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Breakthrough Technologies
A strategic goal of RZD’s development is the enhancement of transportation efficiency, the increase in the quality of services and transportation safety. Directions of innovations are formed in accordance with these goals. First of all, they are targeted at creation of conditions for stable, safe, and efficient functioning of railways as the key element of the RF transport system.
This contributes to increasing transport service quality and safety in accordance with best world practices. They are to help eliminate bottle-necks on the RZD network, and to stimulate Russian railways’ integration into the world transport system, and to contribute to reducing the negative impact on the environment.
The directions of innovation are mentioned in such important documents for Russian railways as “The RF Transport Strategy until 2020,” “The Strategy of Railway Transport Development in the RF until 2030,” “Strategic Directions of Scientific and Technological Development of RZD until 2015,” and “The Programme of Innovative Development of RZD until 2015.”
The projects carried out on the network may be divided into three groups – the enhancement of the efficiency of locomotives and rolling stock; the transport infrastructure improvement; and the enhancement of the communication systems.

Enhancement of Haulage Efficiency
A priority in the cargo transportation sector is the development of a series of up-to-date locomotives. The most important of them is the two-unit eight-axle electric freight locomotive with asynchronous traction motor of 2ES10 model (“Granite”). This locomotive was manufactured by the Urals Locomotives LLC (a joint venture between the Sinara group of companies and Siemens).
A pilot cargo DC electric locomotive 2ES10 model passed tests at the end of 2010. It has a number of advantages in comparison with old locomotives. Firstly, the individual regulation of traction motors allows maximum traction: “Granite” is almost twice as powerful as, for example, VL11 locomotive, but consumes less energy. Secondly, its range between repairs is longer than that of the previous generation of machinery. Thirdly, the maintenance of the new electric locomotive in depots is simplified. Due to all these characteristics, the maintenance expenditures of RZD is decreased. A microprocessor-based system of control and static convertors reduces the number of contact elements, and contributes to the improved reliability of the new train. This provides a high safety level of cargo train transportation. This is the most efficient locomotive used on the Russian railway network. In the words of Dmitry Pumpyansky, Chairman of the Board of Directors of the Sinara group of companies, the new electric train has no equivalent not only in Russia, but on the entire 1520 network. Using standard weight parameters, it can haul trains weighing by 40-50% more than VL11 electric locomotives can. 60% of engineering solutions used in the new locomotive have never been applied in the Russian machine building sector before. More than a hundred Russian enterprises are engaged in supplying components for it.
In 2011, the Urals Locomotives delivered the first batch of 2ES10 electric locomotives to RZD. According to the contract concluded by the companies, more than 220 such locomotives are to be manufactured by 2016.
Two types of electric current are used on the RZD network – direct current and alternating current. Therefore, another innovation – the 2ES5K electric locomotive (“Ermak”) – uses alternating current. It was developed by the Russian Research Institute of Electric Locomotive Building (VElNII) and Novocherkassk Electric Locomotive Building Plant (NEVZ).
 The innovation of the electric locomotive is that its every wheel-set is rotated by its own traction electric engine. Such engines weigh less than those installed in older electric locomotives. Also, they are more energy-efficient and powerful. “Ermak” may be driven from the cabin of any section either manually or automatically with different train driving modes. The safety level is enhanced due to the automated braking system and the system of indicators informing about the work of different nodes of the locomotive. The driving desk resembles a computer display. Data is processed automatically. Hitched with another locomotive or an additional locomotive section (a booster), the machine can haul heavy trains
 Initially, the locomotive was designed to operate on the Transsib – the severe climate of that region was taken into account. Machines of this type can haul heavy and long trains, thus enhancing the carrying capacity of the railway infrastructure in Siberia and the Far East.   
The third most important innovation is the TEM14 shunting locomotive with two diesel power supply units. It was manufactured by Sinara – Transport Machines OJSC. It was designed for sorting wagons at stations. The innovation combines an enhanced capacity, reliability, and cost effectiveness. During shunting operations, the major part of fuel is consumed in standby mode. The engine of a diesel locomotive cannot be switched off (especially in winter), and running idle is too fuel-consuming. That’s why the principle of two diesel engines was applied: the first of them supports the activity of the locomotive and the second – the traction. In other words, the first compact engine supports the performance of the machine’s systems, including the power supply unit in case it is stopped. That’s why the power diesel engine may be started fast for the diesel locomotive to begin moving.
TEM14 can be operated through multiple unit control systems with synchronised control over diesel locomotives from one cabin.    
Another specific feature is the ability to idle at the temperature of -50°C without any additional need for conservation, coolant discharge, and warming its nodes and systems. The diesel engine is started without connection to any external energy sources thanks to the installed preheater. An autonomous heater for the control cab is also installed to create comfortable conditions for locomotive drivers before the basic diesel starts.
All these innovations help to save at least 20% of diesel fuel in comparison with the TEM7A diesel locomotive.
Special attention should be paid to the gas turbine locomotive made by Transmashholding and Caterpillar. It can haul trains weighing as much as those usually carried by electric locomotives and may replace a three- or four-section diesel locomotive. 
Calculations of the cost of a gas turbine locomotive over its life cycle made by RZD specialists have proved its high efficiency. Expenditure on maintenance and the power supply unit repair is 57% less than that on maintaining diesel engines of a similar total capacity, which are now in use on the diesel locomotive network. On the whole, the gas turbine locomotive will cut expenses during its life cycle by 20-22% in comparison with the 2TE116 mainline diesel locomotive.
Thanks to its capacity, the locomotive managed to haul a train weighing 15,000 tons on the RZD’s network. It was a world record for autonomous locomotives with one power supply unit.
Carbon emissions are 90% less than those of a diesel locomotive, and by 80% less than the standard emissions envisaged in the requirements for diesel engines in the EU as per directives issued in 2012. The ambient noise level is also minimal.  
According to Valentin Gapanovich, Senior Vice President of RZD, one of the company’s tasks is to replace up to 30% of diesel fuel consumed by autonomous locomotives with natural gas by 2030.

Next-Generation Railcars
A series of innovative solutions is connected with supplying railway operators with new wagons. RZD is interested in such rolling stock to enhance reliability of transportation and expand the infrastructure capacity at the expense of extended cargo carrying capacity. 
Here we must mention a gondola car for coal transportation with a 27 t. axle load manufactured by Roslavl Wagon Repair Plant and the Research and Production Corporation Uralvagonzavod. It was developed in accordance with the programme of Russian transport companies’ railcar fleet renewal. “The Strategy of Railway Transport Development in the RF until 2030” defined the key requirements of new freight railcars: cargo carrying capacity of 25-27 t. axle load and the distance run between repairs of up to 500,000 km instead of the current 210,000 km.
Uralvagonzavod was one of the first companies on the 1520 network to develop and start mass production of this rolling stock, and, particularly, a special 4-axle gondola car of 12-5158 specification for coal transportation on 18-5155 bogies with 27 t. axle load. 
“Mass production of rolling stock with 25-27 t. axle load was held back in Russia by the condition of the railway infrastructure. First of all, the axle load is limited on a number of sections because of the condition of the permanent way and the lack of equipment for servicing such railcars, that’s why they are purchased to operate on specific routes,” explains Alexander Pranov, Deputy Chief Engineer of the Urals Railcar Building Engineering Bureau.
In particular, such lines are built to serve large industrial extracting and processing enterprises. Rolling stock with increased capacity is one of the conditions for their further development. 
A breakthrough is the 13-9781 model joint-type flat wagon for large-capacity containers. It was developed by Promtractor-Wagon (a subsidiary of Machinery & Industrial Group N.V.). It is a railcar for transportation of large-capacity containers weighing up to 40 tons.  
The maximum static design load of a wheel-set on rails is 23.5 t. A normal flat car can transport either two 20-foot boxes or one 40-foot box. The last variant is less profitable for cargo owners, because there remains a lot of vacant space. The new flat wagon can carry two 40-foot containers.
A weakness of the railcars is the complicated molded parts, especially the bogies. The innovation offered by Tikhvin Railcar Building Plant solves this problem. The plant produces Barber S-2-R bogies with 23.5 t. axle load. They were developed by Standard Car Truck company (in the USA) and modified by the Tikhvin Railcar Building Plant for Russian conditions. The Certification Register at the federal railway transport gave a conformity certificate. The bogies are registered in the RF as the 18-9810 model.
One more innovation is the double-deck railcar produced by Tver Wagon Building Plant (TVZ, incorporated in Transmashholding). All its systems were tested thoroughly. A compartment coach has 50 sleeping berths. A separate compartment and one of WCs are designated for a disabled passenger and one travelling companion.
According to the contract, in 2013, TVZ will supply to Russian Railways 50 double-deck coaches: 4 staff compartment cars (61-4472 model), 4 restaurant cars and 42 cars of 61-4465 model – 38 four-bed compartment coaches and 4 two-bed compartment coaches. They will form two trainsets to be operated on the Moscow-Adler route, including transportation of participants and guests to the 2014 Olympic Games in Sochi.

