of the project, it is supposed to extend the railway line to Sovetskaya Gavan, Nikolaevsk-on-Amur, and Lazarev settlement in the Nikolaevsky district. Nowadays, its final point is Komsomolsk-on-Amur. It significantly restrains development of infrastructural enterprises and port areas. The railway extension will give a powerful impulse to the forest and mining sectors, hydrocarbon processing and gas chemical industries.
Two variants of the cargo flow increase are now being discussed – minimum and optimum ones. In the first case, the cargo flow may grow to 51 million tons per annum. Approximately RUR 447 million are needed for this variant. In the second case, the cargo flow may amount to 100 million tons. Then, the cost of the project will be RUR 1.087 trillion.
The project will be financed from the federal and regional budgets and by large investors. 

Russian Rail Infrastructure Will Meet Industry Needs
Russian Railways, industrial enterprises and the state-owned bank Vnesheconombank have signed an agreement on the development of rail infrastructure to meet the needs of industry.
The agreement was signed in Kemerovo on January 24, 2011. It provides for the complete pick-up of goods as required by shippers by increasing the through capacity of railway lines.
In particular, industrial enterprises will, in cooperation with Russian Railways, determine on a long-term basis the volumes, timing and direction of freight shipments, while for its part, the Company will assess the need to increase through rail capacity and the possible return on these projects, as well as the possibilities for financing then.
In the event that Russian Railways meets its required rate of return, the Company and the shipper will sign a contract which provides for the volume and timing of shipments, the long-term tariff level and mutual guarantees of the parties. In particular, if smaller freight volumes are to be shipped than agreed, the industrial enterprises shall compensate Russian Railways for the amount of goods not carried. The Company also undertakes to develop infrastructure to the extent necessary from its own or borrowed funds. 
At the same time, it is a priority to make the maximum use of available debt financing in order to hold down the growth in tariff rates.

New Railcar Building Plant Is Launched in Russia
The ceremony of the launch of a brand new railcar building plant took place in Tikhvin on January 30, 2012. The start-up of the Tikhvin Freight Car Building Plant will become a remarkable benchmark for the Russian industry. For the first time in more than half a century an innovative full-cycle enterprise has been constructed – car assembly and foundry production are integrated into a single technological complex ensuring a high rate of productivity and flexibility of production. 
The project of the Tikhvin Freight Car Building Plant is implemented by the ICT Group together with the state development institutes – Vnesheconombank and Eurasian Development Bank. The total amount of investment is RUR 36 billion into the industrial production and RUR 6 billion into the housing construction for the plant’s employees. On the amount of investment, production facilities and level of the technological infrastructure it is one of the most large-scale objects in the European machine building industry.
Tikhvin Freight Car Building Plant is a unique enterprise comprising discrete and continuous production into a single structure. Labour capacity at the main TVSZ car building production will comply with the level of the world transport companies such as Alstom, Siemens, Wabtec and exceeds several times the figures of the domestic enterprises-producers of the freight rolling-stock. Production capacity of the facility is 13,000 new-generation freight cars, 90,000 tons of railway castings and 65,000 wheel sets per annum.  

Railway Line Connected BAM And Coal Deposit in Yakutia
Mechel, one of the leading Russian mining and metals companies, finished laying tracks along the entire route of the railway link from Ulak station to the Elga coal deposit which is being developed by Mechel Mining’s subsidiary, Yakutugol Holding Company.
The last section of track of the railway link to the Elga deposit was laid in December 2011. This has opened traffic along the entire route from Baikal-Amur Mainline’s Ulak station to the Elga deposit. The railway track’s construction has thus far required investment of some RUR 40 billion ($1.25 billion). Construction involved laying 321 kilometers of tracks.
Mechel began constructing the railway link to the Elga coal deposit in February 2008. During this time, some 70 contracting parties from various Russian regions were involved in construction works. Metallurgshakhtspetsstroy ZAO, Mechel Mining OAO’s subsidiary, is the project’s general contractor. The railway was built in difficult climatic and geological conditions. A total of 76 bridges were built in the course of the railway’s construction. Mining at the Elga open pit began in August 2011, producing some 200,000 tons by the year’s end.

Turkmenistan to build railway for high speed trains 
According to “The General Programme of Railways Development in Turkmenistan in 2012-2016” approved by the authorities of Turkmenistan, a new railway for high speed trains is to be built. It will connect the town of Turkmenbashi and the town of Turkmenabat.
In the short term it is also planned to build the railway lines Atamyrat – Imamnazar, Gazachak – Shahsenem – Dashoguz as well as the railway bridge Turkmenabat – Farab across Amu Darya river and other large infrastructure facilities. Several dozen new railway stations, locomotive depots, engineering and technical constructions and socially important facilities will be built on the territory of trans-national railway North-South (Kazakhstan –Turkmenistan – Iran).

Eesti Raudtee Will Invest in Infrastructural Projects worth €74.3 million in 2012
The management of Estonian Railway company Eesti Raudtee in 2012 plans to invest in various infrastructural projects approximately €74.3 million, Urmas Glaze, the spokesman for the enterprise, said. 
Almost half of the sum will be co-financed from the EU Funds. Means will be invested into reconstruction of Tallinn – Paldiski and Kejla – Rijzipere sections, the transfer of passenger platforms to the European height, and also into renovation of overhead network and railcars purchase. In 2011, almost €74 million were invested into infrastructural projects. According to forecasts made by management of the company, about 25.9 million tons of cargoes will be carried via the infrastructure of Eesti Raudtee in 2012.
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Construction of High-Speed Railway Lines in Russia May Cost RUR 3 Trillion
Construction of high-speed railway lines in Russia will cost RUR 3 trillion ($102.4 billion), “Vedomosti” newspaper wrote referring to Russian Transport Minister Igor Levitin’s letter to Vladimir Putin, the RF Prime Minister. 
The document runs that the following high-speed railway lines are to be constructed: Moscow – St Petersburg, Moscow –
Nizhny Novgorod – Kazan – Yekaterinburg. These projects are to be carried out before 2020. Also, the Transport Ministry suggests to construct a high-speed railway line in the Russian Southern region, in the Far East, to Ukraine and Belarus, and to European countries. These projects are to be carried out before 2030. 
According to the newspaper, the estimated cost of the Moscow – St Petersburg line is RUR 1.12 trillion ($38.2 billion). Thus, RUR 966 million ($32.9 million) is planned to be spent on one kilometer of the new line. The final project of the high-speed railway line has not been approved yet.
“Kommersant” newspaper noted that St Petersburg – Moscow high-speed line construction will be financed by a private investor, who will invest RUR 202-505 billion, and by the state. The private participant in the project has not been chosen yet. The Ministry of Transport is supposed to guarantee it the minimum profitability of investments.
Trains will run on the high-speed lines at speeds up to 400 kph. A specially launched subsidiary of RZD – Skorostnye Magistrali (High-Speed Mainlines) will develop the project and carry it out later. 

BAM Upgrading to Become a Priority
Upgrading the Baikal-Amur Mainline (BAM) will be one of the priorities of the state programme of the Far East and Zabaykalsky Region. The RF Ministry of Economic Development is developing the programme, the realization of which is supposed to start in 2013. 
The BAM-2 project envisages construction of the branch lines of the BAM, electrification of some sections, and rolling stock replacement. The need for transportation via the BAM will amount to approximately 100 million tons of cargo by 2025. The carrying capacity of the BAM is now about 12 million tons.　In the framework of the project, it is supposed to extend the railway line to Sovetskaya Gavan, Nikolaevsk-on-Amur, and Lazarev settlement in the Nikolaevsky district. Nowadays, its final point is Komsomolsk-on-Amur. It significantly restrains development of infrastructural enterprises and port areas. The railway extension will give a powerful impulse to the forest and mining sectors, hydrocarbon processing and gas chemical industries.
Two variants of the cargo flow increase are now being discussed – minimum and optimum ones. In the first case, the cargo flow may grow to 51 million tons per annum. Approximately RUR 447 million are needed for this variant. In the second case, the cargo flow may amount to 100 million tons. Then, the cost of the project will be RUR 1.087 trillion.
The project will be financed from the federal and regional budgets and by large investors. 

Russian Rail Infrastructure Will Meet Industry Needs
Russian Railways, industrial enterprises and the state-owned bank Vnesheconombank have signed an agreement on the development of rail infrastructure to meet the needs of industry.
The agreement was signed in Kemerovo on January 24, 2011. It provides for the complete pick-up of goods as required by shippers by increasing the through capacity of railway lines.
In particular, industrial enterprises will, in cooperation with Russian Railways, determine on a long-term basis the volumes, timing and direction of freight shipments, while for its part, the Company will assess the need to increase through rail capacity and the possible return on these projects, as well as the possibilities for financing then.
In the event that Russian Railways meets its required rate of return, the Company and the shipper will sign a contract which provides for the volume and timing of shipments, the long-term tariff level and mutual guarantees of the parties. In particular, if smaller freight volumes are to be shipped than agreed, the industrial enterprises shall compensate Russian Railways for the amount of goods not carried. The Company also undertakes to develop infrastructure to the extent necessary from its own or borrowed funds. 
At the same time, it is a priority to make the maximum use of available debt financing in order to hold down the growth in tariff rates.

New Railcar Building Plant Is Launched in Russia
The ceremony of the launch of a brand new railcar building plant took place in Tikhvin on January 30, 2012. The start-up of the Tikhvin Freight Car Building Plant will become a remarkable benchmark for the Russian industry. For the first time in more than half a century an innovative full-cycle enterprise has been constructed – car assembly and foundry production are integrated into a single technological complex ensuring a high rate of productivity and flexibility of production. 
The project of the Tikhvin Freight Car Building Plant is implemented by the ICT Group together with the state development institutes – Vnesheconombank and Eurasian Development Bank. The total amount of investment is RUR 36 billion into the industrial production and RUR 6 billion into the housing construction for the plant’s employees. On the amount of investment, production facilities and level of the technological infrastructure it is one of the most large-scale objects in the European machine building industry.
Tikhvin Freight Car Building Plant is a unique enterprise comprising discrete and continuous production into a single structure. Labour capacity at the main TVSZ car building production will comply with the level of the world transport companies such as Alstom, Siemens, Wabtec and exceeds several times the figures of the domestic enterprises-producers of the freight rolling-stock. Production capacity of the facility is 13,000 new-generation freight cars, 90,000 tons of railway castings and 65,000 wheel sets per annum.  

Railway Line Connected BAM And Coal Deposit in Yakutia
Mechel, one of the leading Russian mining and metals companies, finished laying tracks along the entire route of the railway link from Ulak station to the Elga coal deposit which is being developed by Mechel Mining’s subsidiary, Yakutugol Holding Company.
The last section of track of the railway link to the Elga deposit was laid in December 2011. This has opened traffic along the entire route from Baikal-Amur Mainline’s Ulak station to the Elga deposit. The railway track’s construction has thus far required investment of some RUR 40 billion ($1.25 billion). Construction involved laying 321 kilometers of tracks.
Mechel began constructing the railway link to the Elga coal deposit in February 2008. During this time, some 70 contracting parties from various Russian regions were involved in construction works. Metallurgshakhtspetsstroy ZAO, Mechel Mining OAO’s subsidiary, is the project’s general contractor. The railway was built in difficult climatic and geological conditions. A total of 76 bridges were built in the course of the railway’s construction. Mining at the Elga open pit began in August 2011, producing some 200,000 tons by the year’s end.

Turkmenistan to build railway for high speed trains 
According to “The General Programme of Railways Development in Turkmenistan in 2012-2016” approved by the authorities of Turkmenistan, a new railway for high speed trains is to be built. It will connect the town of Turkmenbashi and the town of Turkmenabat.
In the short term it is also planned to build the railway lines Atamyrat – Imamnazar, Gazachak – Shahsenem – Dashoguz as well as the railway bridge Turkmenabat – Farab across Amu Darya river and other large infrastructure facilities. Several dozen new railway stations, locomotive depots, engineering and technical constructions and socially important facilities will be built on the territory of trans-national railway North-South (Kazakhstan –Turkmenistan – Iran).

Eesti Raudtee Will Invest in Infrastructural Projects worth €74.3 million in 2012
The management of Estonian Railway company Eesti Raudtee in 2012 plans to invest in various infrastructural projects approximately €74.3 million, Urmas Glaze, the spokesman for the enterprise, said. 
Almost half of the sum will be co-financed from the EU Funds. Means will be invested into reconstruction of Tallinn – Paldiski and Kejla – Rijzipere sections, the transfer of passenger platforms to the European height, and also into renovation of overhead network and railcars purchase. In 2011, almost €74 million were invested into infrastructural projects. According to forecasts made by management of the company, about 25.9 million tons of cargoes will be carried via the infrastructure of Eesti Raudtee in 2012.
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Construction of High-Speed Railway Lines in Russia May Cost RUR 3 Trillion
Construction of high-speed railway lines in Russia will cost RUR 3 trillion ($102.4 billion), “Vedomosti” newspaper wrote referring to Russian Transport Minister Igor Levitin’s letter to Vladimir Putin, the RF Prime Minister. 
The document runs that the following high-speed railway lines are to be constructed: Moscow – St Petersburg, Moscow –
Nizhny Novgorod – Kazan – Yekaterinburg. These projects are to be carried out before 2020. Also, the Transport Ministry suggests to construct a high-speed railway line in the Russian Southern region, in the Far East, to Ukraine and Belarus, and to European countries. These projects are to be carried out before 2030. 
According to the newspaper, the estimated cost of the Moscow – St Petersburg line is RUR 1.12 trillion ($38.2 billion). Thus, RUR 966 million ($32.9 million) is planned to be spent on one kilometer of the new line. The final project of the high-speed railway line has not been approved yet.
“Kommersant” newspaper noted that St Petersburg – Moscow high-speed line construction will be financed by a private investor, who will invest RUR 202-505 billion, and by the state. The private participant in the project has not been chosen yet. The Ministry of Transport is supposed to guarantee it the minimum profitability of investments.
Trains will run on the high-speed lines at speeds up to 400 kph. A specially launched subsidiary of RZD – Skorostnye Magistrali (High-Speed Mainlines) will develop the project and carry it out later. 

BAM Upgrading to Become a Priority
Upgrading the Baikal-Amur Mainline (BAM) will be one of the priorities of the state programme of the Far East and Zabaykalsky Region. The RF Ministry of Economic Development is developing the programme, the realization of which is supposed to start in 2013. 
The BAM-2 project envisages construction of the branch lines of the BAM, electrification of some sections, and rolling stock replacement. The need for transportation via the BAM will amount to approximately 100 million tons of cargo by 2025. The carrying capacity of the BAM is now about 12 million tons.　In the framework of the project, it is supposed to extend the railway line to Sovetskaya Gavan, Nikolaevsk-on-Amur, and Lazarev settlement in the Nikolaevsky district. Nowadays, its final point is Komsomolsk-on-Amur. It significantly restrains development of infrastructural enterprises and port areas. The railway extension will give a powerful impulse to the forest and mining sectors, hydrocarbon processing and gas chemical industries.
Two variants of the cargo flow increase are now being discussed – minimum and optimum ones. In the first case, the cargo flow may grow to 51 million tons per annum. Approximately RUR 447 million are needed for this variant. In the second case, the cargo flow may amount to 100 million tons. Then, the cost of the project will be RUR 1.087 trillion.
The project will be financed from the federal and regional budgets and by large investors. 

Russian Rail Infrastructure Will Meet Industry Needs
Russian Railways, industrial enterprises and the state-owned bank Vnesheconombank have signed an agreement on the development of rail infrastructure to meet the needs of industry.
The agreement was signed in Kemerovo on January 24, 2011. It provides for the complete pick-up of goods as required by shippers by increasing the through capacity of railway lines.
In particular, industrial enterprises will, in cooperation with Russian Railways, determine on a long-term basis the volumes, timing and direction of freight shipments, while for its part, the Company will assess the need to increase through rail capacity and the possible return on these projects, as well as the possibilities for financing then.
In the event that Russian Railways meets its required rate of return, the Company and the shipper will sign a contract which provides for the volume and timing of shipments, the long-term tariff level and mutual guarantees of the parties. In particular, if smaller freight volumes are to be shipped than agreed, the industrial enterprises shall compensate Russian Railways for the amount of goods not carried. The Company also undertakes to develop infrastructure to the extent necessary from its own or borrowed funds. 
At the same time, it is a priority to make the maximum use of available debt financing in order to hold down the growth in tariff rates.