Satellite and Digital Technologies
RZD actively implements satellite technologies: in accordance with the targets set by the RF Government, over 36% of rolling stock on the network was equipped with GLONASS/GPS navigation electronics in the last 5-7 years.
Satellite technologies are applied in the systems of Train traffic interval regulation by integrated coordinating systems. 
A system for detailed traffic control, applied at the Moscow – St Petersburg fast mainline has been developed. This line was used as a pilot project for an intelligent dispatcher control system. In the words of Alexander Korchagin, Head of the Centre of Innovative Development of RZD the project envisages a number of automatic solutions, including “Automatic Train Operation” and “Automatic Train Driver.” 
Satellite technologies are useful for monitoring infrastructure repair and maintenance operations as well. Alexander Vasileisky, Head of the Centre of Space-Based Processing Technologies Implementation at NIIAS, says that work is underway to control hazardous cargo transportation with the help of satellite navigation.
In the framework of the RZD approved concept of lubrication in the “wheel-rail” system, an automatic complex has been added to the base of a passenger wagon, where lubrication supply is controlled with the help of the GLONASS/GPS system.
Jointly with companies incorporated in the Finmeccanica concern, work is underway to create a Russian-Italian train control system, which is similar to ERTMS Level-2 (being able to use GSM-R to communicate with its Radio Block Center) but adds satellite navigation to the system. Unlike Eurobalise used in Europe (electronic beacon or transponder placed between the rails of a railway to give the exact location of a train), the system combines inertial navigation and wheel sensors to measure distance. 
The upper layer of the transport network at the Olympic Games-2014 is to be equipped with the ITARUS-ATC system.
This system will launch high-speed traffic, help to monitor rolling stock and infrastructure, and to plan train traffic more efficiently.
Application of satellite technologies on the RF railways envisages equipping the network with GLONASS/GPS as well as such systems as INMARSAT and Resource-DK1.
RZD attracts a number of partners to projects with satellite technologies. Among them there are such companies as OCV CJSC (system of rolling stock automatic identification “PALMA”), GeoStar Navigation, Cesar Satellite, and SPIRIT DSP.
In the digital technologies sector, a priority is innovation connected with implementation of specialised diagnostic complexes and non-destructive flaw detection facilities. Devices developed by TVEMA, RPC INFOTRANS,  Industrial and Innovation Company Progress, and Radioavionika, have become an important link in provision of safe traffic on the Russian railways.
This review does not cover all the innovations carried out by RZD. Meanwhile, the projects mentioned in the article show that the innovative development of railways is a priority of the sector. Digital and satellite technologies herald a new age of railway sector development in the creation of a complex control and enhanced train safety system.
By Alexander Solntsev

Best innovative projects of RZD
1. “Granite” electric locomotive
2. “Ermak” electric locomotive
3. TEM14 shunting locomotive with two diesel power supply units
4. Gas turbine locomotive
5. 27 t. axle load gondola car for coal transportation
6. Joint-type flat wagon for large-capacity containers
7. Next-generation bogies for cargo railcars
8. Double-deck passenger railcar
9. Satellite technologies
10. Non-destructive flaw detection facilities

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Breakthrough Technologies
A strategic goal of RZD’s development is the enhancement of transportation efficiency, the increase in the quality of services and transportation safety. Directions of innovations are formed in accordance with these goals. First of all, they are targeted at creation of conditions for stable, safe, and efficient functioning of railways as the key element of the RF transport system.
This contributes to increasing transport service quality and safety in accordance with best world practices. They are to help eliminate bottle-necks on the RZD network, and to stimulate Russian railways’ integration into the world transport system, and to contribute to reducing the negative impact on the environment.
The directions of innovation are mentioned in such important documents for Russian railways as “The RF Transport Strategy until 2020,” “The Strategy of Railway Transport Development in the RF until 2030,” “Strategic Directions of Scientific and Technological Development of RZD until 2015,” and “The Programme of Innovative Development of RZD until 2015.”
The projects carried out on the network may be divided into three groups – the enhancement of the efficiency of locomotives and rolling stock; the transport infrastructure improvement; and the enhancement of the communication systems.

Enhancement of Haulage Efficiency
A priority in the cargo transportation sector is the development of a series of up-to-date locomotives. The most important of them is the two-unit eight-axle electric freight locomotive with asynchronous traction motor of 2ES10 model (“Granite”). This locomotive was manufactured by the Urals Locomotives LLC (a joint venture between the Sinara group of companies and Siemens).
A pilot cargo DC electric locomotive 2ES10 model passed tests at the end of 2010. It has a number of advantages in comparison with old locomotives. Firstly, the individual regulation of traction motors allows maximum traction: “Granite” is almost twice as powerful as, for example, VL11 locomotive, but consumes less energy. Secondly, its range between repairs is longer than that of the previous generation of machinery. Thirdly, the maintenance of the new electric locomotive in depots is simplified. Due to all these characteristics, the maintenance expenditures of RZD is decreased. A microprocessor-based system of control and static convertors reduces the number of contact elements, and contributes to the improved reliability of the new train. This provides a high safety level of cargo train transportation. This is the most efficient locomotive used on the Russian railway network. In the words of Dmitry Pumpyansky, Chairman of the Board of Directors of the Sinara group of companies, the new electric train has no equivalent not only in Russia, but on the entire 1520 network. Using standard weight parameters, it can haul trains weighing by 40-50% more than VL11 electric locomotives can. 60% of engineering solutions used in the new locomotive have never been applied in the Russian machine building sector before. More than a hundred Russian enterprises are engaged in supplying components for it.
In 2011, the Urals Locomotives delivered the first batch of 2ES10 electric locomotives to RZD. According to the contract concluded by the companies, more than 220 such locomotives are to be manufactured by 2016.
Two types of electric current are used on the RZD network – direct current and alternating current. Therefore, another innovation – the 2ES5K electric locomotive (“Ermak”) – uses alternating current. It was developed by the Russian Research Institute of Electric Locomotive Building (VElNII) and Novocherkassk Electric Locomotive Building Plant (NEVZ).
 The innovation of the electric locomotive is that its every wheel-set is rotated by its own traction electric engine. Such engines weigh less than those installed in older electric locomotives. Also, they are more energy-efficient and powerful. “Ermak” may be driven from the cabin of any section either manually or automatically with different train driving modes. The safety level is enhanced due to the automated braking system and the system of indicators informing about the work of different nodes of the locomotive. The driving desk resembles a computer display. Data is processed automatically. Hitched with another locomotive or an additional locomotive section (a booster), the machine can haul heavy trains
 Initially, the locomotive was designed to operate on the Transsib – the severe climate of that region was taken into account. Machines of this type can haul heavy and long trains, thus enhancing the carrying capacity of the railway infrastructure in Siberia and the Far East.   
The third most important innovation is the TEM14 shunting locomotive with two diesel power supply units. It was manufactured by Sinara – Transport Machines OJSC. It was designed for sorting wagons at stations. The innovation combines an enhanced capacity, reliability, and cost effectiveness. During shunting operations, the major part of fuel is consumed in standby mode. The engine of a diesel locomotive cannot be switched off (especially in winter), and running idle is too fuel-consuming. That’s why the principle of two diesel engines was applied: the first of them supports the activity of the locomotive and the second – the traction. In other words, the first compact engine supports the performance of the machine’s systems, including the power supply unit in case it is stopped. That’s why the power diesel engine may be started fast for the diesel locomotive to begin moving.
TEM14 can be operated through multiple unit control systems with synchronised control over diesel locomotives from one cabin.    
Another specific feature is the ability to idle at the temperature of -50°C without any additional need for conservation, coolant discharge, and warming its nodes and systems. The diesel engine is started without connection to any external energy sources thanks to the installed preheater. An autonomous heater for the control cab is also installed to create comfortable conditions for locomotive drivers before the basic diesel starts.
All these innovations help to save at least 20% of diesel fuel in comparison with the TEM7A diesel locomotive.
Special attention should be paid to the gas turbine locomotive made by Transmashholding and Caterpillar. It can haul trains weighing as much as those usually carried by electric locomotives and may replace a three- or four-section diesel locomotive. 
Calculations of the cost of a gas turbine locomotive over its life cycle made by RZD specialists have proved its high efficiency. Expenditure on maintenance and the power supply unit repair is 57% less than that on maintaining diesel engines of a similar total capacity, which are now in use on the diesel locomotive network. On the whole, the gas turbine locomotive will cut expenses during its life cycle by 20-22% in comparison with the 2TE116 mainline diesel locomotive.
Thanks to its capacity, the locomotive managed to haul a train weighing 15,000 tons on the RZD’s network. It was a world record for autonomous locomotives with one power supply unit.
Carbon emissions are 90% less than those of a diesel locomotive, and by 80% less than the standard emissions envisaged in the requirements for diesel engines in the EU as per directives issued in 2012. The ambient noise level is also minimal.  
According to Valentin Gapanovich, Senior Vice President of RZD, one of the company’s tasks is to replace up to 30% of diesel fuel consumed by autonomous locomotives with natural gas by 2030.

Next-Generation Railcars
A series of innovative solutions is connected with supplying railway operators with new wagons. RZD is interested in such rolling stock to enhance reliability of transportation and expand the infrastructure capacity at the expense of extended cargo carrying capacity. 
Here we must mention a gondola car for coal transportation with a 27 t. axle load manufactured by Roslavl Wagon Repair Plant and the Research and Production Corporation Uralvagonzavod. It was developed in accordance with the programme of Russian transport companies’ railcar fleet renewal. “The Strategy of Railway Transport Development in the RF until 2030” defined the key requirements of new freight railcars: cargo carrying capacity of 25-27 t. axle load and the distance run between repairs of up to 500,000 km instead of the current 210,000 km.
Uralvagonzavod was one of the first companies on the 1520 network to develop and start mass production of this rolling stock, and, particularly, a special 4-axle gondola car of 12-5158 specification for coal transportation on 18-5155 bogies with 27 t. axle load. 
“Mass production of rolling stock with 25-27 t. axle load was held back in Russia by the condition of the railway infrastructure. First of all, the axle load is limited on a number of sections because of the condition of the permanent way and the lack of equipment for servicing such railcars, that’s why they are purchased to operate on specific routes,” explains Alexander Pranov, Deputy Chief Engineer of the Urals Railcar Building Engineering Bureau.
In particular, such lines are built to serve large industrial extracting and processing enterprises. Rolling stock with increased capacity is one of the conditions for their further development. 
A breakthrough is the 13-9781 model joint-type flat wagon for large-capacity containers. It was developed by Promtractor-Wagon (a subsidiary of Machinery & Industrial Group N.V.). It is a railcar for transportation of large-capacity containers weighing up to 40 tons.  
The maximum static design load of a wheel-set on rails is 23.5 t. A normal flat car can transport either two 20-foot boxes or one 40-foot box. The last variant is less profitable for cargo owners, because there remains a lot of vacant space. The new flat wagon can carry two 40-foot containers.
A weakness of the railcars is the complicated molded parts, especially the bogies. The innovation offered by Tikhvin Railcar Building Plant solves this problem. The plant produces Barber S-2-R bogies with 23.5 t. axle load. They were developed by Standard Car Truck company (in the USA) and modified by the Tikhvin Railcar Building Plant for Russian conditions. The Certification Register at the federal railway transport gave a conformity certificate. The bogies are registered in the RF as the 18-9810 model.
One more innovation is the double-deck railcar produced by Tver Wagon Building Plant (TVZ, incorporated in Transmashholding). All its systems were tested thoroughly. A compartment coach has 50 sleeping berths. A separate compartment and one of WCs are designated for a disabled passenger and one travelling companion.
According to the contract, in 2013, TVZ will supply to Russian Railways 50 double-deck coaches: 4 staff compartment cars (61-4472 model), 4 restaurant cars and 42 cars of 61-4465 model – 38 four-bed compartment coaches and 4 two-bed compartment coaches. They will form two trainsets to be operated on the Moscow-Adler route, including transportation of participants and guests to the 2014 Olympic Games in Sochi.

Satellite and Digital Technologies
RZD actively implements satellite technologies: in accordance with the targets set by the RF Government, over 36% of rolling stock on the network was equipped with GLONASS/GPS navigation electronics in the last 5-7 years.
Satellite technologies are applied in the systems of Train traffic interval regulation by integrated coordinating systems. 
A system for detailed traffic control, applied at the Moscow – St Petersburg fast mainline has been developed. This line was used as a pilot project for an intelligent dispatcher control system. In the words of Alexander Korchagin, Head of the Centre of Innovative Development of RZD the project envisages a number of automatic solutions, including “Automatic Train Operation” and “Automatic Train Driver.” 
Satellite technologies are useful for monitoring infrastructure repair and maintenance operations as well. Alexander Vasileisky, Head of the Centre of Space-Based Processing Technologies Implementation at NIIAS, says that work is underway to control hazardous cargo transportation with the help of satellite navigation.
In the framework of the RZD approved concept of lubrication in the “wheel-rail” system, an automatic complex has been added to the base of a passenger wagon, where lubrication supply is controlled with the help of the GLONASS/GPS system.
Jointly with companies incorporated in the Finmeccanica concern, work is underway to create a Russian-Italian train control system, which is similar to ERTMS Level-2 (being able to use GSM-R to communicate with its Radio Block Center) but adds satellite navigation to the system. Unlike Eurobalise used in Europe (electronic beacon or transponder placed between the rails of a railway to give the exact location of a train), the system combines inertial navigation and wheel sensors to measure distance. 
The upper layer of the transport network at the Olympic Games-2014 is to be equipped with the ITARUS-ATC system.
This system will launch high-speed traffic, help to monitor rolling stock and infrastructure, and to plan train traffic more efficiently.
Application of satellite technologies on the RF railways envisages equipping the network with GLONASS/GPS as well as such systems as INMARSAT and Resource-DK1.
RZD attracts a number of partners to projects with satellite technologies. Among them there are such companies as OCV CJSC (system of rolling stock automatic identification “PALMA”), GeoStar Navigation, Cesar Satellite, and SPIRIT DSP.
In the digital technologies sector, a priority is innovation connected with implementation of specialised diagnostic complexes and non-destructive flaw detection facilities. Devices developed by TVEMA, RPC INFOTRANS,  Industrial and Innovation Company Progress, and Radioavionika, have become an important link in provision of safe traffic on the Russian railways.
This review does not cover all the innovations carried out by RZD. Meanwhile, the projects mentioned in the article show that the innovative development of railways is a priority of the sector. Digital and satellite technologies herald a new age of railway sector development in the creation of a complex control and enhanced train safety system.
By Alexander Solntsev

Best innovative projects of RZD
1. “Granite” electric locomotive
2. “Ermak” electric locomotive
3. TEM14 shunting locomotive with two diesel power supply units
4. Gas turbine locomotive
5. 27 t. axle load gondola car for coal transportation
6. Joint-type flat wagon for large-capacity containers
7. Next-generation bogies for cargo railcars
8. Double-deck passenger railcar
9. Satellite technologies
10. Non-destructive flaw detection facilities

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            [SECTION_META_DESCRIPTION] => <img src="/ufiles/image/rus/inter/2012/3/3.jpg" border="1" alt=" " hspace="5" width="200" height="264" align="left" />The innovative potential of the Russian rail machine building sector has increased lately. This is a review of the largest new projects being carried out on the Russian railways network.
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Breakthrough Technologies
A strategic goal of RZD’s development is the enhancement of transportation efficiency, the increase in the quality of services and transportation safety. Directions of innovations are formed in accordance with these goals. First of all, they are targeted at creation of conditions for stable, safe, and efficient functioning of railways as the key element of the RF transport system.
This contributes to increasing transport service quality and safety in accordance with best world practices. They are to help eliminate bottle-necks on the RZD network, and to stimulate Russian railways’ integration into the world transport system, and to contribute to reducing the negative impact on the environment.
The directions of innovation are mentioned in such important documents for Russian railways as “The RF Transport Strategy until 2020,” “The Strategy of Railway Transport Development in the RF until 2030,” “Strategic Directions of Scientific and Technological Development of RZD until 2015,” and “The Programme of Innovative Development of RZD until 2015.”
The projects carried out on the network may be divided into three groups – the enhancement of the efficiency of locomotives and rolling stock; the transport infrastructure improvement; and the enhancement of the communication systems.

Enhancement of Haulage Efficiency
A priority in the cargo transportation sector is the development of a series of up-to-date locomotives. The most important of them is the two-unit eight-axle electric freight locomotive with asynchronous traction motor of 2ES10 model (“Granite”). This locomotive was manufactured by the Urals Locomotives LLC (a joint venture between the Sinara group of companies and Siemens).
A pilot cargo DC electric locomotive 2ES10 model passed tests at the end of 2010. It has a number of advantages in comparison with old locomotives. Firstly, the individual regulation of traction motors allows maximum traction: “Granite” is almost twice as powerful as, for example, VL11 locomotive, but consumes less energy. Secondly, its range between repairs is longer than that of the previous generation of machinery. Thirdly, the maintenance of the new electric locomotive in depots is simplified. Due to all these characteristics, the maintenance expenditures of RZD is decreased. A microprocessor-based system of control and static convertors reduces the number of contact elements, and contributes to the improved reliability of the new train. This provides a high safety level of cargo train transportation. This is the most efficient locomotive used on the Russian railway network. In the words of Dmitry Pumpyansky, Chairman of the Board of Directors of the Sinara group of companies, the new electric train has no equivalent not only in Russia, but on the entire 1520 network. Using standard weight parameters, it can haul trains weighing by 40-50% more than VL11 electric locomotives can. 60% of engineering solutions used in the new locomotive have never been applied in the Russian machine building sector before. More than a hundred Russian enterprises are engaged in supplying components for it.
In 2011, the Urals Locomotives delivered the first batch of 2ES10 electric locomotives to RZD. According to the contract concluded by the companies, more than 220 such locomotives are to be manufactured by 2016.
Two types of electric current are used on the RZD network – direct current and alternating current. Therefore, another innovation – the 2ES5K electric locomotive (“Ermak”) – uses alternating current. It was developed by the Russian Research Institute of Electric Locomotive Building (VElNII) and Novocherkassk Electric Locomotive Building Plant (NEVZ).
 The innovation of the electric locomotive is that its every wheel-set is rotated by its own traction electric engine. Such engines weigh less than those installed in older electric locomotives. Also, they are more energy-efficient and powerful. “Ermak” may be driven from the cabin of any section either manually or automatically with different train driving modes. The safety level is enhanced due to the automated braking system and the system of indicators informing about the work of different nodes of the locomotive. The driving desk resembles a computer display. Data is processed automatically. Hitched with another locomotive or an additional locomotive section (a booster), the machine can haul heavy trains
 Initially, the locomotive was designed to operate on the Transsib – the severe climate of that region was taken into account. Machines of this type can haul heavy and long trains, thus enhancing the carrying capacity of the railway infrastructure in Siberia and the Far East.   
The third most important innovation is the TEM14 shunting locomotive with two diesel power supply units. It was manufactured by Sinara – Transport Machines OJSC. It was designed for sorting wagons at stations. The innovation combines an enhanced capacity, reliability, and cost effectiveness. During shunting operations, the major part of fuel is consumed in standby mode. The engine of a diesel locomotive cannot be switched off (especially in winter), and running idle is too fuel-consuming. That’s why the principle of two diesel engines was applied: the first of them supports the activity of the locomotive and the second – the traction. In other words, the first compact engine supports the performance of the machine’s systems, including the power supply unit in case it is stopped. That’s why the power diesel engine may be started fast for the diesel locomotive to begin moving.
TEM14 can be operated through multiple unit control systems with synchronised control over diesel locomotives from one cabin.    
Another specific feature is the ability to idle at the temperature of -50°C without any additional need for conservation, coolant discharge, and warming its nodes and systems. The diesel engine is started without connection to any external energy sources thanks to the installed preheater. An autonomous heater for the control cab is also installed to create comfortable conditions for locomotive drivers before the basic diesel starts.
All these innovations help to save at least 20% of diesel fuel in comparison with the TEM7A diesel locomotive.
Special attention should be paid to the gas turbine locomotive made by Transmashholding and Caterpillar. It can haul trains weighing as much as those usually carried by electric locomotives and may replace a three- or four-section diesel locomotive. 
Calculations of the cost of a gas turbine locomotive over its life cycle made by RZD specialists have proved its high efficiency. Expenditure on maintenance and the power supply unit repair is 57% less than that on maintaining diesel engines of a similar total capacity, which are now in use on the diesel locomotive network. On the whole, the gas turbine locomotive will cut expenses during its life cycle by 20-22% in comparison with the 2TE116 mainline diesel locomotive.
Thanks to its capacity, the locomotive managed to haul a train weighing 15,000 tons on the RZD’s network. It was a world record for autonomous locomotives with one power supply unit.
Carbon emissions are 90% less than those of a diesel locomotive, and by 80% less than the standard emissions envisaged in the requirements for diesel engines in the EU as per directives issued in 2012. The ambient noise level is also minimal.  
According to Valentin Gapanovich, Senior Vice President of RZD, one of the company’s tasks is to replace up to 30% of diesel fuel consumed by autonomous locomotives with natural gas by 2030.