New Railcar Building Plant Is Launched in Russia
The ceremony of the launch of a brand new railcar building plant took place in Tikhvin on January 30, 2012. The start-up of the Tikhvin Freight Car Building Plant will become a remarkable benchmark for the Russian industry. For the first time in more than half a century an innovative full-cycle enterprise has been constructed – car assembly and foundry production are integrated into a single technological complex ensuring a high rate of productivity and flexibility of production. 
The project of the Tikhvin Freight Car Building Plant is implemented by the ICT Group together with the state development institutes – Vnesheconombank and Eurasian Development Bank. The total amount of investment is RUR 36 billion into the industrial production and RUR 6 billion into the housing construction for the plant’s employees. On the amount of investment, production facilities and level of the technological infrastructure it is one of the most large-scale objects in the European machine building industry.
Tikhvin Freight Car Building Plant is a unique enterprise comprising discrete and continuous production into a single structure. Labour capacity at the main TVSZ car building production will comply with the level of the world transport companies such as Alstom, Siemens, Wabtec and exceeds several times the figures of the domestic enterprises-producers of the freight rolling-stock. Production capacity of the facility is 13,000 new-generation freight cars, 90,000 tons of railway castings and 65,000 wheel sets per annum.  

Railway Line Connected BAM And Coal Deposit in Yakutia
Mechel, one of the leading Russian mining and metals companies, finished laying tracks along the entire route of the railway link from Ulak station to the Elga coal deposit which is being developed by Mechel Mining’s subsidiary, Yakutugol Holding Company.
The last section of track of the railway link to the Elga deposit was laid in December 2011. This has opened traffic along the entire route from Baikal-Amur Mainline’s Ulak station to the Elga deposit. The railway track’s construction has thus far required investment of some RUR 40 billion ($1.25 billion). Construction involved laying 321 kilometers of tracks.
Mechel began constructing the railway link to the Elga coal deposit in February 2008. During this time, some 70 contracting parties from various Russian regions were involved in construction works. Metallurgshakhtspetsstroy ZAO, Mechel Mining OAO’s subsidiary, is the project’s general contractor. The railway was built in difficult climatic and geological conditions. A total of 76 bridges were built in the course of the railway’s construction. Mining at the Elga open pit began in August 2011, producing some 200,000 tons by the year’s end.

Turkmenistan to build railway for high speed trains 
According to “The General Programme of Railways Development in Turkmenistan in 2012-2016” approved by the authorities of Turkmenistan, a new railway for high speed trains is to be built. It will connect the town of Turkmenbashi and the town of Turkmenabat.
In the short term it is also planned to build the railway lines Atamyrat – Imamnazar, Gazachak – Shahsenem – Dashoguz as well as the railway bridge Turkmenabat – Farab across Amu Darya river and other large infrastructure facilities. Several dozen new railway stations, locomotive depots, engineering and technical constructions and socially important facilities will be built on the territory of trans-national railway North-South (Kazakhstan –Turkmenistan – Iran).

Eesti Raudtee Will Invest in Infrastructural Projects worth €74.3 million in 2012
The management of Estonian Railway company Eesti Raudtee in 2012 plans to invest in various infrastructural projects approximately €74.3 million, Urmas Glaze, the spokesman for the enterprise, said. 
Almost half of the sum will be co-financed from the EU Funds. Means will be invested into reconstruction of Tallinn – Paldiski and Kejla – Rijzipere sections, the transfer of passenger platforms to the European height, and also into renovation of overhead network and railcars purchase. In 2011, almost €74 million were invested into infrastructural projects. According to forecasts made by management of the company, about 25.9 million tons of cargoes will be carried via the infrastructure of Eesti Raudtee in 2012.
    [~DETAIL_TEXT] => 
Construction of High-Speed Railway Lines in Russia May Cost RUR 3 Trillion
Construction of high-speed railway lines in Russia will cost RUR 3 trillion ($102.4 billion), “Vedomosti” newspaper wrote referring to Russian Transport Minister Igor Levitin’s letter to Vladimir Putin, the RF Prime Minister. 
The document runs that the following high-speed railway lines are to be constructed: Moscow – St Petersburg, Moscow –
Nizhny Novgorod – Kazan – Yekaterinburg. These projects are to be carried out before 2020. Also, the Transport Ministry suggests to construct a high-speed railway line in the Russian Southern region, in the Far East, to Ukraine and Belarus, and to European countries. These projects are to be carried out before 2030. 
According to the newspaper, the estimated cost of the Moscow – St Petersburg line is RUR 1.12 trillion ($38.2 billion). Thus, RUR 966 million ($32.9 million) is planned to be spent on one kilometer of the new line. The final project of the high-speed railway line has not been approved yet.
“Kommersant” newspaper noted that St Petersburg – Moscow high-speed line construction will be financed by a private investor, who will invest RUR 202-505 billion, and by the state. The private participant in the project has not been chosen yet. The Ministry of Transport is supposed to guarantee it the minimum profitability of investments.
Trains will run on the high-speed lines at speeds up to 400 kph. A specially launched subsidiary of RZD – Skorostnye Magistrali (High-Speed Mainlines) will develop the project and carry it out later. 

BAM Upgrading to Become a Priority
Upgrading the Baikal-Amur Mainline (BAM) will be one of the priorities of the state programme of the Far East and Zabaykalsky Region. The RF Ministry of Economic Development is developing the programme, the realization of which is supposed to start in 2013. 
The BAM-2 project envisages construction of the branch lines of the BAM, electrification of some sections, and rolling stock replacement. The need for transportation via the BAM will amount to approximately 100 million tons of cargo by 2025. The carrying capacity of the BAM is now about 12 million tons.　In the framework of the project, it is supposed to extend the railway line to Sovetskaya Gavan, Nikolaevsk-on-Amur, and Lazarev settlement in the Nikolaevsky district. Nowadays, its final point is Komsomolsk-on-Amur. It significantly restrains development of infrastructural enterprises and port areas. The railway extension will give a powerful impulse to the forest and mining sectors, hydrocarbon processing and gas chemical industries.
Two variants of the cargo flow increase are now being discussed – minimum and optimum ones. In the first case, the cargo flow may grow to 51 million tons per annum. Approximately RUR 447 million are needed for this variant. In the second case, the cargo flow may amount to 100 million tons. Then, the cost of the project will be RUR 1.087 trillion.
The project will be financed from the federal and regional budgets and by large investors. 

Russian Rail Infrastructure Will Meet Industry Needs
Russian Railways, industrial enterprises and the state-owned bank Vnesheconombank have signed an agreement on the development of rail infrastructure to meet the needs of industry.
The agreement was signed in Kemerovo on January 24, 2011. It provides for the complete pick-up of goods as required by shippers by increasing the through capacity of railway lines.
In particular, industrial enterprises will, in cooperation with Russian Railways, determine on a long-term basis the volumes, timing and direction of freight shipments, while for its part, the Company will assess the need to increase through rail capacity and the possible return on these projects, as well as the possibilities for financing then.
In the event that Russian Railways meets its required rate of return, the Company and the shipper will sign a contract which provides for the volume and timing of shipments, the long-term tariff level and mutual guarantees of the parties. In particular, if smaller freight volumes are to be shipped than agreed, the industrial enterprises shall compensate Russian Railways for the amount of goods not carried. The Company also undertakes to develop infrastructure to the extent necessary from its own or borrowed funds. 
At the same time, it is a priority to make the maximum use of available debt financing in order to hold down the growth in tariff rates.

New Railcar Building Plant Is Launched in Russia
The ceremony of the launch of a brand new railcar building plant took place in Tikhvin on January 30, 2012. The start-up of the Tikhvin Freight Car Building Plant will become a remarkable benchmark for the Russian industry. For the first time in more than half a century an innovative full-cycle enterprise has been constructed – car assembly and foundry production are integrated into a single technological complex ensuring a high rate of productivity and flexibility of production. 
The project of the Tikhvin Freight Car Building Plant is implemented by the ICT Group together with the state development institutes – Vnesheconombank and Eurasian Development Bank. The total amount of investment is RUR 36 billion into the industrial production and RUR 6 billion into the housing construction for the plant’s employees. On the amount of investment, production facilities and level of the technological infrastructure it is one of the most large-scale objects in the European machine building industry.
Tikhvin Freight Car Building Plant is a unique enterprise comprising discrete and continuous production into a single structure. Labour capacity at the main TVSZ car building production will comply with the level of the world transport companies such as Alstom, Siemens, Wabtec and exceeds several times the figures of the domestic enterprises-producers of the freight rolling-stock. Production capacity of the facility is 13,000 new-generation freight cars, 90,000 tons of railway castings and 65,000 wheel sets per annum.  

Railway Line Connected BAM And Coal Deposit in Yakutia
Mechel, one of the leading Russian mining and metals companies, finished laying tracks along the entire route of the railway link from Ulak station to the Elga coal deposit which is being developed by Mechel Mining’s subsidiary, Yakutugol Holding Company.
The last section of track of the railway link to the Elga deposit was laid in December 2011. This has opened traffic along the entire route from Baikal-Amur Mainline’s Ulak station to the Elga deposit. The railway track’s construction has thus far required investment of some RUR 40 billion ($1.25 billion). Construction involved laying 321 kilometers of tracks.
Mechel began constructing the railway link to the Elga coal deposit in February 2008. During this time, some 70 contracting parties from various Russian regions were involved in construction works. Metallurgshakhtspetsstroy ZAO, Mechel Mining OAO’s subsidiary, is the project’s general contractor. The railway was built in difficult climatic and geological conditions. A total of 76 bridges were built in the course of the railway’s construction. Mining at the Elga open pit began in August 2011, producing some 200,000 tons by the year’s end.

Turkmenistan to build railway for high speed trains 
According to “The General Programme of Railways Development in Turkmenistan in 2012-2016” approved by the authorities of Turkmenistan, a new railway for high speed trains is to be built. It will connect the town of Turkmenbashi and the town of Turkmenabat.
In the short term it is also planned to build the railway lines Atamyrat – Imamnazar, Gazachak – Shahsenem – Dashoguz as well as the railway bridge Turkmenabat – Farab across Amu Darya river and other large infrastructure facilities. Several dozen new railway stations, locomotive depots, engineering and technical constructions and socially important facilities will be built on the territory of trans-national railway North-South (Kazakhstan –Turkmenistan – Iran).

Eesti Raudtee Will Invest in Infrastructural Projects worth €74.3 million in 2012
The management of Estonian Railway company Eesti Raudtee in 2012 plans to invest in various infrastructural projects approximately €74.3 million, Urmas Glaze, the spokesman for the enterprise, said. 
Almost half of the sum will be co-financed from the EU Funds. Means will be invested into reconstruction of Tallinn – Paldiski and Kejla – Rijzipere sections, the transfer of passenger platforms to the European height, and also into renovation of overhead network and railcars purchase. In 2011, almost €74 million were invested into infrastructural projects. According to forecasts made by management of the company, about 25.9 million tons of cargoes will be carried via the infrastructure of Eesti Raudtee in 2012.
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The Transition to a Market Economy
It will be recalled that in April 2011, the Board of Directors of RZD approved the sale of 75% minus two shares of authorized capital in its four subsidiaries at once: Zheldorremmash, Moscow Locomotive Works, Vagonremmash and Novosibirsk Switch Plant. In late January of 2012 the Ministry of Economic Development agreed with the Ministry of Transport  and RZD on the sale of 3,055 billion and 11,372 billion ordinary shares in Vagonremmash and Zheldorremmash respectively. Packages of documents are to be sold at a price not lower than the market price, determined on the basis of a report by an independent appraiser. The relevant government № 16-r and 17-r orders were signed on January 26, 2012.
Zheldorremmash JSC was formed as a subsidiary of RZD  in 2009 on the basis of the Directorate of  Locomotives as part of structural railway reform. Today the company is an integrated repair complex, distributed throughout the network RZD. It includes 11 branch offices: 10 locomotive plant and engineering center in Yaroslavl. Zheldorremmash is the market leader in the manufacture of spare parts and repair of locomotives in Russia and other post-Soviet countries.
In particular, the company is occupied with the repair of units and accessories, repair of locomotives at a level of AR (average repair) and MO (major overhaul), as well as the maintenance from AR to MO and modernization of locomotives for the extension service life. The company is also involved in the development of innovative technologies on repair and modernization, as well as on the creation of a new generation of rolling stock. The company is successfully implementing energy saving programs and technologies, a modern system of quality, and lean manufacturing techniques. Developed branch of the network of the company satisfies the needs of enterprises of RZD.
Vagonremmash started its economic activity in mid-2008. It was established on the basis of the property of three wagon repair plants – Voronezh, Tambov, and Novorossiysk. The company provides such services as major overhauls, major reconstructions and upgrades of passenger rolling stock, repair of special-purpose wagons, depot and repairs of freight cars, as well as repair of wheel sets. In addition, Vagonremmash manufactures braking equipment, spare parts, and the company offers the assembly of two-axle bogies for freight cars and a new formation of wheelsets. The geographical location of plants means it provides products and services mainly to the central and southern regions of Russia with the lowest transport costs.
“Sale of controlling stakes in these companies started the process of structural change in the field of repair of locomotives and passenger cars. These steps are a practical implementation of the plans to improve the efficiency of the repair complex of RZD, as well as implementation of the transition to market relations between repair companies and customers, including the determination of financial responsibility for the quality and timeliness of repairs,” says Konstantin Kostrikin, Head of the Department of Transport Engineering Research at the Institute of Natural Monopoly Problems. 

In Search of Unusual Investors
The sale of these two subsidiaries is carried out in accordance with the general trend, given by the progress of reform in rail transport. It is assumed that the new owners will invest in the modernization of repair facilities,  implementation of  advanced technologies for the repair of locomotives and passenger cars. According to the experts  we interviewed, these assets will certainly be in the sphere of interest of investors. “Despite the relatively small turnover, Zheldorremmash  is one of the major players in the locomotive servicing sector. As the company operates not only in Russia but also in CIS countries (and owns assets in Ukraine, Latvia and Uzbekistan), the purchaser will have access not only to the Russian market, but also to almost  the entire space of 1520 mm track,” says Dmitry Adamidov, co-executive of Analytical Department of Investcafe independent analytical agency. He adds: “Vagonremmash is a major player in the market of repair of cars in South Russia”.
If Zheldorremmash currently serves primarily RZD, then Vagonremmash is focused mainly on the independent operators and operates in a competitive market. “Selling  shares in the companies will greatly influence the industry only if they are acquired by one of the major rail operators and thereby change the profile of orders (for example, if it refocuses on servicing  its own  rolling stock). In all other cases, the sale will not cause serious disruption,” said Dmitry Adamidov. According to his estimates, based on the existing practice of selling shares of subsidiaries and affiliates of RZD, the evaluation will be about 1.8-2 times the value of net assets of these companies. Speaking about the results of 2010, 100% shares of  Zheldorremmash would be valued at at least  30-31 billion RUR. Thus, a package of 75% minus two shares may cost about 23 billion RUR. And Vagonremmash will be evaluated at 8.6 – 8.7 and 6.5 billion RUR, respectively.
“Another question – to what extent will potential buyers be ready to pay such a sum,”  says the analyst. In his view, mainly large rail operators can become investors in both cases, as they have sufficient funds to pay the price, something that suits RZD. Zheldorremmash can be interesting in terms of the expected liberalization of the locomotive fleet. “The idea, to say the least, is  controversial, but if it will be insisted on and RZD will be forced to go on with this, then the repair company will certainly be attractive. Without the liberalization of locomotives, the purchase of shares of Zheldorremmash can be done only at an attractive price (at a level that is approximately equal to net assets), because it isn’t possible to earn much money only with the help of orders of RZD,” believes Mr Adamidov. “By the way, in 2010 the net profit margin was less than 2%”.
Vagonremmash also does not show high profitability (in 2010 the net profit was 1.2%), but the purchase of shares in the company can be interesting in terms of  risk management and partly of competition. “Operators that purchase such an asset get their own repair facilities and can put pressure on competitors to some extent,  if they are repairing their rolling stock at their facilities,”  says the expert. The option of buying of these assets in the usual manner, that is by  investors in order to get income, is regarded as unlikely.
In its turn, Mr Kostrikin emphasizes that the value of shares of two subsidiaries depends on the results of the evaluation by independent evaluators. With this approach both the market value of assets owned by the companies and their market prospects will be taken into account.
“Due to the fact that RZD will remain the main customer of Zheldorremmash for a long time and the Federal Passenger Company will remain the main customer of Vagonremmash it can be said that the market of the services of these plants is quite stable and this fact should be also taken into account when determining the starting price of the shares, “ says Mr Kostrikin. In his view, the assets, firstly, might be interesting to manufacturers of locomotives and passenger cars.
We should also say that it is a high-risk time to sell the shares, according to financial analysts. It is really hard to find a strategic investor in times of financial instability.  Mr Kostrikin proves that. “Due to the general economic situation is not very favorable time today to invest because there is a lack of cheap long liquidity on the market. On the other hand, at the moment the situation with the railway transport is quite favourable: the transportation of goods and passengers is increasing and so there is a need to repair rolling stock. So if investors manage to solve the problem of attracting the liquidity, these assets could bring significant revenues to the new owners and the growth of capitalization of their businesses”. 
“At the moment the situation is quite uncertain, the external background is worse than it was a year ago, although it is not as bad as it could be, for example, in the case of default  in Greece or in the case of a rapid fall in oil prices,” adds Mr Adamidov. “On the one hand, RZD should not hesitate with the sale of its subsidiaries. On the other hand, due to the specifics of potential investors there is no deadline for the sale.  If the assets can be sold during 2012, it would be a good result”. 
by Elena Ushkova
    [~DETAIL_TEXT] => 
The Transition to a Market Economy
It will be recalled that in April 2011, the Board of Directors of RZD approved the sale of 75% minus two shares of authorized capital in its four subsidiaries at once: Zheldorremmash, Moscow Locomotive Works, Vagonremmash and Novosibirsk Switch Plant. In late January of 2012 the Ministry of Economic Development agreed with the Ministry of Transport  and RZD on the sale of 3,055 billion and 11,372 billion ordinary shares in Vagonremmash and Zheldorremmash respectively. Packages of documents are to be sold at a price not lower than the market price, determined on the basis of a report by an independent appraiser. The relevant government № 16-r and 17-r orders were signed on January 26, 2012.
Zheldorremmash JSC was formed as a subsidiary of RZD  in 2009 on the basis of the Directorate of  Locomotives as part of structural railway reform. Today the company is an integrated repair complex, distributed throughout the network RZD. It includes 11 branch offices: 10 locomotive plant and engineering center in Yaroslavl. Zheldorremmash is the market leader in the manufacture of spare parts and repair of locomotives in Russia and other post-Soviet countries.
In particular, the company is occupied with the repair of units and accessories, repair of locomotives at a level of AR (average repair) and MO (major overhaul), as well as the maintenance from AR to MO and modernization of locomotives for the extension service life. The company is also involved in the development of innovative technologies on repair and modernization, as well as on the creation of a new generation of rolling stock. The company is successfully implementing energy saving programs and technologies, a modern system of quality, and lean manufacturing techniques. Developed branch of the network of the company satisfies the needs of enterprises of RZD.
Vagonremmash started its economic activity in mid-2008. It was established on the basis of the property of three wagon repair plants – Voronezh, Tambov, and Novorossiysk. The company provides such services as major overhauls, major reconstructions and upgrades of passenger rolling stock, repair of special-purpose wagons, depot and repairs of freight cars, as well as repair of wheel sets. In addition, Vagonremmash manufactures braking equipment, spare parts, and the company offers the assembly of two-axle bogies for freight cars and a new formation of wheelsets. The geographical location of plants means it provides products and services mainly to the central and southern regions of Russia with the lowest transport costs.
“Sale of controlling stakes in these companies started the process of structural change in the field of repair of locomotives and passenger cars. These steps are a practical implementation of the plans to improve the efficiency of the repair complex of RZD, as well as implementation of the transition to market relations between repair companies and customers, including the determination of financial responsibility for the quality and timeliness of repairs,” says Konstantin Kostrikin, Head of the Department of Transport Engineering Research at the Institute of Natural Monopoly Problems. 

In Search of Unusual Investors
The sale of these two subsidiaries is carried out in accordance with the general trend, given by the progress of reform in rail transport. It is assumed that the new owners will invest in the modernization of repair facilities,  implementation of  advanced technologies for the repair of locomotives and passenger cars. According to the experts  we interviewed, these assets will certainly be in the sphere of interest of investors. “Despite the relatively small turnover, Zheldorremmash  is one of the major players in the locomotive servicing sector. As the company operates not only in Russia but also in CIS countries (and owns assets in Ukraine, Latvia and Uzbekistan), the purchaser will have access not only to the Russian market, but also to almost  the entire space of 1520 mm track,” says Dmitry Adamidov, co-executive of Analytical Department of Investcafe independent analytical agency. He adds: “Vagonremmash is a major player in the market of repair of cars in South Russia”.
If Zheldorremmash currently serves primarily RZD, then Vagonremmash is focused mainly on the independent operators and operates in a competitive market. “Selling  shares in the companies will greatly influence the industry only if they are acquired by one of the major rail operators and thereby change the profile of orders (for example, if it refocuses on servicing  its own  rolling stock). In all other cases, the sale will not cause serious disruption,” said Dmitry Adamidov. According to his estimates, based on the existing practice of selling shares of subsidiaries and affiliates of RZD, the evaluation will be about 1.8-2 times the value of net assets of these companies. Speaking about the results of 2010, 100% shares of  Zheldorremmash would be valued at at least  30-31 billion RUR. Thus, a package of 75% minus two shares may cost about 23 billion RUR. And Vagonremmash will be evaluated at 8.6 – 8.7 and 6.5 billion RUR, respectively.
“Another question – to what extent will potential buyers be ready to pay such a sum,”  says the analyst. In his view, mainly large rail operators can become investors in both cases, as they have sufficient funds to pay the price, something that suits RZD. Zheldorremmash can be interesting in terms of the expected liberalization of the locomotive fleet. “The idea, to say the least, is  controversial, but if it will be insisted on and RZD will be forced to go on with this, then the repair company will certainly be attractive. Without the liberalization of locomotives, the purchase of shares of Zheldorremmash can be done only at an attractive price (at a level that is approximately equal to net assets), because it isn’t possible to earn much money only with the help of orders of RZD,” believes Mr Adamidov. “By the way, in 2010 the net profit margin was less than 2%”.
Vagonremmash also does not show high profitability (in 2010 the net profit was 1.2%), but the purchase of shares in the company can be interesting in terms of  risk management and partly of competition. “Operators that purchase such an asset get their own repair facilities and can put pressure on competitors to some extent,  if they are repairing their rolling stock at their facilities,”  says the expert. The option of buying of these assets in the usual manner, that is by  investors in order to get income, is regarded as unlikely.
In its turn, Mr Kostrikin emphasizes that the value of shares of two subsidiaries depends on the results of the evaluation by independent evaluators. With this approach both the market value of assets owned by the companies and their market prospects will be taken into account.
“Due to the fact that RZD will remain the main customer of Zheldorremmash for a long time and the Federal Passenger Company will remain the main customer of Vagonremmash it can be said that the market of the services of these plants is quite stable and this fact should be also taken into account when determining the starting price of the shares, “ says Mr Kostrikin. In his view, the assets, firstly, might be interesting to manufacturers of locomotives and passenger cars.
We should also say that it is a high-risk time to sell the shares, according to financial analysts. It is really hard to find a strategic investor in times of financial instability.  Mr Kostrikin proves that. “Due to the general economic situation is not very favorable time today to invest because there is a lack of cheap long liquidity on the market. On the other hand, at the moment the situation with the railway transport is quite favourable: the transportation of goods and passengers is increasing and so there is a need to repair rolling stock. So if investors manage to solve the problem of attracting the liquidity, these assets could bring significant revenues to the new owners and the growth of capitalization of their businesses”. 
“At the moment the situation is quite uncertain, the external background is worse than it was a year ago, although it is not as bad as it could be, for example, in the case of default  in Greece or in the case of a rapid fall in oil prices,” adds Mr Adamidov. “On the one hand, RZD should not hesitate with the sale of its subsidiaries. On the other hand, due to the specifics of potential investors there is no deadline for the sale.  If the assets can be sold during 2012, it would be a good result”. 
by Elena Ushkova
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The Transition to a Market Economy
It will be recalled that in April 2011, the Board of Directors of RZD approved the sale of 75% minus two shares of authorized capital in its four subsidiaries at once: Zheldorremmash, Moscow Locomotive Works, Vagonremmash and Novosibirsk Switch Plant. In late January of 2012 the Ministry of Economic Development agreed with the Ministry of Transport  and RZD on the sale of 3,055 billion and 11,372 billion ordinary shares in Vagonremmash and Zheldorremmash respectively. Packages of documents are to be sold at a price not lower than the market price, determined on the basis of a report by an independent appraiser. The relevant government № 16-r and 17-r orders were signed on January 26, 2012.
Zheldorremmash JSC was formed as a subsidiary of RZD  in 2009 on the basis of the Directorate of  Locomotives as part of structural railway reform. Today the company is an integrated repair complex, distributed throughout the network RZD. It includes 11 branch offices: 10 locomotive plant and engineering center in Yaroslavl. Zheldorremmash is the market leader in the manufacture of spare parts and repair of locomotives in Russia and other post-Soviet countries.
In particular, the company is occupied with the repair of units and accessories, repair of locomotives at a level of AR (average repair) and MO (major overhaul), as well as the maintenance from AR to MO and modernization of locomotives for the extension service life. The company is also involved in the development of innovative technologies on repair and modernization, as well as on the creation of a new generation of rolling stock. The company is successfully implementing energy saving programs and technologies, a modern system of quality, and lean manufacturing techniques. Developed branch of the network of the company satisfies the needs of enterprises of RZD.
Vagonremmash started its economic activity in mid-2008. It was established on the basis of the property of three wagon repair plants – Voronezh, Tambov, and Novorossiysk. The company provides such services as major overhauls, major reconstructions and upgrades of passenger rolling stock, repair of special-purpose wagons, depot and repairs of freight cars, as well as repair of wheel sets. In addition, Vagonremmash manufactures braking equipment, spare parts, and the company offers the assembly of two-axle bogies for freight cars and a new formation of wheelsets. The geographical location of plants means it provides products and services mainly to the central and southern regions of Russia with the lowest transport costs.
“Sale of controlling stakes in these companies started the process of structural change in the field of repair of locomotives and passenger cars. These steps are a practical implementation of the plans to improve the efficiency of the repair complex of RZD, as well as implementation of the transition to market relations between repair companies and customers, including the determination of financial responsibility for the quality and timeliness of repairs,” says Konstantin Kostrikin, Head of the Department of Transport Engineering Research at the Institute of Natural Monopoly Problems. 

In Search of Unusual Investors
The sale of these two subsidiaries is carried out in accordance with the general trend, given by the progress of reform in rail transport. It is assumed that the new owners will invest in the modernization of repair facilities,  implementation of  advanced technologies for the repair of locomotives and passenger cars. According to the experts  we interviewed, these assets will certainly be in the sphere of interest of investors. “Despite the relatively small turnover, Zheldorremmash  is one of the major players in the locomotive servicing sector. As the company operates not only in Russia but also in CIS countries (and owns assets in Ukraine, Latvia and Uzbekistan), the purchaser will have access not only to the Russian market, but also to almost  the entire space of 1520 mm track,” says Dmitry Adamidov, co-executive of Analytical Department of Investcafe independent analytical agency. He adds: “Vagonremmash is a major player in the market of repair of cars in South Russia”.
If Zheldorremmash currently serves primarily RZD, then Vagonremmash is focused mainly on the independent operators and operates in a competitive market. “Selling  shares in the companies will greatly influence the industry only if they are acquired by one of the major rail operators and thereby change the profile of orders (for example, if it refocuses on servicing  its own  rolling stock). In all other cases, the sale will not cause serious disruption,” said Dmitry Adamidov. According to his estimates, based on the existing practice of selling shares of subsidiaries and affiliates of RZD, the evaluation will be about 1.8-2 times the value of net assets of these companies. Speaking about the results of 2010, 100% shares of  Zheldorremmash would be valued at at least  30-31 billion RUR. Thus, a package of 75% minus two shares may cost about 23 billion RUR. And Vagonremmash will be evaluated at 8.6 – 8.7 and 6.5 billion RUR, respectively.
“Another question – to what extent will potential buyers be ready to pay such a sum,”  says the analyst. In his view, mainly large rail operators can become investors in both cases, as they have sufficient funds to pay the price, something that suits RZD. Zheldorremmash can be interesting in terms of the expected liberalization of the locomotive fleet. “The idea, to say the least, is  controversial, but if it will be insisted on and RZD will be forced to go on with this, then the repair company will certainly be attractive. Without the liberalization of locomotives, the purchase of shares of Zheldorremmash can be done only at an attractive price (at a level that is approximately equal to net assets), because it isn’t possible to earn much money only with the help of orders of RZD,” believes Mr Adamidov. “By the way, in 2010 the net profit margin was less than 2%”.
Vagonremmash also does not show high profitability (in 2010 the net profit was 1.2%), but the purchase of shares in the company can be interesting in terms of  risk management and partly of competition. “Operators that purchase such an asset get their own repair facilities and can put pressure on competitors to some extent,  if they are repairing their rolling stock at their facilities,”  says the expert. The option of buying of these assets in the usual manner, that is by  investors in order to get income, is regarded as unlikely.
In its turn, Mr Kostrikin emphasizes that the value of shares of two subsidiaries depends on the results of the evaluation by independent evaluators. With this approach both the market value of assets owned by the companies and their market prospects will be taken into account.
“Due to the fact that RZD will remain the main customer of Zheldorremmash for a long time and the Federal Passenger Company will remain the main customer of Vagonremmash it can be said that the market of the services of these plants is quite stable and this fact should be also taken into account when determining the starting price of the shares, “ says Mr Kostrikin. In his view, the assets, firstly, might be interesting to manufacturers of locomotives and passenger cars.
We should also say that it is a high-risk time to sell the shares, according to financial analysts. It is really hard to find a strategic investor in times of financial instability.  Mr Kostrikin proves that. “Due to the general economic situation is not very favorable time today to invest because there is a lack of cheap long liquidity on the market. On the other hand, at the moment the situation with the railway transport is quite favourable: the transportation of goods and passengers is increasing and so there is a need to repair rolling stock. So if investors manage to solve the problem of attracting the liquidity, these assets could bring significant revenues to the new owners and the growth of capitalization of their businesses”. 
“At the moment the situation is quite uncertain, the external background is worse than it was a year ago, although it is not as bad as it could be, for example, in the case of default  in Greece or in the case of a rapid fall in oil prices,” adds Mr Adamidov. “On the one hand, RZD should not hesitate with the sale of its subsidiaries. On the other hand, due to the specifics of potential investors there is no deadline for the sale.  If the assets can be sold during 2012, it would be a good result”. 
by Elena Ushkova
    [~DETAIL_TEXT] => 
The Transition to a Market Economy
It will be recalled that in April 2011, the Board of Directors of RZD approved the sale of 75% minus two shares of authorized capital in its four subsidiaries at once: Zheldorremmash, Moscow Locomotive Works, Vagonremmash and Novosibirsk Switch Plant. In late January of 2012 the Ministry of Economic Development agreed with the Ministry of Transport  and RZD on the sale of 3,055 billion and 11,372 billion ordinary shares in Vagonremmash and Zheldorremmash respectively. Packages of documents are to be sold at a price not lower than the market price, determined on the basis of a report by an independent appraiser. The relevant government № 16-r and 17-r orders were signed on January 26, 2012.
Zheldorremmash JSC was formed as a subsidiary of RZD  in 2009 on the basis of the Directorate of  Locomotives as part of structural railway reform. Today the company is an integrated repair complex, distributed throughout the network RZD. It includes 11 branch offices: 10 locomotive plant and engineering center in Yaroslavl. Zheldorremmash is the market leader in the manufacture of spare parts and repair of locomotives in Russia and other post-Soviet countries.
In particular, the company is occupied with the repair of units and accessories, repair of locomotives at a level of AR (average repair) and MO (major overhaul), as well as the maintenance from AR to MO and modernization of locomotives for the extension service life. The company is also involved in the development of innovative technologies on repair and modernization, as well as on the creation of a new generation of rolling stock. The company is successfully implementing energy saving programs and technologies, a modern system of quality, and lean manufacturing techniques. Developed branch of the network of the company satisfies the needs of enterprises of RZD.
Vagonremmash started its economic activity in mid-2008. It was established on the basis of the property of three wagon repair plants – Voronezh, Tambov, and Novorossiysk. The company provides such services as major overhauls, major reconstructions and upgrades of passenger rolling stock, repair of special-purpose wagons, depot and repairs of freight cars, as well as repair of wheel sets. In addition, Vagonremmash manufactures braking equipment, spare parts, and the company offers the assembly of two-axle bogies for freight cars and a new formation of wheelsets. The geographical location of plants means it provides products and services mainly to the central and southern regions of Russia with the lowest transport costs.
“Sale of controlling stakes in these companies started the process of structural change in the field of repair of locomotives and passenger cars. These steps are a practical implementation of the plans to improve the efficiency of the repair complex of RZD, as well as implementation of the transition to market relations between repair companies and customers, including the determination of financial responsibility for the quality and timeliness of repairs,” says Konstantin Kostrikin, Head of the Department of Transport Engineering Research at the Institute of Natural Monopoly Problems. 