Next-Generation Railcars
A series of innovative solutions is connected with supplying railway operators with new wagons. RZD is interested in such rolling stock to enhance reliability of transportation and expand the infrastructure capacity at the expense of extended cargo carrying capacity. 
Here we must mention a gondola car for coal transportation with a 27 t. axle load manufactured by Roslavl Wagon Repair Plant and the Research and Production Corporation Uralvagonzavod. It was developed in accordance with the programme of Russian transport companies’ railcar fleet renewal. “The Strategy of Railway Transport Development in the RF until 2030” defined the key requirements of new freight railcars: cargo carrying capacity of 25-27 t. axle load and the distance run between repairs of up to 500,000 km instead of the current 210,000 km.
Uralvagonzavod was one of the first companies on the 1520 network to develop and start mass production of this rolling stock, and, particularly, a special 4-axle gondola car of 12-5158 specification for coal transportation on 18-5155 bogies with 27 t. axle load. 
“Mass production of rolling stock with 25-27 t. axle load was held back in Russia by the condition of the railway infrastructure. First of all, the axle load is limited on a number of sections because of the condition of the permanent way and the lack of equipment for servicing such railcars, that’s why they are purchased to operate on specific routes,” explains Alexander Pranov, Deputy Chief Engineer of the Urals Railcar Building Engineering Bureau.
In particular, such lines are built to serve large industrial extracting and processing enterprises. Rolling stock with increased capacity is one of the conditions for their further development. 
A breakthrough is the 13-9781 model joint-type flat wagon for large-capacity containers. It was developed by Promtractor-Wagon (a subsidiary of Machinery & Industrial Group N.V.). It is a railcar for transportation of large-capacity containers weighing up to 40 tons.  
The maximum static design load of a wheel-set on rails is 23.5 t. A normal flat car can transport either two 20-foot boxes or one 40-foot box. The last variant is less profitable for cargo owners, because there remains a lot of vacant space. The new flat wagon can carry two 40-foot containers.
A weakness of the railcars is the complicated molded parts, especially the bogies. The innovation offered by Tikhvin Railcar Building Plant solves this problem. The plant produces Barber S-2-R bogies with 23.5 t. axle load. They were developed by Standard Car Truck company (in the USA) and modified by the Tikhvin Railcar Building Plant for Russian conditions. The Certification Register at the federal railway transport gave a conformity certificate. The bogies are registered in the RF as the 18-9810 model.
One more innovation is the double-deck railcar produced by Tver Wagon Building Plant (TVZ, incorporated in Transmashholding). All its systems were tested thoroughly. A compartment coach has 50 sleeping berths. A separate compartment and one of WCs are designated for a disabled passenger and one travelling companion.
According to the contract, in 2013, TVZ will supply to Russian Railways 50 double-deck coaches: 4 staff compartment cars (61-4472 model), 4 restaurant cars and 42 cars of 61-4465 model – 38 four-bed compartment coaches and 4 two-bed compartment coaches. They will form two trainsets to be operated on the Moscow-Adler route, including transportation of participants and guests to the 2014 Olympic Games in Sochi.

Satellite and Digital Technologies
RZD actively implements satellite technologies: in accordance with the targets set by the RF Government, over 36% of rolling stock on the network was equipped with GLONASS/GPS navigation electronics in the last 5-7 years.
Satellite technologies are applied in the systems of Train traffic interval regulation by integrated coordinating systems. 
A system for detailed traffic control, applied at the Moscow – St Petersburg fast mainline has been developed. This line was used as a pilot project for an intelligent dispatcher control system. In the words of Alexander Korchagin, Head of the Centre of Innovative Development of RZD the project envisages a number of automatic solutions, including “Automatic Train Operation” and “Automatic Train Driver.” 
Satellite technologies are useful for monitoring infrastructure repair and maintenance operations as well. Alexander Vasileisky, Head of the Centre of Space-Based Processing Technologies Implementation at NIIAS, says that work is underway to control hazardous cargo transportation with the help of satellite navigation.
In the framework of the RZD approved concept of lubrication in the “wheel-rail” system, an automatic complex has been added to the base of a passenger wagon, where lubrication supply is controlled with the help of the GLONASS/GPS system.
Jointly with companies incorporated in the Finmeccanica concern, work is underway to create a Russian-Italian train control system, which is similar to ERTMS Level-2 (being able to use GSM-R to communicate with its Radio Block Center) but adds satellite navigation to the system. Unlike Eurobalise used in Europe (electronic beacon or transponder placed between the rails of a railway to give the exact location of a train), the system combines inertial navigation and wheel sensors to measure distance. 
The upper layer of the transport network at the Olympic Games-2014 is to be equipped with the ITARUS-ATC system.
This system will launch high-speed traffic, help to monitor rolling stock and infrastructure, and to plan train traffic more efficiently.
Application of satellite technologies on the RF railways envisages equipping the network with GLONASS/GPS as well as such systems as INMARSAT and Resource-DK1.
RZD attracts a number of partners to projects with satellite technologies. Among them there are such companies as OCV CJSC (system of rolling stock automatic identification “PALMA”), GeoStar Navigation, Cesar Satellite, and SPIRIT DSP.
In the digital technologies sector, a priority is innovation connected with implementation of specialised diagnostic complexes and non-destructive flaw detection facilities. Devices developed by TVEMA, RPC INFOTRANS,  Industrial and Innovation Company Progress, and Radioavionika, have become an important link in provision of safe traffic on the Russian railways.
This review does not cover all the innovations carried out by RZD. Meanwhile, the projects mentioned in the article show that the innovative development of railways is a priority of the sector. Digital and satellite technologies herald a new age of railway sector development in the creation of a complex control and enhanced train safety system.
By Alexander Solntsev

Best innovative projects of RZD
1. “Granite” electric locomotive
2. “Ermak” electric locomotive
3. TEM14 shunting locomotive with two diesel power supply units
4. Gas turbine locomotive
5. 27 t. axle load gondola car for coal transportation
6. Joint-type flat wagon for large-capacity containers
7. Next-generation bogies for cargo railcars
8. Double-deck passenger railcar
9. Satellite technologies
10. Non-destructive flaw detection facilities

    [~DETAIL_TEXT] => 
Breakthrough Technologies
A strategic goal of RZD’s development is the enhancement of transportation efficiency, the increase in the quality of services and transportation safety. Directions of innovations are formed in accordance with these goals. First of all, they are targeted at creation of conditions for stable, safe, and efficient functioning of railways as the key element of the RF transport system.
This contributes to increasing transport service quality and safety in accordance with best world practices. They are to help eliminate bottle-necks on the RZD network, and to stimulate Russian railways’ integration into the world transport system, and to contribute to reducing the negative impact on the environment.
The directions of innovation are mentioned in such important documents for Russian railways as “The RF Transport Strategy until 2020,” “The Strategy of Railway Transport Development in the RF until 2030,” “Strategic Directions of Scientific and Technological Development of RZD until 2015,” and “The Programme of Innovative Development of RZD until 2015.”
The projects carried out on the network may be divided into three groups – the enhancement of the efficiency of locomotives and rolling stock; the transport infrastructure improvement; and the enhancement of the communication systems.

Enhancement of Haulage Efficiency
A priority in the cargo transportation sector is the development of a series of up-to-date locomotives. The most important of them is the two-unit eight-axle electric freight locomotive with asynchronous traction motor of 2ES10 model (“Granite”). This locomotive was manufactured by the Urals Locomotives LLC (a joint venture between the Sinara group of companies and Siemens).
A pilot cargo DC electric locomotive 2ES10 model passed tests at the end of 2010. It has a number of advantages in comparison with old locomotives. Firstly, the individual regulation of traction motors allows maximum traction: “Granite” is almost twice as powerful as, for example, VL11 locomotive, but consumes less energy. Secondly, its range between repairs is longer than that of the previous generation of machinery. Thirdly, the maintenance of the new electric locomotive in depots is simplified. Due to all these characteristics, the maintenance expenditures of RZD is decreased. A microprocessor-based system of control and static convertors reduces the number of contact elements, and contributes to the improved reliability of the new train. This provides a high safety level of cargo train transportation. This is the most efficient locomotive used on the Russian railway network. In the words of Dmitry Pumpyansky, Chairman of the Board of Directors of the Sinara group of companies, the new electric train has no equivalent not only in Russia, but on the entire 1520 network. Using standard weight parameters, it can haul trains weighing by 40-50% more than VL11 electric locomotives can. 60% of engineering solutions used in the new locomotive have never been applied in the Russian machine building sector before. More than a hundred Russian enterprises are engaged in supplying components for it.
In 2011, the Urals Locomotives delivered the first batch of 2ES10 electric locomotives to RZD. According to the contract concluded by the companies, more than 220 such locomotives are to be manufactured by 2016.
Two types of electric current are used on the RZD network – direct current and alternating current. Therefore, another innovation – the 2ES5K electric locomotive (“Ermak”) – uses alternating current. It was developed by the Russian Research Institute of Electric Locomotive Building (VElNII) and Novocherkassk Electric Locomotive Building Plant (NEVZ).
 The innovation of the electric locomotive is that its every wheel-set is rotated by its own traction electric engine. Such engines weigh less than those installed in older electric locomotives. Also, they are more energy-efficient and powerful. “Ermak” may be driven from the cabin of any section either manually or automatically with different train driving modes. The safety level is enhanced due to the automated braking system and the system of indicators informing about the work of different nodes of the locomotive. The driving desk resembles a computer display. Data is processed automatically. Hitched with another locomotive or an additional locomotive section (a booster), the machine can haul heavy trains
 Initially, the locomotive was designed to operate on the Transsib – the severe climate of that region was taken into account. Machines of this type can haul heavy and long trains, thus enhancing the carrying capacity of the railway infrastructure in Siberia and the Far East.   
The third most important innovation is the TEM14 shunting locomotive with two diesel power supply units. It was manufactured by Sinara – Transport Machines OJSC. It was designed for sorting wagons at stations. The innovation combines an enhanced capacity, reliability, and cost effectiveness. During shunting operations, the major part of fuel is consumed in standby mode. The engine of a diesel locomotive cannot be switched off (especially in winter), and running idle is too fuel-consuming. That’s why the principle of two diesel engines was applied: the first of them supports the activity of the locomotive and the second – the traction. In other words, the first compact engine supports the performance of the machine’s systems, including the power supply unit in case it is stopped. That’s why the power diesel engine may be started fast for the diesel locomotive to begin moving.
TEM14 can be operated through multiple unit control systems with synchronised control over diesel locomotives from one cabin.    
Another specific feature is the ability to idle at the temperature of -50°C without any additional need for conservation, coolant discharge, and warming its nodes and systems. The diesel engine is started without connection to any external energy sources thanks to the installed preheater. An autonomous heater for the control cab is also installed to create comfortable conditions for locomotive drivers before the basic diesel starts.
All these innovations help to save at least 20% of diesel fuel in comparison with the TEM7A diesel locomotive.
Special attention should be paid to the gas turbine locomotive made by Transmashholding and Caterpillar. It can haul trains weighing as much as those usually carried by electric locomotives and may replace a three- or four-section diesel locomotive. 
Calculations of the cost of a gas turbine locomotive over its life cycle made by RZD specialists have proved its high efficiency. Expenditure on maintenance and the power supply unit repair is 57% less than that on maintaining diesel engines of a similar total capacity, which are now in use on the diesel locomotive network. On the whole, the gas turbine locomotive will cut expenses during its life cycle by 20-22% in comparison with the 2TE116 mainline diesel locomotive.
Thanks to its capacity, the locomotive managed to haul a train weighing 15,000 tons on the RZD’s network. It was a world record for autonomous locomotives with one power supply unit.
Carbon emissions are 90% less than those of a diesel locomotive, and by 80% less than the standard emissions envisaged in the requirements for diesel engines in the EU as per directives issued in 2012. The ambient noise level is also minimal.  
According to Valentin Gapanovich, Senior Vice President of RZD, one of the company’s tasks is to replace up to 30% of diesel fuel consumed by autonomous locomotives with natural gas by 2030.