In Search of Unusual Investors
The sale of these two subsidiaries is carried out in accordance with the general trend, given by the progress of reform in rail transport. It is assumed that the new owners will invest in the modernization of repair facilities,  implementation of  advanced technologies for the repair of locomotives and passenger cars. According to the experts  we interviewed, these assets will certainly be in the sphere of interest of investors. “Despite the relatively small turnover, Zheldorremmash  is one of the major players in the locomotive servicing sector. As the company operates not only in Russia but also in CIS countries (and owns assets in Ukraine, Latvia and Uzbekistan), the purchaser will have access not only to the Russian market, but also to almost  the entire space of 1520 mm track,” says Dmitry Adamidov, co-executive of Analytical Department of Investcafe independent analytical agency. He adds: “Vagonremmash is a major player in the market of repair of cars in South Russia”.
If Zheldorremmash currently serves primarily RZD, then Vagonremmash is focused mainly on the independent operators and operates in a competitive market. “Selling  shares in the companies will greatly influence the industry only if they are acquired by one of the major rail operators and thereby change the profile of orders (for example, if it refocuses on servicing  its own  rolling stock). In all other cases, the sale will not cause serious disruption,” said Dmitry Adamidov. According to his estimates, based on the existing practice of selling shares of subsidiaries and affiliates of RZD, the evaluation will be about 1.8-2 times the value of net assets of these companies. Speaking about the results of 2010, 100% shares of  Zheldorremmash would be valued at at least  30-31 billion RUR. Thus, a package of 75% minus two shares may cost about 23 billion RUR. And Vagonremmash will be evaluated at 8.6 – 8.7 and 6.5 billion RUR, respectively.
“Another question – to what extent will potential buyers be ready to pay such a sum,”  says the analyst. In his view, mainly large rail operators can become investors in both cases, as they have sufficient funds to pay the price, something that suits RZD. Zheldorremmash can be interesting in terms of the expected liberalization of the locomotive fleet. “The idea, to say the least, is  controversial, but if it will be insisted on and RZD will be forced to go on with this, then the repair company will certainly be attractive. Without the liberalization of locomotives, the purchase of shares of Zheldorremmash can be done only at an attractive price (at a level that is approximately equal to net assets), because it isn’t possible to earn much money only with the help of orders of RZD,” believes Mr Adamidov. “By the way, in 2010 the net profit margin was less than 2%”.
Vagonremmash also does not show high profitability (in 2010 the net profit was 1.2%), but the purchase of shares in the company can be interesting in terms of  risk management and partly of competition. “Operators that purchase such an asset get their own repair facilities and can put pressure on competitors to some extent,  if they are repairing their rolling stock at their facilities,”  says the expert. The option of buying of these assets in the usual manner, that is by  investors in order to get income, is regarded as unlikely.
In its turn, Mr Kostrikin emphasizes that the value of shares of two subsidiaries depends on the results of the evaluation by independent evaluators. With this approach both the market value of assets owned by the companies and their market prospects will be taken into account.
“Due to the fact that RZD will remain the main customer of Zheldorremmash for a long time and the Federal Passenger Company will remain the main customer of Vagonremmash it can be said that the market of the services of these plants is quite stable and this fact should be also taken into account when determining the starting price of the shares, “ says Mr Kostrikin. In his view, the assets, firstly, might be interesting to manufacturers of locomotives and passenger cars.
We should also say that it is a high-risk time to sell the shares, according to financial analysts. It is really hard to find a strategic investor in times of financial instability.  Mr Kostrikin proves that. “Due to the general economic situation is not very favorable time today to invest because there is a lack of cheap long liquidity on the market. On the other hand, at the moment the situation with the railway transport is quite favourable: the transportation of goods and passengers is increasing and so there is a need to repair rolling stock. So if investors manage to solve the problem of attracting the liquidity, these assets could bring significant revenues to the new owners and the growth of capitalization of their businesses”. 
“At the moment the situation is quite uncertain, the external background is worse than it was a year ago, although it is not as bad as it could be, for example, in the case of default  in Greece or in the case of a rapid fall in oil prices,” adds Mr Adamidov. “On the one hand, RZD should not hesitate with the sale of its subsidiaries. On the other hand, due to the specifics of potential investors there is no deadline for the sale.  If the assets can be sold during 2012, it would be a good result”. 
by Elena Ushkova
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The Vertical Chain of Command 
During the first three phases of the railroad reform the RF Traffic Ministry’s state-owned complex structure was reorganized into a diversified holding with an accounting and tax management system, providing verifiable information about its businesses as well as profit and loss statements.
The framework of the reform, adopted in 2007, was meant to single out several specialized business management units within RZD. The Central Infrastructure Department, the Central Traffic Control Department, the Traction Department, the Traction Rolling Stock Repair Department and the Railway Centre of Transportation Services are vertically integrated structures, separated from RZD’s economic complex. Each of them has its own economic targets, property and funds. As RZD’s  First Vice President Vadim Morozov puts it, they should order resources from each other proceeding from demand. All the Departments and Centers will be integrated into a single vertical chain of command by the end of 2012. 
The reform will create a new railway transportation system, which is cast in the different mould to American and European models and can provide regular and effective transportation for various branches of industry and Russian people, RZD’s Senior Vice President for corporate governance and strategic development Valery Reshetnikov says.  

Formation of the Competitive Market
In 2011, the Russian railroad transportation market underwent changes: there appeared private   passenger carriers, as well as competition in the field of rolling stock repair and maintenance. There are conditions for recruitment of private investors into competitive market segments. Railroad operators invested more than RUR 400 billion in freight stock acquisition. As a result, almost all the cargo turnover is provided by private cars. 
Today almost all of the 1.6 million cars used on the Russian railway network have a private status. They are distributed among more than 1,800 owners of rolling stock. 
Expectations for car fleet consolidation in the hands of three or four big operators working on a network-wide scale, which should form the core of operator market, have not been satisfied yet. That is why at the end of 2011 RZD had to consolidate a big pool of multipurpose high-sided wagons under its authority. According to Mr Reshetnikov, there is no reason to think that such a decision would revive the RZD’s monopoly on the freight transportation market. As a matter of fact, it is enough to consolidate control over the rolling stock which accounts for less than fourth quarter of the whole Russian car fleet to satisfy the needs of Russia’s economy. 
As Yermolai Solzhenitsyn, Managing Partner of McKinsey & Company’s office in Moscow, puts it, the proposed decisions on partial consolidation of the carrier’s multipurpose cars is not a step backwards or market competition violation. It is nothing like an overhaul of the Target Market Model for 2011-2015, which outlines the basic principles of railroad industry reform. It is a means to stabilize the market, meant to organize railway transport’s work in the new conditions. 

Market Model Remains the Same 
During the Fourth Phase of the reform RZD remains committed to rigorously observe the provisions of the Target market model. 
In the near term this model envisages the start of experimental pilot projects, meant to support competition between carriers “on the route” and “for the route” in specially designated districts.   The normative basis for this is being formed now. In practice it means the advent of local carriers, whose turnover can reach 5% to 10% by 2015. After 2015 the expediency of expanding the testing area for local carriers and their transformation into network-wide operators will be discerned.  
The main task is to work out a balanced financial economic model of railroad infrastructure development and to lay the ground for it. It should be based on the “network” agreement between the state and the infrastructure’s owner. This form of strategic cooperation between the State and the infrastructure’s owner as an additional tool of rate policy has been tested in many European countries, including Germany, where it has proved to be very efficient. This mechanism enables to maintain the infrastructure’s quality at the level defined by the State, ensuring railway transportation economic affordability and competitive equilibrium of different transportation vehicles. 
RZD is now forming a Corporate Governance Centre and its regional subsidiaries to further improve the Holding’s governance system, cut costs, to enhance services quality and raise key operating performance ratios. They are to be set by the end of 2012. Their managers should coordinate their work along the following business lines: “Passenger Transportation”, “Cargo Transportation” and “Infrastructure”. But the tasks of the governance system go beyond this. 
In the course of the reform some RZD departments were spun off. There appeared 85 subsidiaries and related companies. This has ensured competition in the design and survey works, construction, industrial production, logistics, social work and other spheres. Today these subsidiaries generate more than 30% of the Holding’s revenues. In 2011 the number of such companies increased. 
On the 30th of July RZD’s subsidiary The Central Department of Cargo Cars Repair ceased operations. Three car repair companies started to work from the 1st of August, 2011. Each of them span off four subsidiaries in different regions of Russia: VRK-1 (40 enterprises), VRK-2 (38 enterprises) and VRK-3 (37 enterprises), dedicated to car repair services. 
In 2013–2015 the Central Department of distriport management will be reorganized the same way and move from being an RZD’s subsidiary to enter the Holding’s affiliated structure. 
Later on RZD will sell blocks of shares in the new companies. Some of the sales have already taken place. For example, in October 2011 75% of JSC PGK’s shares were sold for RUR 125.5 billion (PGK was the largest RZD’s subsidiary). Assets of 54 subsidiaries are to be sold by 2013. The money will be invested in railroad infrastructure development. According to Mr Reshetnikov, recruitment of private strategic investors will afford to improve the overall performance of new companies, to attract money for renovation and re-equipment of production capacities and, correspondingly, to improve the quality of products. 
Nevertheless, RZD subsidiaries will become less dependent.  That is why the Corporate Centre singles out one more trend in management perfection: the services system cohesiveness is one of the main tasks of Russian railway. To fulfill it, the holding is going to bring its subsidiaries’ management systems in compliance with generally recognized international standards and to build it on the basis of common managerial proceedings. They suppose, for example, participation of independent directors, creating committees under the board of directors, single corporate policy formation and introduction of project management principles.

Passenger Transportation Is To Become Break-Even 
The reforms have led to a deep transformation of the holding’s passenger complex. Federal Passenger Company was founded on the 1st of October, 2010. From the 1st of January, 2011, 26 suburban companies (RZD’s special-purpose affiliated structures set up on parity basis with the RF subjects) carry out regional passenger transportation.
Long-distance transportation became possible because Russian government decided to compensate shortfalls in income and keep rates low to ensure railroad transportation is affordable for Russian people.  
To avoid increasing the traffic load on citizens and reducing their mobility, Russian government decided to introduce preferential rates for infrastructure services for suburban railroad companies, which allowed to equal conditions for passenger transportation by rail and by car.  In its turn in 2011 RZD preserved the same fee for multiple units leasing by suburban companies as in 2010.
RZD promised to maintain the number of commuter trains in the regions. That said, in 2011 the Holding slashed the losses of suburban transportation companies by RUR 9 billion thanks to cost-cutting and improvements in fare collection control on RZD’s commuter trains as compared with 2010. According to RZD President Vladimir Yakunin, if RF subjects could get RUR 14.5 billion compensation, they would be break -even. But they could deliver only RUR 5.7 billion.
In 2012-2013 RZD will solve this problem if the bill “On the Organization of Regular Passenger Railway Communication in the Russian Federation” comes into force. The act is to define the demand for passenger transportation (its volumes and quality) and the sources of infrastructure financing. 

Enforcing Horizontal Integration 
The new conditions on the cargo transportation market require new forms of interaction between the players. In October, 2011 it was decided to establish Coordination Councils with the involvement of RRW and representatives of cargo transport operators, freight owners and government authorities. Sixteen regional and eight transregional councils are already working.    
Cooperation issues were settled earlier by the medium of three-party agreements (between railroads, enterprises and regional governments). But they couldn’t solve all the problems regarding efficient use of the railroad infrastructure. Now it became possible to synchronize not only the work of junctions, but also of the whole range of Russian railroads. If a railway or Russian federal subject does not have enough powers, the issue should be solved by a federal district or a higher body – by central administration.
RZD is also looking for other tools of cooperation. It plans to create three regional distriports on railroads: North-Caucasian, Oktyabrskaya and Far-Eastern Railways. The work of regional centers will be coordinated from Moscow. New distriports will help to cut handling costs and to accelerate cargo transportation, when almost all the rolling stock on Russian railroads is in hand of private operators. It should be noted that a distriport on the Oktyabrskaya Railway has been working since 2008. Now it is included into the structure of Oktyabrskaya Railway Traffic Control Department. Its experts arrange traffic on the way to dock stations and deal with transport planning. Their experience is taken as a basis. The work of RZD’s distriports is customer-friendly. 
by Andrey Lazarev 
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The Vertical Chain of Command 
During the first three phases of the railroad reform the RF Traffic Ministry’s state-owned complex structure was reorganized into a diversified holding with an accounting and tax management system, providing verifiable information about its businesses as well as profit and loss statements.
The framework of the reform, adopted in 2007, was meant to single out several specialized business management units within RZD. The Central Infrastructure Department, the Central Traffic Control Department, the Traction Department, the Traction Rolling Stock Repair Department and the Railway Centre of Transportation Services are vertically integrated structures, separated from RZD’s economic complex. Each of them has its own economic targets, property and funds. As RZD’s  First Vice President Vadim Morozov puts it, they should order resources from each other proceeding from demand. All the Departments and Centers will be integrated into a single vertical chain of command by the end of 2012. 
The reform will create a new railway transportation system, which is cast in the different mould to American and European models and can provide regular and effective transportation for various branches of industry and Russian people, RZD’s Senior Vice President for corporate governance and strategic development Valery Reshetnikov says.  