Next-Generation Railcars
A series of innovative solutions is connected with supplying railway operators with new wagons. RZD is interested in such rolling stock to enhance reliability of transportation and expand the infrastructure capacity at the expense of extended cargo carrying capacity. 
Here we must mention a gondola car for coal transportation with a 27 t. axle load manufactured by Roslavl Wagon Repair Plant and the Research and Production Corporation Uralvagonzavod. It was developed in accordance with the programme of Russian transport companies’ railcar fleet renewal. “The Strategy of Railway Transport Development in the RF until 2030” defined the key requirements of new freight railcars: cargo carrying capacity of 25-27 t. axle load and the distance run between repairs of up to 500,000 km instead of the current 210,000 km.
Uralvagonzavod was one of the first companies on the 1520 network to develop and start mass production of this rolling stock, and, particularly, a special 4-axle gondola car of 12-5158 specification for coal transportation on 18-5155 bogies with 27 t. axle load. 
“Mass production of rolling stock with 25-27 t. axle load was held back in Russia by the condition of the railway infrastructure. First of all, the axle load is limited on a number of sections because of the condition of the permanent way and the lack of equipment for servicing such railcars, that’s why they are purchased to operate on specific routes,” explains Alexander Pranov, Deputy Chief Engineer of the Urals Railcar Building Engineering Bureau.
In particular, such lines are built to serve large industrial extracting and processing enterprises. Rolling stock with increased capacity is one of the conditions for their further development. 
A breakthrough is the 13-9781 model joint-type flat wagon for large-capacity containers. It was developed by Promtractor-Wagon (a subsidiary of Machinery & Industrial Group N.V.). It is a railcar for transportation of large-capacity containers weighing up to 40 tons.  
The maximum static design load of a wheel-set on rails is 23.5 t. A normal flat car can transport either two 20-foot boxes or one 40-foot box. The last variant is less profitable for cargo owners, because there remains a lot of vacant space. The new flat wagon can carry two 40-foot containers.
A weakness of the railcars is the complicated molded parts, especially the bogies. The innovation offered by Tikhvin Railcar Building Plant solves this problem. The plant produces Barber S-2-R bogies with 23.5 t. axle load. They were developed by Standard Car Truck company (in the USA) and modified by the Tikhvin Railcar Building Plant for Russian conditions. The Certification Register at the federal railway transport gave a conformity certificate. The bogies are registered in the RF as the 18-9810 model.
One more innovation is the double-deck railcar produced by Tver Wagon Building Plant (TVZ, incorporated in Transmashholding). All its systems were tested thoroughly. A compartment coach has 50 sleeping berths. A separate compartment and one of WCs are designated for a disabled passenger and one travelling companion.
According to the contract, in 2013, TVZ will supply to Russian Railways 50 double-deck coaches: 4 staff compartment cars (61-4472 model), 4 restaurant cars and 42 cars of 61-4465 model – 38 four-bed compartment coaches and 4 two-bed compartment coaches. They will form two trainsets to be operated on the Moscow-Adler route, including transportation of participants and guests to the 2014 Olympic Games in Sochi.

Satellite and Digital Technologies
RZD actively implements satellite technologies: in accordance with the targets set by the RF Government, over 36% of rolling stock on the network was equipped with GLONASS/GPS navigation electronics in the last 5-7 years.
Satellite technologies are applied in the systems of Train traffic interval regulation by integrated coordinating systems. 
A system for detailed traffic control, applied at the Moscow – St Petersburg fast mainline has been developed. This line was used as a pilot project for an intelligent dispatcher control system. In the words of Alexander Korchagin, Head of the Centre of Innovative Development of RZD the project envisages a number of automatic solutions, including “Automatic Train Operation” and “Automatic Train Driver.” 
Satellite technologies are useful for monitoring infrastructure repair and maintenance operations as well. Alexander Vasileisky, Head of the Centre of Space-Based Processing Technologies Implementation at NIIAS, says that work is underway to control hazardous cargo transportation with the help of satellite navigation.
In the framework of the RZD approved concept of lubrication in the “wheel-rail” system, an automatic complex has been added to the base of a passenger wagon, where lubrication supply is controlled with the help of the GLONASS/GPS system.
Jointly with companies incorporated in the Finmeccanica concern, work is underway to create a Russian-Italian train control system, which is similar to ERTMS Level-2 (being able to use GSM-R to communicate with its Radio Block Center) but adds satellite navigation to the system. Unlike Eurobalise used in Europe (electronic beacon or transponder placed between the rails of a railway to give the exact location of a train), the system combines inertial navigation and wheel sensors to measure distance. 
The upper layer of the transport network at the Olympic Games-2014 is to be equipped with the ITARUS-ATC system.
This system will launch high-speed traffic, help to monitor rolling stock and infrastructure, and to plan train traffic more efficiently.
Application of satellite technologies on the RF railways envisages equipping the network with GLONASS/GPS as well as such systems as INMARSAT and Resource-DK1.
RZD attracts a number of partners to projects with satellite technologies. Among them there are such companies as OCV CJSC (system of rolling stock automatic identification “PALMA”), GeoStar Navigation, Cesar Satellite, and SPIRIT DSP.
In the digital technologies sector, a priority is innovation connected with implementation of specialised diagnostic complexes and non-destructive flaw detection facilities. Devices developed by TVEMA, RPC INFOTRANS,  Industrial and Innovation Company Progress, and Radioavionika, have become an important link in provision of safe traffic on the Russian railways.
This review does not cover all the innovations carried out by RZD. Meanwhile, the projects mentioned in the article show that the innovative development of railways is a priority of the sector. Digital and satellite technologies herald a new age of railway sector development in the creation of a complex control and enhanced train safety system.
By Alexander Solntsev

Best innovative projects of RZD
1. “Granite” electric locomotive
2. “Ermak” electric locomotive
3. TEM14 shunting locomotive with two diesel power supply units
4. Gas turbine locomotive
5. 27 t. axle load gondola car for coal transportation
6. Joint-type flat wagon for large-capacity containers
7. Next-generation bogies for cargo railcars
8. Double-deck passenger railcar
9. Satellite technologies
10. Non-destructive flaw detection facilities

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Global Challenges and Global Solutions
– Mr Yakunin, in one of your speeches you mentioned the following idea: there are changes in the economy, there are changes in the railway sector, and Russian Railways should change as well. What is central to the current global transformation and how does the company face new challenges?

– The transport community as well as a lot of experts think that the “golden age” of the railway transport starts today. It is a worldwide trend. Europe, for example, intends to make railways an alternative to road transport, and the environment is one of the reasons behind it. According to the European Commission’s White Paper, 30% of road freight over 300 km should shift to other modes such as rail or waterborne transport by 2030, and more than 50% by 2050. There is a similar plan for passenger transportation. I mean the increase in the potential demand for the “5+” transport service (fast, cheap, comfortable, safe, regular), and transportation according to the “wheel-rail” principle, and high-speed mainlines development to coincide with it. The trends mentioned above are relevant for Russia as well.
Speaking about less global but very important things, we participate actively in the formation of the Common Economic Space of Russia, Kazakhstan, and Belarus. We and our colleagues from other countries agreed to launch a joint cargo transport company for container transportation by railway. It will be a network-wide operator, which will have sales points in the main industrial centres in Eurasia. The company will be established on the basis of existing and working assets, therefore, no significant investments will be needed at the initial stage. Kazakhstan is to give its shareholdings in a number of subsidiaries of Kazakhstan Temir Zholy, the Republic of Belarus is to give terminals owned by the Belarusian Railway in Brest and assets of Belintertrans. We are going to transfer RZD’s stake in TransContainer to the capital stock. In our opinion, it is more efficient than to sell it to an external investor, into which we are being prodded.    
Since we are working towards harmonising economies and forming the Common Economic Space with neighbouring countries, transport and logistics are key elements. Integration processes in Eurasia give us a unique chance to join efforts, and it will be silly of us not to make use of it. Logistic services are a very profitable business, but Russia, Kazakhstan, and Belarus are poorly rated according to the level of logistic development. The launch of a global company and a competitive product is a definite step forward to develop this business direction. Regarding the dynamic development of western and central regions, we can count on re-orientation of up to 2% of the entire container transit volume between Europe and Asia to the Russian-Belarusian-Kazakh company by 2020. 

– These plans can hardly be carried out without solving another issue of strategic importance – creating an efficient model of investments into railways development. Unfortunately, such a model has not been developed yet.

– The European practice has already proved it, and nobody doubts now that advanced development of transport infrastructure is the locomotive of economic growth. Even amid the global financial crisis, European railways development was financed as a matter of priority at the pre-crisis level. This trend still continues. This support is especially noticeable in Germany, where the state invests €2.5 billion into infrastructure renewal per annum. In Austria, this sum is more than €2 billion per annum, in France and Great Britain – approximately €1 billion, and in Switzerland – €0.7 billion.
According to the state support level, developed European states have left Russia far behind. How much funds should our state allocate to develop railway infrastructure? In short, reaching an efficient level of investments is possible if 1.5% of the GDP is given over for it (the current figure is just 0.7%). RZD’s suggestions about the mechanisms of infrastructure development financing have been fixed in the state programme of the RF transport system development, which is to be finalised and approved before the end of 2012. In particular, it envisages development of financial instruments to transform pension assets into investments made for this purpose. Adequate mechanisms have been found and are actively applied in Norway and other countries. Meanwhile, we continue to keep money, which does not work now to provide the economic development of the country.

– Governmental officials and sector experts note that the company has reserves to increase efficiency and to search for additional resources.

– Within the framework of the state tariff regulation, Russian Railways uses all available opportunities and works actively to form sources for investment financing. An active project is underway to improve the company’s efficiency using internal optimization measures. This method, however, is finite. Thanks to it, the company may save an additional RUB 24 billion in 2013, but the difference between the real price situation in the market and the parameters, on which the country’s social and economic development outlook depends, causes a forced increase in expenditures due to reasons beyond the company’s control. And this neutralises gains from inner optimization. I understand how difficult it is to identify cost fluctuations due to changes in the economy, but I would like to give one example. According to the real price situation, the increase in prices for diesel fuel in 2012 is estimated at 15-16%. The forecast which was the basis for railway tariffs, envisaged the increase would only be 0.9%. In other words, in practice the price is sixteen-fold higher than it was planned when our tariffs were calculated.
Also, to solve infrastructure problems, the company uses funds from selling stakes in its subsidiaries, but this source is almost exhausted. Last year, we completed perhaps the largest deal in the history of privatization in Russia, when we sold the shareholding in Freight One. We have no such stakes now.
The third source is efficient loans. We are the largest company and most respected borrower in the Russian transport sector today. Meanwhile, even state-guaranteed additional loans will cause a decrease in the company’ investment attractiveness and damage its balance.

– Speaking about the subject of development of an efficient model of investing into railways, what do you suggest?

– In our opinion, to provide infrastructure projects financing, interaction between the state and RZD should be carried out in accordance with the Transport Ministry’s offer – as the mechanism of a regulatory network contract based on long-term tariffs (five years, or at least three years). The efficiency of these mechanisms has been proved by the experience of Germany, France, and Great Britain. For example, the required volume of the state’s support to carry out priority projects of railway infrastructure development in the Eastern part of Russia to 2016 amounts to RUB 291 billion. Of that, RUB 208 billion is to be invested into the Baikal-Amur Mainline, and RUB 83 billion – into the Trans-Siberian Railway.
I would like to explain my idea of the efficiency of investments into railway infrastructure from the standpoint of the state’s interests. The Institute of Economic Forecasting of the Russian Academy of Science analysed the prognosticative model complex developed with the help of the intersectoral balance methods. According to their results, every rouble of additional expenditure or investment made by RZD provides an increase in the output in adjacent sectors by 1.5 roubles if the level of imports remains as high as it is nowadays; or an increase in the output in the adjacent industries by 2.35 roubles in the case of 100% import substitution and fulfillment of the Russian industry’s need for the railway transport. We are carrying out a consistent policy targeted at usage of materials and machines made in Russia. We follow the same methodology when we organise work, in which foreign partners will participate. 
What are the consequences of insufficient investments in infrastructure projects?  For example, in 2011-2015 losses from insufficient transportation of cargo from the GDP viewpoint will amount to RUB 2.3 trillion, and in 2011-2020 – RUB 5.8 trillion. According to these figures, the losses are much more serious for the GDP than the deficit of investments into removing bottlenecks. The research carried out by the Institute shows that there are reserves to optimise the tariff loading among the sectors and increase tariffs on cargo transportation without serious negative impact on prices growth and reduction in the output of main cargo-generating sectors.

Key Directions for Transportation: Time for Decisions to Come to Life
– You have mentioned development of the Far East. If we talk about some global trends, the attention to this region and to Siberia is very noticeable. They speak about launching a state corporation that will be engaged in Transuralia (territory to the east of the Urals, including the Kurgan and the Chelyabinsk regions of the RF), and about increasing the loading volume to the Far Eastern ports and China. What steps should railmen take and what measures should the government take to use this trend most efficiently?

– Analysing the issues of the Far East and Siberian development, the need to support the competitiveness of the national commodity transport network and to coordinate transport modes in order to reduce the cost and improve the quality of the service is to be defined as a state priority.
Looking at railway infrastructure development, the priorities were set in 2008, when the government approved the Strategy of Railway Transport Development in the Russian Federation to 2030. The relevance of these priorities was proved during the crisis in 2008 and later, when the total cargo flow on the network was falling, but freight volume directed eastwards was increasing. Serious economic changes took place in the global market. Together with the Transport Ministry and the Ministry of Economic Development, we had to update the General Scheme of Railway Network Development to 2020 in accordance with the decisions made by the Government at its conference in Kemerovo.
One of the key issues of the General Scheme is the development of infrastructure in the east of Russia, where the carrying capacity is almost exhausted now. In 2010-2011, these questions were discussed many times, offers were developed and submitted to the ministries and departments. I would like to emphasise once again that the increase in the railway cargo turnover is forecasted to reach 40% at the Russian railway network before 2020, and it is supposed to grow by 150% at the Baikal-Amur Mainline (the BAM), and to increase three- or even fourfold at the railway approaches to the ports of the Vanino – the Sovetskaya Gavan transport node. 
To provide the planned transportation volume, the General Scheme and relative infrastructure programme envisage construction of an additional main track at the BAM to make the mainline double-track, development of the Transsib and approaches to the Far Eastern ports and lines providing transportation between Russia and North Korea, and traction rolling stock renewal. 
Regarding the shortage of investment sources, including those for traction rolling stock renewal, RZD offered to discuss the opportunity of state support for development of the leasing mechanism in the railway sector, as it is done in aviation. This includes subsidizing a part of leasing payments by the state, and implementation of additional measures for tax stimulation. 
RUB 181 billion and RUB 737 billion are needed for the Transsib and the BAM development to 2020. I would like to emphasise that these investments should be made until 2020. These are enormous sums, and they can hardly be taken from the operating profits of RZD, which is regulated by the state. Already now, before any momentous decisions about these mainlines are taken, we are ready to invest RUB 15 billion per annum. It means that by 2016 RZD will have given RUB 60 billion, while the total number of investments should exceed RUB 350 billion by that time. I would like to underline that it contradicts the approved policy, which envisages that RZD must invest its own means into payback projects. 
Modernisation of the BAM does not seem to be a project which will pay for itself in a commercially reasonable period of time. Nevertheless, we think it must be done, and we count on governmental support in future.

– There are other popular directions…

– Yes, there are. Recently we held a conference of the scientific and technical council of RZD. It was devoted to the project of the commercial port of Ust-Luga, which, in my opinion, is one of the key projects for Russia. In carrying it out, we expect to be able to compete for cargo flows in this area and to enhance the country’s export potential. I have a peculiar interest in Ust-Luga: in the early 2000-s I was engaged in construction of port capacities there, and then, as the President of RZD, I provided construction of railway approaches to the port. Russian Railways purchased a 25% stake in the port and joined the shareholders’ council of the Ust-Luga Company. In fact, purchase of stakes in large Russian ports is one of our strategic goals, because it allows us to participate in the port infrastructure development, influence tariffs, and set an efficient through rate for consignors. 
Nowadays, RZD as a co-owner of the port is building a transport and logistics complex in the zone, and is carrying out the strategy of combined transportation. There are a lot of problems there. One of them is financing, with which RZD still copes, although the decision on allocation of state investments has been taken, and this was discussed at the conference mentioned above.
I would like to emphasise once again that Russia needs such projects as Ust-Luga. Foreign trade partners of the RF are interested in them as well. In the last four years, cargo transportation volume via the port grew threefold to 22 million tons. We believe that the throughput will triple before 2015, and amount to 120 million tons per annum before 2020. Therefore, Ust-Luga will become the largest port in Russia and a strong competitor to all ports at the Baltic Sea.

Stake in Young People
– Amid the instability in financial markets, negative prognosis of economic development, the railway structural reform seems to have fallen by the wayside. In view of the latest events in the sector – self regulatory development in the transportation market, appearance of own and rented rolling stock park, etc. – do you think that any amendments should be put into the Target Market Model approved in 2011?