Formation of the Competitive Market
In 2011, the Russian railroad transportation market underwent changes: there appeared private   passenger carriers, as well as competition in the field of rolling stock repair and maintenance. There are conditions for recruitment of private investors into competitive market segments. Railroad operators invested more than RUR 400 billion in freight stock acquisition. As a result, almost all the cargo turnover is provided by private cars. 
Today almost all of the 1.6 million cars used on the Russian railway network have a private status. They are distributed among more than 1,800 owners of rolling stock. 
Expectations for car fleet consolidation in the hands of three or four big operators working on a network-wide scale, which should form the core of operator market, have not been satisfied yet. That is why at the end of 2011 RZD had to consolidate a big pool of multipurpose high-sided wagons under its authority. According to Mr Reshetnikov, there is no reason to think that such a decision would revive the RZD’s monopoly on the freight transportation market. As a matter of fact, it is enough to consolidate control over the rolling stock which accounts for less than fourth quarter of the whole Russian car fleet to satisfy the needs of Russia’s economy. 
As Yermolai Solzhenitsyn, Managing Partner of McKinsey & Company’s office in Moscow, puts it, the proposed decisions on partial consolidation of the carrier’s multipurpose cars is not a step backwards or market competition violation. It is nothing like an overhaul of the Target Market Model for 2011-2015, which outlines the basic principles of railroad industry reform. It is a means to stabilize the market, meant to organize railway transport’s work in the new conditions. 

Market Model Remains the Same 
During the Fourth Phase of the reform RZD remains committed to rigorously observe the provisions of the Target market model. 
In the near term this model envisages the start of experimental pilot projects, meant to support competition between carriers “on the route” and “for the route” in specially designated districts.   The normative basis for this is being formed now. In practice it means the advent of local carriers, whose turnover can reach 5% to 10% by 2015. After 2015 the expediency of expanding the testing area for local carriers and their transformation into network-wide operators will be discerned.  
The main task is to work out a balanced financial economic model of railroad infrastructure development and to lay the ground for it. It should be based on the “network” agreement between the state and the infrastructure’s owner. This form of strategic cooperation between the State and the infrastructure’s owner as an additional tool of rate policy has been tested in many European countries, including Germany, where it has proved to be very efficient. This mechanism enables to maintain the infrastructure’s quality at the level defined by the State, ensuring railway transportation economic affordability and competitive equilibrium of different transportation vehicles. 
RZD is now forming a Corporate Governance Centre and its regional subsidiaries to further improve the Holding’s governance system, cut costs, to enhance services quality and raise key operating performance ratios. They are to be set by the end of 2012. Their managers should coordinate their work along the following business lines: “Passenger Transportation”, “Cargo Transportation” and “Infrastructure”. But the tasks of the governance system go beyond this. 
In the course of the reform some RZD departments were spun off. There appeared 85 subsidiaries and related companies. This has ensured competition in the design and survey works, construction, industrial production, logistics, social work and other spheres. Today these subsidiaries generate more than 30% of the Holding’s revenues. In 2011 the number of such companies increased. 
On the 30th of July RZD’s subsidiary The Central Department of Cargo Cars Repair ceased operations. Three car repair companies started to work from the 1st of August, 2011. Each of them span off four subsidiaries in different regions of Russia: VRK-1 (40 enterprises), VRK-2 (38 enterprises) and VRK-3 (37 enterprises), dedicated to car repair services. 
In 2013–2015 the Central Department of distriport management will be reorganized the same way and move from being an RZD’s subsidiary to enter the Holding’s affiliated structure. 
Later on RZD will sell blocks of shares in the new companies. Some of the sales have already taken place. For example, in October 2011 75% of JSC PGK’s shares were sold for RUR 125.5 billion (PGK was the largest RZD’s subsidiary). Assets of 54 subsidiaries are to be sold by 2013. The money will be invested in railroad infrastructure development. According to Mr Reshetnikov, recruitment of private strategic investors will afford to improve the overall performance of new companies, to attract money for renovation and re-equipment of production capacities and, correspondingly, to improve the quality of products. 
Nevertheless, RZD subsidiaries will become less dependent.  That is why the Corporate Centre singles out one more trend in management perfection: the services system cohesiveness is one of the main tasks of Russian railway. To fulfill it, the holding is going to bring its subsidiaries’ management systems in compliance with generally recognized international standards and to build it on the basis of common managerial proceedings. They suppose, for example, participation of independent directors, creating committees under the board of directors, single corporate policy formation and introduction of project management principles.

Passenger Transportation Is To Become Break-Even 
The reforms have led to a deep transformation of the holding’s passenger complex. Federal Passenger Company was founded on the 1st of October, 2010. From the 1st of January, 2011, 26 suburban companies (RZD’s special-purpose affiliated structures set up on parity basis with the RF subjects) carry out regional passenger transportation.
Long-distance transportation became possible because Russian government decided to compensate shortfalls in income and keep rates low to ensure railroad transportation is affordable for Russian people.  
To avoid increasing the traffic load on citizens and reducing their mobility, Russian government decided to introduce preferential rates for infrastructure services for suburban railroad companies, which allowed to equal conditions for passenger transportation by rail and by car.  In its turn in 2011 RZD preserved the same fee for multiple units leasing by suburban companies as in 2010.
RZD promised to maintain the number of commuter trains in the regions. That said, in 2011 the Holding slashed the losses of suburban transportation companies by RUR 9 billion thanks to cost-cutting and improvements in fare collection control on RZD’s commuter trains as compared with 2010. According to RZD President Vladimir Yakunin, if RF subjects could get RUR 14.5 billion compensation, they would be break -even. But they could deliver only RUR 5.7 billion.
In 2012-2013 RZD will solve this problem if the bill “On the Organization of Regular Passenger Railway Communication in the Russian Federation” comes into force. The act is to define the demand for passenger transportation (its volumes and quality) and the sources of infrastructure financing. 

Enforcing Horizontal Integration 
The new conditions on the cargo transportation market require new forms of interaction between the players. In October, 2011 it was decided to establish Coordination Councils with the involvement of RRW and representatives of cargo transport operators, freight owners and government authorities. Sixteen regional and eight transregional councils are already working.    
Cooperation issues were settled earlier by the medium of three-party agreements (between railroads, enterprises and regional governments). But they couldn’t solve all the problems regarding efficient use of the railroad infrastructure. Now it became possible to synchronize not only the work of junctions, but also of the whole range of Russian railroads. If a railway or Russian federal subject does not have enough powers, the issue should be solved by a federal district or a higher body – by central administration.
RZD is also looking for other tools of cooperation. It plans to create three regional distriports on railroads: North-Caucasian, Oktyabrskaya and Far-Eastern Railways. The work of regional centers will be coordinated from Moscow. New distriports will help to cut handling costs and to accelerate cargo transportation, when almost all the rolling stock on Russian railroads is in hand of private operators. It should be noted that a distriport on the Oktyabrskaya Railway has been working since 2008. Now it is included into the structure of Oktyabrskaya Railway Traffic Control Department. Its experts arrange traffic on the way to dock stations and deal with transport planning. Their experience is taken as a basis. The work of RZD’s distriports is customer-friendly. 
by Andrey Lazarev 
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The Vertical Chain of Command 
During the first three phases of the railroad reform the RF Traffic Ministry’s state-owned complex structure was reorganized into a diversified holding with an accounting and tax management system, providing verifiable information about its businesses as well as profit and loss statements.
The framework of the reform, adopted in 2007, was meant to single out several specialized business management units within RZD. The Central Infrastructure Department, the Central Traffic Control Department, the Traction Department, the Traction Rolling Stock Repair Department and the Railway Centre of Transportation Services are vertically integrated structures, separated from RZD’s economic complex. Each of them has its own economic targets, property and funds. As RZD’s  First Vice President Vadim Morozov puts it, they should order resources from each other proceeding from demand. All the Departments and Centers will be integrated into a single vertical chain of command by the end of 2012. 
The reform will create a new railway transportation system, which is cast in the different mould to American and European models and can provide regular and effective transportation for various branches of industry and Russian people, RZD’s Senior Vice President for corporate governance and strategic development Valery Reshetnikov says.  

Formation of the Competitive Market
In 2011, the Russian railroad transportation market underwent changes: there appeared private   passenger carriers, as well as competition in the field of rolling stock repair and maintenance. There are conditions for recruitment of private investors into competitive market segments. Railroad operators invested more than RUR 400 billion in freight stock acquisition. As a result, almost all the cargo turnover is provided by private cars. 
Today almost all of the 1.6 million cars used on the Russian railway network have a private status. They are distributed among more than 1,800 owners of rolling stock. 
Expectations for car fleet consolidation in the hands of three or four big operators working on a network-wide scale, which should form the core of operator market, have not been satisfied yet. That is why at the end of 2011 RZD had to consolidate a big pool of multipurpose high-sided wagons under its authority. According to Mr Reshetnikov, there is no reason to think that such a decision would revive the RZD’s monopoly on the freight transportation market. As a matter of fact, it is enough to consolidate control over the rolling stock which accounts for less than fourth quarter of the whole Russian car fleet to satisfy the needs of Russia’s economy. 
As Yermolai Solzhenitsyn, Managing Partner of McKinsey & Company’s office in Moscow, puts it, the proposed decisions on partial consolidation of the carrier’s multipurpose cars is not a step backwards or market competition violation. It is nothing like an overhaul of the Target Market Model for 2011-2015, which outlines the basic principles of railroad industry reform. It is a means to stabilize the market, meant to organize railway transport’s work in the new conditions. 

Market Model Remains the Same 
During the Fourth Phase of the reform RZD remains committed to rigorously observe the provisions of the Target market model. 
In the near term this model envisages the start of experimental pilot projects, meant to support competition between carriers “on the route” and “for the route” in specially designated districts.   The normative basis for this is being formed now. In practice it means the advent of local carriers, whose turnover can reach 5% to 10% by 2015. After 2015 the expediency of expanding the testing area for local carriers and their transformation into network-wide operators will be discerned.  
The main task is to work out a balanced financial economic model of railroad infrastructure development and to lay the ground for it. It should be based on the “network” agreement between the state and the infrastructure’s owner. This form of strategic cooperation between the State and the infrastructure’s owner as an additional tool of rate policy has been tested in many European countries, including Germany, where it has proved to be very efficient. This mechanism enables to maintain the infrastructure’s quality at the level defined by the State, ensuring railway transportation economic affordability and competitive equilibrium of different transportation vehicles. 
RZD is now forming a Corporate Governance Centre and its regional subsidiaries to further improve the Holding’s governance system, cut costs, to enhance services quality and raise key operating performance ratios. They are to be set by the end of 2012. Their managers should coordinate their work along the following business lines: “Passenger Transportation”, “Cargo Transportation” and “Infrastructure”. But the tasks of the governance system go beyond this. 
In the course of the reform some RZD departments were spun off. There appeared 85 subsidiaries and related companies. This has ensured competition in the design and survey works, construction, industrial production, logistics, social work and other spheres. Today these subsidiaries generate more than 30% of the Holding’s revenues. In 2011 the number of such companies increased. 
On the 30th of July RZD’s subsidiary The Central Department of Cargo Cars Repair ceased operations. Three car repair companies started to work from the 1st of August, 2011. Each of them span off four subsidiaries in different regions of Russia: VRK-1 (40 enterprises), VRK-2 (38 enterprises) and VRK-3 (37 enterprises), dedicated to car repair services. 
In 2013–2015 the Central Department of distriport management will be reorganized the same way and move from being an RZD’s subsidiary to enter the Holding’s affiliated structure. 
Later on RZD will sell blocks of shares in the new companies. Some of the sales have already taken place. For example, in October 2011 75% of JSC PGK’s shares were sold for RUR 125.5 billion (PGK was the largest RZD’s subsidiary). Assets of 54 subsidiaries are to be sold by 2013. The money will be invested in railroad infrastructure development. According to Mr Reshetnikov, recruitment of private strategic investors will afford to improve the overall performance of new companies, to attract money for renovation and re-equipment of production capacities and, correspondingly, to improve the quality of products. 
Nevertheless, RZD subsidiaries will become less dependent.  That is why the Corporate Centre singles out one more trend in management perfection: the services system cohesiveness is one of the main tasks of Russian railway. To fulfill it, the holding is going to bring its subsidiaries’ management systems in compliance with generally recognized international standards and to build it on the basis of common managerial proceedings. They suppose, for example, participation of independent directors, creating committees under the board of directors, single corporate policy formation and introduction of project management principles.

Passenger Transportation Is To Become Break-Even 
The reforms have led to a deep transformation of the holding’s passenger complex. Federal Passenger Company was founded on the 1st of October, 2010. From the 1st of January, 2011, 26 suburban companies (RZD’s special-purpose affiliated structures set up on parity basis with the RF subjects) carry out regional passenger transportation.
Long-distance transportation became possible because Russian government decided to compensate shortfalls in income and keep rates low to ensure railroad transportation is affordable for Russian people.  
To avoid increasing the traffic load on citizens and reducing their mobility, Russian government decided to introduce preferential rates for infrastructure services for suburban railroad companies, which allowed to equal conditions for passenger transportation by rail and by car.  In its turn in 2011 RZD preserved the same fee for multiple units leasing by suburban companies as in 2010.
RZD promised to maintain the number of commuter trains in the regions. That said, in 2011 the Holding slashed the losses of suburban transportation companies by RUR 9 billion thanks to cost-cutting and improvements in fare collection control on RZD’s commuter trains as compared with 2010. According to RZD President Vladimir Yakunin, if RF subjects could get RUR 14.5 billion compensation, they would be break -even. But they could deliver only RUR 5.7 billion.
In 2012-2013 RZD will solve this problem if the bill “On the Organization of Regular Passenger Railway Communication in the Russian Federation” comes into force. The act is to define the demand for passenger transportation (its volumes and quality) and the sources of infrastructure financing. 

Enforcing Horizontal Integration 
The new conditions on the cargo transportation market require new forms of interaction between the players. In October, 2011 it was decided to establish Coordination Councils with the involvement of RRW and representatives of cargo transport operators, freight owners and government authorities. Sixteen regional and eight transregional councils are already working.    
Cooperation issues were settled earlier by the medium of three-party agreements (between railroads, enterprises and regional governments). But they couldn’t solve all the problems regarding efficient use of the railroad infrastructure. Now it became possible to synchronize not only the work of junctions, but also of the whole range of Russian railroads. If a railway or Russian federal subject does not have enough powers, the issue should be solved by a federal district or a higher body – by central administration.
RZD is also looking for other tools of cooperation. It plans to create three regional distriports on railroads: North-Caucasian, Oktyabrskaya and Far-Eastern Railways. The work of regional centers will be coordinated from Moscow. New distriports will help to cut handling costs and to accelerate cargo transportation, when almost all the rolling stock on Russian railroads is in hand of private operators. It should be noted that a distriport on the Oktyabrskaya Railway has been working since 2008. Now it is included into the structure of Oktyabrskaya Railway Traffic Control Department. Its experts arrange traffic on the way to dock stations and deal with transport planning. Their experience is taken as a basis. The work of RZD’s distriports is customer-friendly. 
by Andrey Lazarev 
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The Vertical Chain of Command 
During the first three phases of the railroad reform the RF Traffic Ministry’s state-owned complex structure was reorganized into a diversified holding with an accounting and tax management system, providing verifiable information about its businesses as well as profit and loss statements.
The framework of the reform, adopted in 2007, was meant to single out several specialized business management units within RZD. The Central Infrastructure Department, the Central Traffic Control Department, the Traction Department, the Traction Rolling Stock Repair Department and the Railway Centre of Transportation Services are vertically integrated structures, separated from RZD’s economic complex. Each of them has its own economic targets, property and funds. As RZD’s  First Vice President Vadim Morozov puts it, they should order resources from each other proceeding from demand. All the Departments and Centers will be integrated into a single vertical chain of command by the end of 2012. 
The reform will create a new railway transportation system, which is cast in the different mould to American and European models and can provide regular and effective transportation for various branches of industry and Russian people, RZD’s Senior Vice President for corporate governance and strategic development Valery Reshetnikov says.  