– Today we are at the final stage of the sector reform and we still continue to discuss the contradiction of the railways’ status – either it is a business or an instrument to solve social and geopolitical issues, where the state plays the main role. Obviously, public needs for the network development do not always coincide with the profitability of these directions, that is why classic market laws do not work here no matter how hard market fundamentalists insist on it. A lot of European countries came to the same conclusion – in the last 10-15 years they undertook liberalization and structural reform of the transportation market. The results of the reform were different. 
In 2011, scientists at the University of Leeds (Great Britain) researched how separation of infrastructure from transportation activity impacts on the efficiency and competitiveness of the EU railways. It proved that there was no positive interconnection between such separation and the increase in the cargo turnover or the railways’ share in the transport market. Also, the scientists made a conclusion that competition did not have a direct influence on the efficiency of railways and it should not be a goal in itself. I think that the final results of RZD’s structural reform should be analysed from the same standpoint.
The company follows the terms of the reform, fulfilling all the tasks set by the government. It has been confirmed at the level of the RF government and the Chairman of the RF government, whose assessment is the most respected for me as for the head of a state company. The problem is that the lawmaking mechanism needed to carry out the process is lagging, so there appears some imbalance in the market. What do we observe now after the liberalization of the cargo transportation sector? A decline in the efficiency of wagon park use, and an uncontrolled increase in the private operators’ revenues caused by the lack of any regulation of the wagon constituent in tariffs. And it is considered normal!     
Operators complain a lot, however, they are not poor – there are a lot of senior managers of private cargo transportation companies in the Forbes list. In its turn, RZD earns money for the state (its shareholder) working on the regulated tariff. Moreover, the Ministry of Finance and the Ministry of Economic Development always tell us about the necessity to restrain the growth of the infrastructure constituent in the tariff. Because of this the company constantly lacks funds to invest and has to apply to the state for donations to maintain the infrastructure properly. Meanwhile, the entire margin, which could be earned on the open market and spent on railway network development, belongs to a private railcar owner. In my opinion, this imbalance contradicts public interests. One of the consequences of the situation is the decline in the safety level on the railway network. Accidents caused by railway machinery defects have become more frequent. Amid the total liberalization of rules in the sector, it is difficult to understand whom to blame for the accidents; there is no system of strict technical control. Meanwhile, it is RZD that remains responsible for every force majeure which happens on the railway network. 
From time to time, there appear new initiatives to continue to undermine the single system. Their motto is “the market will regulate everything.” Primarily they concern privatization of locomotive haulage as soon as possible. Meanwhile, most countries consider separating locomotive haulage from infrastructure inefficient. I am surprised that people standing for market principles do not think about the specifics of railways, where the losses from the unplanned disintegration of the single infrastructure can be very serious. 

– We started our talk with global challenges and RZD’s reaction to them. It would be a quite logical final question – what sources of strategic development does the company invest in to exploit arising opportunities efficiently and neutralise emerging risks?

– Since we are talking in the year of the sector’s 175th anniversary, I would like to say that I am always eager to meet young people, to share my experience with those who can make use of it. I’d like them to understand that work in the railway sector is very interesting. Young specialists have good prospects in RZD in terms of both – wages and promotion. We are a dynamically developing transport corporation, which provides 2% of the national GDP, has an clear strategy of development until 2030, and is highly regarded by the market.  It is fair to say that world leading companies think it is an honour to be our partners and carry out joint projects. Despite the large amount of “hardware” in the railway sector, it is the people, the team, who make the company a success. They are the driving force of reforms and innovations, they have a new railway mentality and different competences.  
As the head of the company, I must understand what specialists and managers may join our team tomorrow, to what degree they will be ready to fulfill the tasks set for us, and, which is most important, whether they will be ready and able to take responsibility for the further development of the company and the entire country. Apparently, the next generation is ready for it. And I am glad to know it.
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Global Challenges and Global Solutions
– Mr Yakunin, in one of your speeches you mentioned the following idea: there are changes in the economy, there are changes in the railway sector, and Russian Railways should change as well. What is central to the current global transformation and how does the company face new challenges?

– The transport community as well as a lot of experts think that the “golden age” of the railway transport starts today. It is a worldwide trend. Europe, for example, intends to make railways an alternative to road transport, and the environment is one of the reasons behind it. According to the European Commission’s White Paper, 30% of road freight over 300 km should shift to other modes such as rail or waterborne transport by 2030, and more than 50% by 2050. There is a similar plan for passenger transportation. I mean the increase in the potential demand for the “5+” transport service (fast, cheap, comfortable, safe, regular), and transportation according to the “wheel-rail” principle, and high-speed mainlines development to coincide with it. The trends mentioned above are relevant for Russia as well.
Speaking about less global but very important things, we participate actively in the formation of the Common Economic Space of Russia, Kazakhstan, and Belarus. We and our colleagues from other countries agreed to launch a joint cargo transport company for container transportation by railway. It will be a network-wide operator, which will have sales points in the main industrial centres in Eurasia. The company will be established on the basis of existing and working assets, therefore, no significant investments will be needed at the initial stage. Kazakhstan is to give its shareholdings in a number of subsidiaries of Kazakhstan Temir Zholy, the Republic of Belarus is to give terminals owned by the Belarusian Railway in Brest and assets of Belintertrans. We are going to transfer RZD’s stake in TransContainer to the capital stock. In our opinion, it is more efficient than to sell it to an external investor, into which we are being prodded.    
Since we are working towards harmonising economies and forming the Common Economic Space with neighbouring countries, transport and logistics are key elements. Integration processes in Eurasia give us a unique chance to join efforts, and it will be silly of us not to make use of it. Logistic services are a very profitable business, but Russia, Kazakhstan, and Belarus are poorly rated according to the level of logistic development. The launch of a global company and a competitive product is a definite step forward to develop this business direction. Regarding the dynamic development of western and central regions, we can count on re-orientation of up to 2% of the entire container transit volume between Europe and Asia to the Russian-Belarusian-Kazakh company by 2020. 

– These plans can hardly be carried out without solving another issue of strategic importance – creating an efficient model of investments into railways development. Unfortunately, such a model has not been developed yet.

– The European practice has already proved it, and nobody doubts now that advanced development of transport infrastructure is the locomotive of economic growth. Even amid the global financial crisis, European railways development was financed as a matter of priority at the pre-crisis level. This trend still continues. This support is especially noticeable in Germany, where the state invests €2.5 billion into infrastructure renewal per annum. In Austria, this sum is more than €2 billion per annum, in France and Great Britain – approximately €1 billion, and in Switzerland – €0.7 billion.
According to the state support level, developed European states have left Russia far behind. How much funds should our state allocate to develop railway infrastructure? In short, reaching an efficient level of investments is possible if 1.5% of the GDP is given over for it (the current figure is just 0.7%). RZD’s suggestions about the mechanisms of infrastructure development financing have been fixed in the state programme of the RF transport system development, which is to be finalised and approved before the end of 2012. In particular, it envisages development of financial instruments to transform pension assets into investments made for this purpose. Adequate mechanisms have been found and are actively applied in Norway and other countries. Meanwhile, we continue to keep money, which does not work now to provide the economic development of the country.

– Governmental officials and sector experts note that the company has reserves to increase efficiency and to search for additional resources.

– Within the framework of the state tariff regulation, Russian Railways uses all available opportunities and works actively to form sources for investment financing. An active project is underway to improve the company’s efficiency using internal optimization measures. This method, however, is finite. Thanks to it, the company may save an additional RUB 24 billion in 2013, but the difference between the real price situation in the market and the parameters, on which the country’s social and economic development outlook depends, causes a forced increase in expenditures due to reasons beyond the company’s control. And this neutralises gains from inner optimization. I understand how difficult it is to identify cost fluctuations due to changes in the economy, but I would like to give one example. According to the real price situation, the increase in prices for diesel fuel in 2012 is estimated at 15-16%. The forecast which was the basis for railway tariffs, envisaged the increase would only be 0.9%. In other words, in practice the price is sixteen-fold higher than it was planned when our tariffs were calculated.
Also, to solve infrastructure problems, the company uses funds from selling stakes in its subsidiaries, but this source is almost exhausted. Last year, we completed perhaps the largest deal in the history of privatization in Russia, when we sold the shareholding in Freight One. We have no such stakes now.
The third source is efficient loans. We are the largest company and most respected borrower in the Russian transport sector today. Meanwhile, even state-guaranteed additional loans will cause a decrease in the company’ investment attractiveness and damage its balance.

– Speaking about the subject of development of an efficient model of investing into railways, what do you suggest?

– In our opinion, to provide infrastructure projects financing, interaction between the state and RZD should be carried out in accordance with the Transport Ministry’s offer – as the mechanism of a regulatory network contract based on long-term tariffs (five years, or at least three years). The efficiency of these mechanisms has been proved by the experience of Germany, France, and Great Britain. For example, the required volume of the state’s support to carry out priority projects of railway infrastructure development in the Eastern part of Russia to 2016 amounts to RUB 291 billion. Of that, RUB 208 billion is to be invested into the Baikal-Amur Mainline, and RUB 83 billion – into the Trans-Siberian Railway.
I would like to explain my idea of the efficiency of investments into railway infrastructure from the standpoint of the state’s interests. The Institute of Economic Forecasting of the Russian Academy of Science analysed the prognosticative model complex developed with the help of the intersectoral balance methods. According to their results, every rouble of additional expenditure or investment made by RZD provides an increase in the output in adjacent sectors by 1.5 roubles if the level of imports remains as high as it is nowadays; or an increase in the output in the adjacent industries by 2.35 roubles in the case of 100% import substitution and fulfillment of the Russian industry’s need for the railway transport. We are carrying out a consistent policy targeted at usage of materials and machines made in Russia. We follow the same methodology when we organise work, in which foreign partners will participate. 
What are the consequences of insufficient investments in infrastructure projects?  For example, in 2011-2015 losses from insufficient transportation of cargo from the GDP viewpoint will amount to RUB 2.3 trillion, and in 2011-2020 – RUB 5.8 trillion. According to these figures, the losses are much more serious for the GDP than the deficit of investments into removing bottlenecks. The research carried out by the Institute shows that there are reserves to optimise the tariff loading among the sectors and increase tariffs on cargo transportation without serious negative impact on prices growth and reduction in the output of main cargo-generating sectors.

Key Directions for Transportation: Time for Decisions to Come to Life
– You have mentioned development of the Far East. If we talk about some global trends, the attention to this region and to Siberia is very noticeable. They speak about launching a state corporation that will be engaged in Transuralia (territory to the east of the Urals, including the Kurgan and the Chelyabinsk regions of the RF), and about increasing the loading volume to the Far Eastern ports and China. What steps should railmen take and what measures should the government take to use this trend most efficiently?