Formation of the Competitive Market
In 2011, the Russian railroad transportation market underwent changes: there appeared private   passenger carriers, as well as competition in the field of rolling stock repair and maintenance. There are conditions for recruitment of private investors into competitive market segments. Railroad operators invested more than RUR 400 billion in freight stock acquisition. As a result, almost all the cargo turnover is provided by private cars. 
Today almost all of the 1.6 million cars used on the Russian railway network have a private status. They are distributed among more than 1,800 owners of rolling stock. 
Expectations for car fleet consolidation in the hands of three or four big operators working on a network-wide scale, which should form the core of operator market, have not been satisfied yet. That is why at the end of 2011 RZD had to consolidate a big pool of multipurpose high-sided wagons under its authority. According to Mr Reshetnikov, there is no reason to think that such a decision would revive the RZD’s monopoly on the freight transportation market. As a matter of fact, it is enough to consolidate control over the rolling stock which accounts for less than fourth quarter of the whole Russian car fleet to satisfy the needs of Russia’s economy. 
As Yermolai Solzhenitsyn, Managing Partner of McKinsey & Company’s office in Moscow, puts it, the proposed decisions on partial consolidation of the carrier’s multipurpose cars is not a step backwards or market competition violation. It is nothing like an overhaul of the Target Market Model for 2011-2015, which outlines the basic principles of railroad industry reform. It is a means to stabilize the market, meant to organize railway transport’s work in the new conditions. 

Market Model Remains the Same 
During the Fourth Phase of the reform RZD remains committed to rigorously observe the provisions of the Target market model. 
In the near term this model envisages the start of experimental pilot projects, meant to support competition between carriers “on the route” and “for the route” in specially designated districts.   The normative basis for this is being formed now. In practice it means the advent of local carriers, whose turnover can reach 5% to 10% by 2015. After 2015 the expediency of expanding the testing area for local carriers and their transformation into network-wide operators will be discerned.  
The main task is to work out a balanced financial economic model of railroad infrastructure development and to lay the ground for it. It should be based on the “network” agreement between the state and the infrastructure’s owner. This form of strategic cooperation between the State and the infrastructure’s owner as an additional tool of rate policy has been tested in many European countries, including Germany, where it has proved to be very efficient. This mechanism enables to maintain the infrastructure’s quality at the level defined by the State, ensuring railway transportation economic affordability and competitive equilibrium of different transportation vehicles. 
RZD is now forming a Corporate Governance Centre and its regional subsidiaries to further improve the Holding’s governance system, cut costs, to enhance services quality and raise key operating performance ratios. They are to be set by the end of 2012. Their managers should coordinate their work along the following business lines: “Passenger Transportation”, “Cargo Transportation” and “Infrastructure”. But the tasks of the governance system go beyond this. 
In the course of the reform some RZD departments were spun off. There appeared 85 subsidiaries and related companies. This has ensured competition in the design and survey works, construction, industrial production, logistics, social work and other spheres. Today these subsidiaries generate more than 30% of the Holding’s revenues. In 2011 the number of such companies increased. 
On the 30th of July RZD’s subsidiary The Central Department of Cargo Cars Repair ceased operations. Three car repair companies started to work from the 1st of August, 2011. Each of them span off four subsidiaries in different regions of Russia: VRK-1 (40 enterprises), VRK-2 (38 enterprises) and VRK-3 (37 enterprises), dedicated to car repair services. 
In 2013–2015 the Central Department of distriport management will be reorganized the same way and move from being an RZD’s subsidiary to enter the Holding’s affiliated structure. 
Later on RZD will sell blocks of shares in the new companies. Some of the sales have already taken place. For example, in October 2011 75% of JSC PGK’s shares were sold for RUR 125.5 billion (PGK was the largest RZD’s subsidiary). Assets of 54 subsidiaries are to be sold by 2013. The money will be invested in railroad infrastructure development. According to Mr Reshetnikov, recruitment of private strategic investors will afford to improve the overall performance of new companies, to attract money for renovation and re-equipment of production capacities and, correspondingly, to improve the quality of products. 
Nevertheless, RZD subsidiaries will become less dependent.  That is why the Corporate Centre singles out one more trend in management perfection: the services system cohesiveness is one of the main tasks of Russian railway. To fulfill it, the holding is going to bring its subsidiaries’ management systems in compliance with generally recognized international standards and to build it on the basis of common managerial proceedings. They suppose, for example, participation of independent directors, creating committees under the board of directors, single corporate policy formation and introduction of project management principles.

Passenger Transportation Is To Become Break-Even 
The reforms have led to a deep transformation of the holding’s passenger complex. Federal Passenger Company was founded on the 1st of October, 2010. From the 1st of January, 2011, 26 suburban companies (RZD’s special-purpose affiliated structures set up on parity basis with the RF subjects) carry out regional passenger transportation.
Long-distance transportation became possible because Russian government decided to compensate shortfalls in income and keep rates low to ensure railroad transportation is affordable for Russian people.  
To avoid increasing the traffic load on citizens and reducing their mobility, Russian government decided to introduce preferential rates for infrastructure services for suburban railroad companies, which allowed to equal conditions for passenger transportation by rail and by car.  In its turn in 2011 RZD preserved the same fee for multiple units leasing by suburban companies as in 2010.
RZD promised to maintain the number of commuter trains in the regions. That said, in 2011 the Holding slashed the losses of suburban transportation companies by RUR 9 billion thanks to cost-cutting and improvements in fare collection control on RZD’s commuter trains as compared with 2010. According to RZD President Vladimir Yakunin, if RF subjects could get RUR 14.5 billion compensation, they would be break -even. But they could deliver only RUR 5.7 billion.
In 2012-2013 RZD will solve this problem if the bill “On the Organization of Regular Passenger Railway Communication in the Russian Federation” comes into force. The act is to define the demand for passenger transportation (its volumes and quality) and the sources of infrastructure financing. 

Enforcing Horizontal Integration 
The new conditions on the cargo transportation market require new forms of interaction between the players. In October, 2011 it was decided to establish Coordination Councils with the involvement of RRW and representatives of cargo transport operators, freight owners and government authorities. Sixteen regional and eight transregional councils are already working.    
Cooperation issues were settled earlier by the medium of three-party agreements (between railroads, enterprises and regional governments). But they couldn’t solve all the problems regarding efficient use of the railroad infrastructure. Now it became possible to synchronize not only the work of junctions, but also of the whole range of Russian railroads. If a railway or Russian federal subject does not have enough powers, the issue should be solved by a federal district or a higher body – by central administration.
RZD is also looking for other tools of cooperation. It plans to create three regional distriports on railroads: North-Caucasian, Oktyabrskaya and Far-Eastern Railways. The work of regional centers will be coordinated from Moscow. New distriports will help to cut handling costs and to accelerate cargo transportation, when almost all the rolling stock on Russian railroads is in hand of private operators. It should be noted that a distriport on the Oktyabrskaya Railway has been working since 2008. Now it is included into the structure of Oktyabrskaya Railway Traffic Control Department. Its experts arrange traffic on the way to dock stations and deal with transport planning. Their experience is taken as a basis. The work of RZD’s distriports is customer-friendly. 
by Andrey Lazarev 
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    [DETAIL_TEXT] => 
Reform Helped to Attract Private Investments
Three stages, planned in the structural reform programme, were completed in 2010. Their results were approved by the RF Government and international experts. In accordance with the decision of the RF Government, the fourth stage is now being carried out. It must be completed before 2015.
In the 11 years of the reform, the railway transport services market has undergone a dramatic transformation, and Russian railways have changed, too. While striving to reach the strategic goals of the reform, RZD brooked no serious failures or breaches of the transportation process. As a result, the monopolistic system of the Ministry of Railways, which combined the functions of state regulation, administration, and maintenance, was replaced by a business structure that has proved its financial vitality, ability to work in the market (even when the macroeconomic market situation is negative for railway transportation) and improve competitiveness, and to make its services more attractive to clients. 
A new railway transport system was practically created. It resembles the model of neither American nor European railways. The new system is able to provide non-stop transportation for the needs of industries and the people of Russia. The complicated state structure of the Ministry of Railways was diversified into a holding company with an adjusted system of accounting and tax accounting providing valid information about the operational results and businesses. At the moment, Russian and foreign financial institutes recognise that the company is a stable and reputable borrower in the transport sector.  
Dramatic changes took place in the railway transport services market. As a result, the development of competition in the rolling stock operation sector was stimulated. Private passenger transporters appeared on the railway network. Competition in the sectors of rolling stock repair and maintenance, and services for passengers is developing as well.
During the reform, conditions were created to attract private investments into competitive market sectors. For example, private operators invested more than RUR 400 billion into the purchase of cargo wagons.
85 daughter companies and subsidiaries were launched in the reform period. This stimulated development of competition in the markets of design and research and construction works, industrial manufacturing, logistics, social sectors, and others. An important result was a more efficient operation in comparison with affiliates amid the legal status transfer. Daughter companies of RZD now generate more than 30% of the revenue. Meanwhile, they own just 15% of all assets of the holding company.
To create additional sources of investment into railway infrastructure development, as demanded by regulators, shareholdings in 54 daughter companies are to be sold before 2013. Attraction of private strategic investors will make the launched companies more efficient, help to attract means to renew and re-equip the producing base of plants and, consequently, to improve the quality of their output. 
Last October, a 75% shareholding in RZD’s largest subsidiary Freight One was sold for a record sum of RUR 125.5 billion. Thus, the basic structure of the competitive cargo wagon operation market was formed because RZD stopped dominating in the market of railcar supply for transportation. Nowadays, over 76% of cargo volume is carried in the freight wagons of operators independent of RZD.

The State Forms the Order for Transportation
One of the most successful results of the reform was the transformation of the holding company’s passenger sector. Federal Passenger Company was launched on October 1, 2010. Starting from 2011, suburban passenger transportation was provided by 26 special subsidiaries launched on a parity basis with Russian regions. 
Long-distance transportation of passengers by Federal Passenger Company became possible due to the decision made by the RF Government on compensation for the lost revenue from transportation in sitting carriages and third-class sleepers. It allowed to keep passenger transportation available for people and created prerequisites to develop competition in the socially important sector. 
The suburban passenger transportation sector has the same task. Simultaneously, the transport load on people must not increase, and the constitutional right to free movement must be guaranteed. 
To restrain the increase in tariffs, in October 2011 the Government decided on implementing a privileged tariff on infrastructure services for suburban passenger companies. This allowed to cut loading on the regional budgets and to equalise the operating conditions of railways and road transport. In turn, RZD kept the fee for electric multiple unit stock rented by suburban companies the same as in the previous year. This reduced their total expenditure.
A radical decision is needed to make the suburban passenger transportation sector profitable: regions of the Russian Federation should give subsidies to compensate for the revenue the companies engaged in suburban transportation have lost, taking into account the tariffs on transportation and the order for railway services in the adjusted volume, which will make the transporter’s services available. Last year, however, the holding company’s losses in this sector amounted to approximately RUR 10 billion. 
Lossless suburban transportation is a principally important issue. Here we deal with creation of conditions for private capital investment into this market sector, and making it partly responsible for suburban transportation and, more importantly, for the process of its development taking into account passengers’ demands.  
That is why the basic target in the passenger transportation sector in the short term will be the development of a more accurate system of regional responsibility for socially important transportation and putting regions in charge of compensation for all revenue the transporter has lost. The basis for this will be the federal law “On Organisation of Regular Passenger Railway Transportation in the RF”. The bill is being developed. This document envisages that federal and regional authorities will define the need for the volume and quality of passenger transportation.  

It Is High Time to Form a Pool of Operators
The most difficult step for the company was creation of conditions to develop competition in the cargo railcar operation sector. The transfer of railcars to the Second Freight Company last September practically abolished the public park. Firstly, it escalated the problem of traffic control (and it took several decades to form the system to manage the public wagon park). Secondly, disruption of wagon flows brought about an increase in the unreasonable loading on the infrastructure.
Over 93% of Russia’s 1.6 million railcars are now private. There are more than 1,850 owners of rolling stock.   
The expectations of wagon park consolidation by three or four large companies operating on the entire network, which must become the main body of the operator market, have not been justified so far. To solve arising problems, a pack of urgent measures have been formed to compensate for the problems and create conditions to consolidate universal cargo wagons under the control of RZD. Normative amendments may be put to adjust operators’ and rolling stock owners’ policy on the railway network and to improve tariff regulation in the railway market.
There are no reasons to fear that the consolidation of  some universal wagons under the control of RZD will revive the monopoly in the market. In the opinion of experts, to solve the urgent problems of the cargo transportation sector, a park of 200,000-250,000 gondola cars must be consolidated, which is less than a quarter of the entire wagon park and  half of the universal rolling stock fleet. And the activity of RZD will be regulated with due account for antitrust legislation. 
The issue of a decree by the Transport Ministry to regulate specific features of empty wagon transportation on public railway infrastructure, implementation of amendments to the acting documents of the Federal Tariff Service concerning price formation for cargo transportation services provided by RZD in railcars it has attracted from private companies, and putting amendments to the Russian legislation– all these measures will help to redress the imbalance in wagon flows and to supply consignors with the necessary resources for loading their freight.
 I would like to emphasise that the suggested consolidation of some universal railcars in the transporter’s hands is neither a step backwards, nor breach of competition in the market. Also, it does not mean the revision of the Target Market Model. It is a measure stabilising the market. It is necessary to organise railway transport’s work under new conditions.

Network Contract as Orienting Point
At the fourth stage of the reform, railway transport will be reformed in accordance with the plans to carry out the structural reform and the Target Market Model to 2015, and we will be punctilious in following them. No critical situations, such as a failure to transport the entire cargo volume or inefficient management of rolling stock fleet, must arise. A well-functioning system must not be destabilized on the plea of development of competition in those sectors of the railway transportation market where there are no objective prerequisites for it. We must not disintegrate the railway system, dividing transportation activities and infrastructure services.  
Experience has shown that approved theoretical decisions are not dogma. We have already adjusted some planned measures to the real conditions of the market. We must treat the issues of normative and legislative base improvement, tariff regulation, and formation of new relations in the market carefully and reasonably. 
At the fourth stage of the reform, the Target Market Model envisages launching pilot projects to develop competition between transporters on specified lines according to the principle of developing competition “for the line” and “on the line”. A normative base for local transporters institution formation is being developed. The cargo turnover of local transporters may amount to 5-10% of the total cargo turnover by 2015.
On the basis of the results of this work, the decision on expanding the area for local transporters’ activity and transferring them to network-wide transporters will be made after 2015. 
A key goal will be to form a balanced financial and economic model of railway infrastructure development, and to create the necessary resources for its progress. The basis for it will be a network contract concluded between the state and the infrastructure owner. This form of strategic interaction between the state and infrastructure owner has been applied as an additional instrument of tariff formation in a lot of European countries, in particular in Germany, where it has proved its high efficiency.
This mechanism allows to keep the quality of infrastructure at a level defined by the state, providing economic availability of railway transportation and equal competitive conditions for the work of different transport modes.

Fight for the Market     
Another thing I would like to pay more attention to is further improvement of the management system in RZD. Our goal is to adjust the management system with the real model of relations in the railway transportation market, to create conditions to reveal the potential of local senior managers, and, as a result, to cut specific administrative expenses, and to improve key figures in operating activity.
The results of the reform are widely known. They are works to form the corporate centre and its regional structures, to create verticals according to type of business activity, to abolish divisions in railways. To improve the quality of services and to fight for the market with competitive transport modes, the company had to transfer to service- and client-oriented management models in some business activities. 
Major lines of further business development are defined on the basis of close commercial and financial interdependence of the transportation process participants, who are united by the key asset – railway infrastructure. We have taken the course of forming a strategic holding company with strengthened control functions. From an organizational viewpoint, this means that senior managers are concentrated on fulfilling strategic tasks without groundless interference in the operating activity of business units. 
Considering the commonality of technological tasks and additional synergy effects from coordinated activity, three major business blocks are to be formed – “Passenger Transportation,” “Freight Transportation,” and “Infrastructure.” As soon as the heads of directorates and subsidiaries get fuller responsibilities and powers, it will hardly be possible to overestimate their role in making operations more efficient. 
The role of heads of railways – affiliates of RZD will increase. They must become representatives of the company’s President in their regions, providing technological and corporative coordination of RZD’s affiliates and subsidiaries. Already at the beginning of the last year, the heads of railways got additional powers and responsibilities for the operating activities of the company’s divisions and efficient interaction with authorities, business partners, and public representatives.  
A separate block of tasks in the sector of management system improvement is to make management of subsidiaries more efficient. We strive to make corporate management of subsidiaries meet international standards. Single corporate policies and procedures are carried out for that. In particular, we attract independent directors to work on the boards of directors of RZD’s subsidiaries, establish efficient committees attached to boards of directors, and form single corporate policies and project management principles. All these actions are an essential element of the railway reform.
I would like to emphasise that railway reform is a common process, in which all market players participate. Unbalanced actions, selfish motives and development in different directions may cause malfunctions in the work of the railway transport services market, decrease its efficiency, and, finally, turn railway transport from a factor of economic growth into a limiter of economic development. No consignors, railway companies, or the state need that. We will be able to reach our goals and create a reliable transport basis for further economic growth only if we combine our efforts. 
By Valery Reshetnikov, 
Senior Vice President of Russian Railways JSC
    [~DETAIL_TEXT] => 
Reform Helped to Attract Private Investments
Three stages, planned in the structural reform programme, were completed in 2010. Their results were approved by the RF Government and international experts. In accordance with the decision of the RF Government, the fourth stage is now being carried out. It must be completed before 2015.
In the 11 years of the reform, the railway transport services market has undergone a dramatic transformation, and Russian railways have changed, too. While striving to reach the strategic goals of the reform, RZD brooked no serious failures or breaches of the transportation process. As a result, the monopolistic system of the Ministry of Railways, which combined the functions of state regulation, administration, and maintenance, was replaced by a business structure that has proved its financial vitality, ability to work in the market (even when the macroeconomic market situation is negative for railway transportation) and improve competitiveness, and to make its services more attractive to clients. 
A new railway transport system was practically created. It resembles the model of neither American nor European railways. The new system is able to provide non-stop transportation for the needs of industries and the people of Russia. The complicated state structure of the Ministry of Railways was diversified into a holding company with an adjusted system of accounting and tax accounting providing valid information about the operational results and businesses. At the moment, Russian and foreign financial institutes recognise that the company is a stable and reputable borrower in the transport sector.  
Dramatic changes took place in the railway transport services market. As a result, the development of competition in the rolling stock operation sector was stimulated. Private passenger transporters appeared on the railway network. Competition in the sectors of rolling stock repair and maintenance, and services for passengers is developing as well.
During the reform, conditions were created to attract private investments into competitive market sectors. For example, private operators invested more than RUR 400 billion into the purchase of cargo wagons.
85 daughter companies and subsidiaries were launched in the reform period. This stimulated development of competition in the markets of design and research and construction works, industrial manufacturing, logistics, social sectors, and others. An important result was a more efficient operation in comparison with affiliates amid the legal status transfer. Daughter companies of RZD now generate more than 30% of the revenue. Meanwhile, they own just 15% of all assets of the holding company.
To create additional sources of investment into railway infrastructure development, as demanded by regulators, shareholdings in 54 daughter companies are to be sold before 2013. Attraction of private strategic investors will make the launched companies more efficient, help to attract means to renew and re-equip the producing base of plants and, consequently, to improve the quality of their output. 
Last October, a 75% shareholding in RZD’s largest subsidiary Freight One was sold for a record sum of RUR 125.5 billion. Thus, the basic structure of the competitive cargo wagon operation market was formed because RZD stopped dominating in the market of railcar supply for transportation. Nowadays, over 76% of cargo volume is carried in the freight wagons of operators independent of RZD.

The State Forms the Order for Transportation
One of the most successful results of the reform was the transformation of the holding company’s passenger sector. Federal Passenger Company was launched on October 1, 2010. Starting from 2011, suburban passenger transportation was provided by 26 special subsidiaries launched on a parity basis with Russian regions. 
Long-distance transportation of passengers by Federal Passenger Company became possible due to the decision made by the RF Government on compensation for the lost revenue from transportation in sitting carriages and third-class sleepers. It allowed to keep passenger transportation available for people and created prerequisites to develop competition in the socially important sector. 
The suburban passenger transportation sector has the same task. Simultaneously, the transport load on people must not increase, and the constitutional right to free movement must be guaranteed. 
To restrain the increase in tariffs, in October 2011 the Government decided on implementing a privileged tariff on infrastructure services for suburban passenger companies. This allowed to cut loading on the regional budgets and to equalise the operating conditions of railways and road transport. In turn, RZD kept the fee for electric multiple unit stock rented by suburban companies the same as in the previous year. This reduced their total expenditure.
A radical decision is needed to make the suburban passenger transportation sector profitable: regions of the Russian Federation should give subsidies to compensate for the revenue the companies engaged in suburban transportation have lost, taking into account the tariffs on transportation and the order for railway services in the adjusted volume, which will make the transporter’s services available. Last year, however, the holding company’s losses in this sector amounted to approximately RUR 10 billion. 
Lossless suburban transportation is a principally important issue. Here we deal with creation of conditions for private capital investment into this market sector, and making it partly responsible for suburban transportation and, more importantly, for the process of its development taking into account passengers’ demands.  
That is why the basic target in the passenger transportation sector in the short term will be the development of a more accurate system of regional responsibility for socially important transportation and putting regions in charge of compensation for all revenue the transporter has lost. The basis for this will be the federal law “On Organisation of Regular Passenger Railway Transportation in the RF”. The bill is being developed. This document envisages that federal and regional authorities will define the need for the volume and quality of passenger transportation.  

It Is High Time to Form a Pool of Operators
The most difficult step for the company was creation of conditions to develop competition in the cargo railcar operation sector. The transfer of railcars to the Second Freight Company last September practically abolished the public park. Firstly, it escalated the problem of traffic control (and it took several decades to form the system to manage the public wagon park). Secondly, disruption of wagon flows brought about an increase in the unreasonable loading on the infrastructure.
Over 93% of Russia’s 1.6 million railcars are now private. There are more than 1,850 owners of rolling stock.   
The expectations of wagon park consolidation by three or four large companies operating on the entire network, which must become the main body of the operator market, have not been justified so far. To solve arising problems, a pack of urgent measures have been formed to compensate for the problems and create conditions to consolidate universal cargo wagons under the control of RZD. Normative amendments may be put to adjust operators’ and rolling stock owners’ policy on the railway network and to improve tariff regulation in the railway market.
There are no reasons to fear that the consolidation of  some universal wagons under the control of RZD will revive the monopoly in the market. In the opinion of experts, to solve the urgent problems of the cargo transportation sector, a park of 200,000-250,000 gondola cars must be consolidated, which is less than a quarter of the entire wagon park and  half of the universal rolling stock fleet. And the activity of RZD will be regulated with due account for antitrust legislation. 
The issue of a decree by the Transport Ministry to regulate specific features of empty wagon transportation on public railway infrastructure, implementation of amendments to the acting documents of the Federal Tariff Service concerning price formation for cargo transportation services provided by RZD in railcars it has attracted from private companies, and putting amendments to the Russian legislation– all these measures will help to redress the imbalance in wagon flows and to supply consignors with the necessary resources for loading their freight.
 I would like to emphasise that the suggested consolidation of some universal railcars in the transporter’s hands is neither a step backwards, nor breach of competition in the market. Also, it does not mean the revision of the Target Market Model. It is a measure stabilising the market. It is necessary to organise railway transport’s work under new conditions.

Network Contract as Orienting Point
At the fourth stage of the reform, railway transport will be reformed in accordance with the plans to carry out the structural reform and the Target Market Model to 2015, and we will be punctilious in following them. No critical situations, such as a failure to transport the entire cargo volume or inefficient management of rolling stock fleet, must arise. A well-functioning system must not be destabilized on the plea of development of competition in those sectors of the railway transportation market where there are no objective prerequisites for it. We must not disintegrate the railway system, dividing transportation activities and infrastructure services.  
Experience has shown that approved theoretical decisions are not dogma. We have already adjusted some planned measures to the real conditions of the market. We must treat the issues of normative and legislative base improvement, tariff regulation, and formation of new relations in the market carefully and reasonably. 
At the fourth stage of the reform, the Target Market Model envisages launching pilot projects to develop competition between transporters on specified lines according to the principle of developing competition “for the line” and “on the line”. A normative base for local transporters institution formation is being developed. The cargo turnover of local transporters may amount to 5-10% of the total cargo turnover by 2015.
On the basis of the results of this work, the decision on expanding the area for local transporters’ activity and transferring them to network-wide transporters will be made after 2015. 
A key goal will be to form a balanced financial and economic model of railway infrastructure development, and to create the necessary resources for its progress. The basis for it will be a network contract concluded between the state and the infrastructure owner. This form of strategic interaction between the state and infrastructure owner has been applied as an additional instrument of tariff formation in a lot of European countries, in particular in Germany, where it has proved its high efficiency.
This mechanism allows to keep the quality of infrastructure at a level defined by the state, providing economic availability of railway transportation and equal competitive conditions for the work of different transport modes.

Fight for the Market     
Another thing I would like to pay more attention to is further improvement of the management system in RZD. Our goal is to adjust the management system with the real model of relations in the railway transportation market, to create conditions to reveal the potential of local senior managers, and, as a result, to cut specific administrative expenses, and to improve key figures in operating activity.
The results of the reform are widely known. They are works to form the corporate centre and its regional structures, to create verticals according to type of business activity, to abolish divisions in railways. To improve the quality of services and to fight for the market with competitive transport modes, the company had to transfer to service- and client-oriented management models in some business activities. 
Major lines of further business development are defined on the basis of close commercial and financial interdependence of the transportation process participants, who are united by the key asset – railway infrastructure. We have taken the course of forming a strategic holding company with strengthened control functions. From an organizational viewpoint, this means that senior managers are concentrated on fulfilling strategic tasks without groundless interference in the operating activity of business units. 
Considering the commonality of technological tasks and additional synergy effects from coordinated activity, three major business blocks are to be formed – “Passenger Transportation,” “Freight Transportation,” and “Infrastructure.” As soon as the heads of directorates and subsidiaries get fuller responsibilities and powers, it will hardly be possible to overestimate their role in making operations more efficient. 
The role of heads of railways – affiliates of RZD will increase. They must become representatives of the company’s President in their regions, providing technological and corporative coordination of RZD’s affiliates and subsidiaries. Already at the beginning of the last year, the heads of railways got additional powers and responsibilities for the operating activities of the company’s divisions and efficient interaction with authorities, business partners, and public representatives.  
A separate block of tasks in the sector of management system improvement is to make management of subsidiaries more efficient. We strive to make corporate management of subsidiaries meet international standards. Single corporate policies and procedures are carried out for that. In particular, we attract independent directors to work on the boards of directors of RZD’s subsidiaries, establish efficient committees attached to boards of directors, and form single corporate policies and project management principles. All these actions are an essential element of the railway reform.
I would like to emphasise that railway reform is a common process, in which all market players participate. Unbalanced actions, selfish motives and development in different directions may cause malfunctions in the work of the railway transport services market, decrease its efficiency, and, finally, turn railway transport from a factor of economic growth into a limiter of economic development. No consignors, railway companies, or the state need that. We will be able to reach our goals and create a reliable transport basis for further economic growth only if we combine our efforts. 
By Valery Reshetnikov, 
Senior Vice President of Russian Railways JSC
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    [DETAIL_TEXT] => 
Reform Helped to Attract Private Investments
Three stages, planned in the structural reform programme, were completed in 2010. Their results were approved by the RF Government and international experts. In accordance with the decision of the RF Government, the fourth stage is now being carried out. It must be completed before 2015.
In the 11 years of the reform, the railway transport services market has undergone a dramatic transformation, and Russian railways have changed, too. While striving to reach the strategic goals of the reform, RZD brooked no serious failures or breaches of the transportation process. As a result, the monopolistic system of the Ministry of Railways, which combined the functions of state regulation, administration, and maintenance, was replaced by a business structure that has proved its financial vitality, ability to work in the market (even when the macroeconomic market situation is negative for railway transportation) and improve competitiveness, and to make its services more attractive to clients. 
A new railway transport system was practically created. It resembles the model of neither American nor European railways. The new system is able to provide non-stop transportation for the needs of industries and the people of Russia. The complicated state structure of the Ministry of Railways was diversified into a holding company with an adjusted system of accounting and tax accounting providing valid information about the operational results and businesses. At the moment, Russian and foreign financial institutes recognise that the company is a stable and reputable borrower in the transport sector.  
Dramatic changes took place in the railway transport services market. As a result, the development of competition in the rolling stock operation sector was stimulated. Private passenger transporters appeared on the railway network. Competition in the sectors of rolling stock repair and maintenance, and services for passengers is developing as well.
During the reform, conditions were created to attract private investments into competitive market sectors. For example, private operators invested more than RUR 400 billion into the purchase of cargo wagons.
85 daughter companies and subsidiaries were launched in the reform period. This stimulated development of competition in the markets of design and research and construction works, industrial manufacturing, logistics, social sectors, and others. An important result was a more efficient operation in comparison with affiliates amid the legal status transfer. Daughter companies of RZD now generate more than 30% of the revenue. Meanwhile, they own just 15% of all assets of the holding company.
To create additional sources of investment into railway infrastructure development, as demanded by regulators, shareholdings in 54 daughter companies are to be sold before 2013. Attraction of private strategic investors will make the launched companies more efficient, help to attract means to renew and re-equip the producing base of plants and, consequently, to improve the quality of their output. 
Last October, a 75% shareholding in RZD’s largest subsidiary Freight One was sold for a record sum of RUR 125.5 billion. Thus, the basic structure of the competitive cargo wagon operation market was formed because RZD stopped dominating in the market of railcar supply for transportation. Nowadays, over 76% of cargo volume is carried in the freight wagons of operators independent of RZD.

The State Forms the Order for Transportation
One of the most successful results of the reform was the transformation of the holding company’s passenger sector. Federal Passenger Company was launched on October 1, 2010. Starting from 2011, suburban passenger transportation was provided by 26 special subsidiaries launched on a parity basis with Russian regions. 
Long-distance transportation of passengers by Federal Passenger Company became possible due to the decision made by the RF Government on compensation for the lost revenue from transportation in sitting carriages and third-class sleepers. It allowed to keep passenger transportation available for people and created prerequisites to develop competition in the socially important sector. 
The suburban passenger transportation sector has the same task. Simultaneously, the transport load on people must not increase, and the constitutional right to free movement must be guaranteed. 
To restrain the increase in tariffs, in October 2011 the Government decided on implementing a privileged tariff on infrastructure services for suburban passenger companies. This allowed to cut loading on the regional budgets and to equalise the operating conditions of railways and road transport. In turn, RZD kept the fee for electric multiple unit stock rented by suburban companies the same as in the previous year. This reduced their total expenditure.
A radical decision is needed to make the suburban passenger transportation sector profitable: regions of the Russian Federation should give subsidies to compensate for the revenue the companies engaged in suburban transportation have lost, taking into account the tariffs on transportation and the order for railway services in the adjusted volume, which will make the transporter’s services available. Last year, however, the holding company’s losses in this sector amounted to approximately RUR 10 billion. 
Lossless suburban transportation is a principally important issue. Here we deal with creation of conditions for private capital investment into this market sector, and making it partly responsible for suburban transportation and, more importantly, for the process of its development taking into account passengers’ demands.  
That is why the basic target in the passenger transportation sector in the short term will be the development of a more accurate system of regional responsibility for socially important transportation and putting regions in charge of compensation for all revenue the transporter has lost. The basis for this will be the federal law “On Organisation of Regular Passenger Railway Transportation in the RF”. The bill is being developed. This document envisages that federal and regional authorities will define the need for the volume and quality of passenger transportation.  

It Is High Time to Form a Pool of Operators
The most difficult step for the company was creation of conditions to develop competition in the cargo railcar operation sector. The transfer of railcars to the Second Freight Company last September practically abolished the public park. Firstly, it escalated the problem of traffic control (and it took several decades to form the system to manage the public wagon park). Secondly, disruption of wagon flows brought about an increase in the unreasonable loading on the infrastructure.
Over 93% of Russia’s 1.6 million railcars are now private. There are more than 1,850 owners of rolling stock.   
The expectations of wagon park consolidation by three or four large companies operating on the entire network, which must become the main body of the operator market, have not been justified so far. To solve arising problems, a pack of urgent measures have been formed to compensate for the problems and create conditions to consolidate universal cargo wagons under the control of RZD. Normative amendments may be put to adjust operators’ and rolling stock owners’ policy on the railway network and to improve tariff regulation in the railway market.
There are no reasons to fear that the consolidation of  some universal wagons under the control of RZD will revive the monopoly in the market. In the opinion of experts, to solve the urgent problems of the cargo transportation sector, a park of 200,000-250,000 gondola cars must be consolidated, which is less than a quarter of the entire wagon park and  half of the universal rolling stock fleet. And the activity of RZD will be regulated with due account for antitrust legislation. 
The issue of a decree by the Transport Ministry to regulate specific features of empty wagon transportation on public railway infrastructure, implementation of amendments to the acting documents of the Federal Tariff Service concerning price formation for cargo transportation services provided by RZD in railcars it has attracted from private companies, and putting amendments to the Russian legislation– all these measures will help to redress the imbalance in wagon flows and to supply consignors with the necessary resources for loading their freight.
 I would like to emphasise that the suggested consolidation of some universal railcars in the transporter’s hands is neither a step backwards, nor breach of competition in the market. Also, it does not mean the revision of the Target Market Model. It is a measure stabilising the market. It is necessary to organise railway transport’s work under new conditions.

Network Contract as Orienting Point
At the fourth stage of the reform, railway transport will be reformed in accordance with the plans to carry out the structural reform and the Target Market Model to 2015, and we will be punctilious in following them. No critical situations, such as a failure to transport the entire cargo volume or inefficient management of rolling stock fleet, must arise. A well-functioning system must not be destabilized on the plea of development of competition in those sectors of the railway transportation market where there are no objective prerequisites for it. We must not disintegrate the railway system, dividing transportation activities and infrastructure services.  
Experience has shown that approved theoretical decisions are not dogma. We have already adjusted some planned measures to the real conditions of the market. We must treat the issues of normative and legislative base improvement, tariff regulation, and formation of new relations in the market carefully and reasonably. 
At the fourth stage of the reform, the Target Market Model envisages launching pilot projects to develop competition between transporters on specified lines according to the principle of developing competition “for the line” and “on the line”. A normative base for local transporters institution formation is being developed. The cargo turnover of local transporters may amount to 5-10% of the total cargo turnover by 2015.
On the basis of the results of this work, the decision on expanding the area for local transporters’ activity and transferring them to network-wide transporters will be made after 2015. 
A key goal will be to form a balanced financial and economic model of railway infrastructure development, and to create the necessary resources for its progress. The basis for it will be a network contract concluded between the state and the infrastructure owner. This form of strategic interaction between the state and infrastructure owner has been applied as an additional instrument of tariff formation in a lot of European countries, in particular in Germany, where it has proved its high efficiency.
This mechanism allows to keep the quality of infrastructure at a level defined by the state, providing economic availability of railway transportation and equal competitive conditions for the work of different transport modes.

Fight for the Market     
Another thing I would like to pay more attention to is further improvement of the management system in RZD. Our goal is to adjust the management system with the real model of relations in the railway transportation market, to create conditions to reveal the potential of local senior managers, and, as a result, to cut specific administrative expenses, and to improve key figures in operating activity.
The results of the reform are widely known. They are works to form the corporate centre and its regional structures, to create verticals according to type of business activity, to abolish divisions in railways. To improve the quality of services and to fight for the market with competitive transport modes, the company had to transfer to service- and client-oriented management models in some business activities. 
Major lines of further business development are defined on the basis of close commercial and financial interdependence of the transportation process participants, who are united by the key asset – railway infrastructure. We have taken the course of forming a strategic holding company with strengthened control functions. From an organizational viewpoint, this means that senior managers are concentrated on fulfilling strategic tasks without groundless interference in the operating activity of business units. 
Considering the commonality of technological tasks and additional synergy effects from coordinated activity, three major business blocks are to be formed – “Passenger Transportation,” “Freight Transportation,” and “Infrastructure.” As soon as the heads of directorates and subsidiaries get fuller responsibilities and powers, it will hardly be possible to overestimate their role in making operations more efficient. 
The role of heads of railways – affiliates of RZD will increase. They must become representatives of the company’s President in their regions, providing technological and corporative coordination of RZD’s affiliates and subsidiaries. Already at the beginning of the last year, the heads of railways got additional powers and responsibilities for the operating activities of the company’s divisions and efficient interaction with authorities, business partners, and public representatives.  
A separate block of tasks in the sector of management system improvement is to make management of subsidiaries more efficient. We strive to make corporate management of subsidiaries meet international standards. Single corporate policies and procedures are carried out for that. In particular, we attract independent directors to work on the boards of directors of RZD’s subsidiaries, establish efficient committees attached to boards of directors, and form single corporate policies and project management principles. All these actions are an essential element of the railway reform.
I would like to emphasise that railway reform is a common process, in which all market players participate. Unbalanced actions, selfish motives and development in different directions may cause malfunctions in the work of the railway transport services market, decrease its efficiency, and, finally, turn railway transport from a factor of economic growth into a limiter of economic development. No consignors, railway companies, or the state need that. We will be able to reach our goals and create a reliable transport basis for further economic growth only if we combine our efforts. 
By Valery Reshetnikov, 
Senior Vice President of Russian Railways JSC
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Reform Helped to Attract Private Investments
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In the 11 years of the reform, the railway transport services market has undergone a dramatic transformation, and Russian railways have changed, too. While striving to reach the strategic goals of the reform, RZD brooked no serious failures or breaches of the transportation process. As a result, the monopolistic system of the Ministry of Railways, which combined the functions of state regulation, administration, and maintenance, was replaced by a business structure that has proved its financial vitality, ability to work in the market (even when the macroeconomic market situation is negative for railway transportation) and improve competitiveness, and to make its services more attractive to clients. 
A new railway transport system was practically created. It resembles the model of neither American nor European railways. The new system is able to provide non-stop transportation for the needs of industries and the people of Russia. The complicated state structure of the Ministry of Railways was diversified into a holding company with an adjusted system of accounting and tax accounting providing valid information about the operational results and businesses. At the moment, Russian and foreign financial institutes recognise that the company is a stable and reputable borrower in the transport sector.  
Dramatic changes took place in the railway transport services market. As a result, the development of competition in the rolling stock operation sector was stimulated. Private passenger transporters appeared on the railway network. Competition in the sectors of rolling stock repair and maintenance, and services for passengers is developing as well.
During the reform, conditions were created to attract private investments into competitive market sectors. For example, private operators invested more than RUR 400 billion into the purchase of cargo wagons.
85 daughter companies and subsidiaries were launched in the reform period. This stimulated development of competition in the markets of design and research and construction works, industrial manufacturing, logistics, social sectors, and others. An important result was a more efficient operation in comparison with affiliates amid the legal status transfer. Daughter companies of RZD now generate more than 30% of the revenue. Meanwhile, they own just 15% of all assets of the holding company.
To create additional sources of investment into railway infrastructure development, as demanded by regulators, shareholdings in 54 daughter companies are to be sold before 2013. Attraction of private strategic investors will make the launched companies more efficient, help to attract means to renew and re-equip the producing base of plants and, consequently, to improve the quality of their output. 
Last October, a 75% shareholding in RZD’s largest subsidiary Freight One was sold for a record sum of RUR 125.5 billion. Thus, the basic structure of the competitive cargo wagon operation market was formed because RZD stopped dominating in the market of railcar supply for transportation. Nowadays, over 76% of cargo volume is carried in the freight wagons of operators independent of RZD.

The State Forms the Order for Transportation
One of the most successful results of the reform was the transformation of the holding company’s passenger sector. Federal Passenger Company was launched on October 1, 2010. Starting from 2011, suburban passenger transportation was provided by 26 special subsidiaries launched on a parity basis with Russian regions. 
Long-distance transportation of passengers by Federal Passenger Company became possible due to the decision made by the RF Government on compensation for the lost revenue from transportation in sitting carriages and third-class sleepers. It allowed to keep passenger transportation available for people and created prerequisites to develop competition in the socially important sector. 
The suburban passenger transportation sector has the same task. Simultaneously, the transport load on people must not increase, and the constitutional right to free movement must be guaranteed. 
To restrain the increase in tariffs, in October 2011 the Government decided on implementing a privileged tariff on infrastructure services for suburban passenger companies. This allowed to cut loading on the regional budgets and to equalise the operating conditions of railways and road transport. In turn, RZD kept the fee for electric multiple unit stock rented by suburban companies the same as in the previous year. This reduced their total expenditure.
A radical decision is needed to make the suburban passenger transportation sector profitable: regions of the Russian Federation should give subsidies to compensate for the revenue the companies engaged in suburban transportation have lost, taking into account the tariffs on transportation and the order for railway services in the adjusted volume, which will make the transporter’s services available. Last year, however, the holding company’s losses in this sector amounted to approximately RUR 10 billion. 
Lossless suburban transportation is a principally important issue. Here we deal with creation of conditions for private capital investment into this market sector, and making it partly responsible for suburban transportation and, more importantly, for the process of its development taking into account passengers’ demands.  
That is why the basic target in the passenger transportation sector in the short term will be the development of a more accurate system of regional responsibility for socially important transportation and putting regions in charge of compensation for all revenue the transporter has lost. The basis for this will be the federal law “On Organisation of Regular Passenger Railway Transportation in the RF”. The bill is being developed. This document envisages that federal and regional authorities will define the need for the volume and quality of passenger transportation.  

It Is High Time to Form a Pool of Operators
The most difficult step for the company was creation of conditions to develop competition in the cargo railcar operation sector. The transfer of railcars to the Second Freight Company last September practically abolished the public park. Firstly, it escalated the problem of traffic control (and it took several decades to form the system to manage the public wagon park). Secondly, disruption of wagon flows brought about an increase in the unreasonable loading on the infrastructure.
Over 93% of Russia’s 1.6 million railcars are now private. There are more than 1,850 owners of rolling stock.   
The expectations of wagon park consolidation by three or four large companies operating on the entire network, which must become the main body of the operator market, have not been justified so far. To solve arising problems, a pack of urgent measures have been formed to compensate for the problems and create conditions to consolidate universal cargo wagons under the control of RZD. Normative amendments may be put to adjust operators’ and rolling stock owners’ policy on the railway network and to improve tariff regulation in the railway market.
There are no reasons to fear that the consolidation of  some universal wagons under the control of RZD will revive the monopoly in the market. In the opinion of experts, to solve the urgent problems of the cargo transportation sector, a park of 200,000-250,000 gondola cars must be consolidated, which is less than a quarter of the entire wagon park and  half of the universal rolling stock fleet. And the activity of RZD will be regulated with due account for antitrust legislation. 
The issue of a decree by the Transport Ministry to regulate specific features of empty wagon transportation on public railway infrastructure, implementation of amendments to the acting documents of the Federal Tariff Service concerning price formation for cargo transportation services provided by RZD in railcars it has attracted from private companies, and putting amendments to the Russian legislation– all these measures will help to redress the imbalance in wagon flows and to supply consignors with the necessary resources for loading their freight.
 I would like to emphasise that the suggested consolidation of some universal railcars in the transporter’s hands is neither a step backwards, nor breach of competition in the market. Also, it does not mean the revision of the Target Market Model. It is a measure stabilising the market. It is necessary to organise railway transport’s work under new conditions.

Network Contract as Orienting Point
At the fourth stage of the reform, railway transport will be reformed in accordance with the plans to carry out the structural reform and the Target Market Model to 2015, and we will be punctilious in following them. No critical situations, such as a failure to transport the entire cargo volume or inefficient management of rolling stock fleet, must arise. A well-functioning system must not be destabilized on the plea of development of competition in those sectors of the railway transportation market where there are no objective prerequisites for it. We must not disintegrate the railway system, dividing transportation activities and infrastructure services.  
Experience has shown that approved theoretical decisions are not dogma. We have already adjusted some planned measures to the real conditions of the market. We must treat the issues of normative and legislative base improvement, tariff regulation, and formation of new relations in the market carefully and reasonably. 
At the fourth stage of the reform, the Target Market Model envisages launching pilot projects to develop competition between transporters on specified lines according to the principle of developing competition “for the line” and “on the line”. A normative base for local transporters institution formation is being developed. The cargo turnover of local transporters may amount to 5-10% of the total cargo turnover by 2015.
On the basis of the results of this work, the decision on expanding the area for local transporters’ activity and transferring them to network-wide transporters will be made after 2015. 
A key goal will be to form a balanced financial and economic model of railway infrastructure development, and to create the necessary resources for its progress. The basis for it will be a network contract concluded between the state and the infrastructure owner. This form of strategic interaction between the state and infrastructure owner has been applied as an additional instrument of tariff formation in a lot of European countries, in particular in Germany, where it has proved its high efficiency.
This mechanism allows to keep the quality of infrastructure at a level defined by the state, providing economic availability of railway transportation and equal competitive conditions for the work of different transport modes.

Fight for the Market     
Another thing I would like to pay more attention to is further improvement of the management system in RZD. Our goal is to adjust the management system with the real model of relations in the railway transportation market, to create conditions to reveal the potential of local senior managers, and, as a result, to cut specific administrative expenses, and to improve key figures in operating activity.
The results of the reform are widely known. They are works to form the corporate centre and its regional structures, to create verticals according to type of business activity, to abolish divisions in railways. To improve the quality of services and to fight for the market with competitive transport modes, the company had to transfer to service- and client-oriented management models in some business activities. 
Major lines of further business development are defined on the basis of close commercial and financial interdependence of the transportation process participants, who are united by the key asset – railway infrastructure. We have taken the course of forming a strategic holding company with strengthened control functions. From an organizational viewpoint, this means that senior managers are concentrated on fulfilling strategic tasks without groundless interference in the operating activity of business units. 
Considering the commonality of technological tasks and additional synergy effects from coordinated activity, three major business blocks are to be formed – “Passenger Transportation,” “Freight Transportation,” and “Infrastructure.” As soon as the heads of directorates and subsidiaries get fuller responsibilities and powers, it will hardly be possible to overestimate their role in making operations more efficient. 
The role of heads of railways – affiliates of RZD will increase. They must become representatives of the company’s President in their regions, providing technological and corporative coordination of RZD’s affiliates and subsidiaries. Already at the beginning of the last year, the heads of railways got additional powers and responsibilities for the operating activities of the company’s divisions and efficient interaction with authorities, business partners, and public representatives.  
A separate block of tasks in the sector of management system improvement is to make management of subsidiaries more efficient. We strive to make corporate management of subsidiaries meet international standards. Single corporate policies and procedures are carried out for that. In particular, we attract independent directors to work on the boards of directors of RZD’s subsidiaries, establish efficient committees attached to boards of directors, and form single corporate policies and project management principles. All these actions are an essential element of the railway reform.
I would like to emphasise that railway reform is a common process, in which all market players participate. Unbalanced actions, selfish motives and development in different directions may cause malfunctions in the work of the railway transport services market, decrease its efficiency, and, finally, turn railway transport from a factor of economic growth into a limiter of economic development. No consignors, railway companies, or the state need that. We will be able to reach our goals and create a reliable transport basis for further economic growth only if we combine our efforts. 
By Valery Reshetnikov, 
Senior Vice President of Russian Railways JSC
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