– Analysing the issues of the Far East and Siberian development, the need to support the competitiveness of the national commodity transport network and to coordinate transport modes in order to reduce the cost and improve the quality of the service is to be defined as a state priority.
Looking at railway infrastructure development, the priorities were set in 2008, when the government approved the Strategy of Railway Transport Development in the Russian Federation to 2030. The relevance of these priorities was proved during the crisis in 2008 and later, when the total cargo flow on the network was falling, but freight volume directed eastwards was increasing. Serious economic changes took place in the global market. Together with the Transport Ministry and the Ministry of Economic Development, we had to update the General Scheme of Railway Network Development to 2020 in accordance with the decisions made by the Government at its conference in Kemerovo.
One of the key issues of the General Scheme is the development of infrastructure in the east of Russia, where the carrying capacity is almost exhausted now. In 2010-2011, these questions were discussed many times, offers were developed and submitted to the ministries and departments. I would like to emphasise once again that the increase in the railway cargo turnover is forecasted to reach 40% at the Russian railway network before 2020, and it is supposed to grow by 150% at the Baikal-Amur Mainline (the BAM), and to increase three- or even fourfold at the railway approaches to the ports of the Vanino – the Sovetskaya Gavan transport node. 
To provide the planned transportation volume, the General Scheme and relative infrastructure programme envisage construction of an additional main track at the BAM to make the mainline double-track, development of the Transsib and approaches to the Far Eastern ports and lines providing transportation between Russia and North Korea, and traction rolling stock renewal. 
Regarding the shortage of investment sources, including those for traction rolling stock renewal, RZD offered to discuss the opportunity of state support for development of the leasing mechanism in the railway sector, as it is done in aviation. This includes subsidizing a part of leasing payments by the state, and implementation of additional measures for tax stimulation. 
RUB 181 billion and RUB 737 billion are needed for the Transsib and the BAM development to 2020. I would like to emphasise that these investments should be made until 2020. These are enormous sums, and they can hardly be taken from the operating profits of RZD, which is regulated by the state. Already now, before any momentous decisions about these mainlines are taken, we are ready to invest RUB 15 billion per annum. It means that by 2016 RZD will have given RUB 60 billion, while the total number of investments should exceed RUB 350 billion by that time. I would like to underline that it contradicts the approved policy, which envisages that RZD must invest its own means into payback projects. 
Modernisation of the BAM does not seem to be a project which will pay for itself in a commercially reasonable period of time. Nevertheless, we think it must be done, and we count on governmental support in future.

– There are other popular directions…

– Yes, there are. Recently we held a conference of the scientific and technical council of RZD. It was devoted to the project of the commercial port of Ust-Luga, which, in my opinion, is one of the key projects for Russia. In carrying it out, we expect to be able to compete for cargo flows in this area and to enhance the country’s export potential. I have a peculiar interest in Ust-Luga: in the early 2000-s I was engaged in construction of port capacities there, and then, as the President of RZD, I provided construction of railway approaches to the port. Russian Railways purchased a 25% stake in the port and joined the shareholders’ council of the Ust-Luga Company. In fact, purchase of stakes in large Russian ports is one of our strategic goals, because it allows us to participate in the port infrastructure development, influence tariffs, and set an efficient through rate for consignors. 
Nowadays, RZD as a co-owner of the port is building a transport and logistics complex in the zone, and is carrying out the strategy of combined transportation. There are a lot of problems there. One of them is financing, with which RZD still copes, although the decision on allocation of state investments has been taken, and this was discussed at the conference mentioned above.
I would like to emphasise once again that Russia needs such projects as Ust-Luga. Foreign trade partners of the RF are interested in them as well. In the last four years, cargo transportation volume via the port grew threefold to 22 million tons. We believe that the throughput will triple before 2015, and amount to 120 million tons per annum before 2020. Therefore, Ust-Luga will become the largest port in Russia and a strong competitor to all ports at the Baltic Sea.

Stake in Young People
– Amid the instability in financial markets, negative prognosis of economic development, the railway structural reform seems to have fallen by the wayside. In view of the latest events in the sector – self regulatory development in the transportation market, appearance of own and rented rolling stock park, etc. – do you think that any amendments should be put into the Target Market Model approved in 2011?

– Today we are at the final stage of the sector reform and we still continue to discuss the contradiction of the railways’ status – either it is a business or an instrument to solve social and geopolitical issues, where the state plays the main role. Obviously, public needs for the network development do not always coincide with the profitability of these directions, that is why classic market laws do not work here no matter how hard market fundamentalists insist on it. A lot of European countries came to the same conclusion – in the last 10-15 years they undertook liberalization and structural reform of the transportation market. The results of the reform were different. 
In 2011, scientists at the University of Leeds (Great Britain) researched how separation of infrastructure from transportation activity impacts on the efficiency and competitiveness of the EU railways. It proved that there was no positive interconnection between such separation and the increase in the cargo turnover or the railways’ share in the transport market. Also, the scientists made a conclusion that competition did not have a direct influence on the efficiency of railways and it should not be a goal in itself. I think that the final results of RZD’s structural reform should be analysed from the same standpoint.
The company follows the terms of the reform, fulfilling all the tasks set by the government. It has been confirmed at the level of the RF government and the Chairman of the RF government, whose assessment is the most respected for me as for the head of a state company. The problem is that the lawmaking mechanism needed to carry out the process is lagging, so there appears some imbalance in the market. What do we observe now after the liberalization of the cargo transportation sector? A decline in the efficiency of wagon park use, and an uncontrolled increase in the private operators’ revenues caused by the lack of any regulation of the wagon constituent in tariffs. And it is considered normal!     
Operators complain a lot, however, they are not poor – there are a lot of senior managers of private cargo transportation companies in the Forbes list. In its turn, RZD earns money for the state (its shareholder) working on the regulated tariff. Moreover, the Ministry of Finance and the Ministry of Economic Development always tell us about the necessity to restrain the growth of the infrastructure constituent in the tariff. Because of this the company constantly lacks funds to invest and has to apply to the state for donations to maintain the infrastructure properly. Meanwhile, the entire margin, which could be earned on the open market and spent on railway network development, belongs to a private railcar owner. In my opinion, this imbalance contradicts public interests. One of the consequences of the situation is the decline in the safety level on the railway network. Accidents caused by railway machinery defects have become more frequent. Amid the total liberalization of rules in the sector, it is difficult to understand whom to blame for the accidents; there is no system of strict technical control. Meanwhile, it is RZD that remains responsible for every force majeure which happens on the railway network. 
From time to time, there appear new initiatives to continue to undermine the single system. Their motto is “the market will regulate everything.” Primarily they concern privatization of locomotive haulage as soon as possible. Meanwhile, most countries consider separating locomotive haulage from infrastructure inefficient. I am surprised that people standing for market principles do not think about the specifics of railways, where the losses from the unplanned disintegration of the single infrastructure can be very serious. 

– We started our talk with global challenges and RZD’s reaction to them. It would be a quite logical final question – what sources of strategic development does the company invest in to exploit arising opportunities efficiently and neutralise emerging risks?

– Since we are talking in the year of the sector’s 175th anniversary, I would like to say that I am always eager to meet young people, to share my experience with those who can make use of it. I’d like them to understand that work in the railway sector is very interesting. Young specialists have good prospects in RZD in terms of both – wages and promotion. We are a dynamically developing transport corporation, which provides 2% of the national GDP, has an clear strategy of development until 2030, and is highly regarded by the market.  It is fair to say that world leading companies think it is an honour to be our partners and carry out joint projects. Despite the large amount of “hardware” in the railway sector, it is the people, the team, who make the company a success. They are the driving force of reforms and innovations, they have a new railway mentality and different competences.  
As the head of the company, I must understand what specialists and managers may join our team tomorrow, to what degree they will be ready to fulfill the tasks set for us, and, which is most important, whether they will be ready and able to take responsibility for the further development of the company and the entire country. Apparently, the next generation is ready for it. And I am glad to know it.
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            [SECTION_META_DESCRIPTION] => I<img src="/ufiles/image/rus/inter/2012/3/2.jpg" border="1" alt=" " hspace="5" width="200" height="260" />n the year of the 175th anniversary of Russian Railway we talk with Vladimir Yakunin, President of RZD, about strategic issues in the company’s and sector’s development.
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Global Challenges and Global Solutions
– Mr Yakunin, in one of your speeches you mentioned the following idea: there are changes in the economy, there are changes in the railway sector, and Russian Railways should change as well. What is central to the current global transformation and how does the company face new challenges?

– The transport community as well as a lot of experts think that the “golden age” of the railway transport starts today. It is a worldwide trend. Europe, for example, intends to make railways an alternative to road transport, and the environment is one of the reasons behind it. According to the European Commission’s White Paper, 30% of road freight over 300 km should shift to other modes such as rail or waterborne transport by 2030, and more than 50% by 2050. There is a similar plan for passenger transportation. I mean the increase in the potential demand for the “5+” transport service (fast, cheap, comfortable, safe, regular), and transportation according to the “wheel-rail” principle, and high-speed mainlines development to coincide with it. The trends mentioned above are relevant for Russia as well.
Speaking about less global but very important things, we participate actively in the formation of the Common Economic Space of Russia, Kazakhstan, and Belarus. We and our colleagues from other countries agreed to launch a joint cargo transport company for container transportation by railway. It will be a network-wide operator, which will have sales points in the main industrial centres in Eurasia. The company will be established on the basis of existing and working assets, therefore, no significant investments will be needed at the initial stage. Kazakhstan is to give its shareholdings in a number of subsidiaries of Kazakhstan Temir Zholy, the Republic of Belarus is to give terminals owned by the Belarusian Railway in Brest and assets of Belintertrans. We are going to transfer RZD’s stake in TransContainer to the capital stock. In our opinion, it is more efficient than to sell it to an external investor, into which we are being prodded.    
Since we are working towards harmonising economies and forming the Common Economic Space with neighbouring countries, transport and logistics are key elements. Integration processes in Eurasia give us a unique chance to join efforts, and it will be silly of us not to make use of it. Logistic services are a very profitable business, but Russia, Kazakhstan, and Belarus are poorly rated according to the level of logistic development. The launch of a global company and a competitive product is a definite step forward to develop this business direction. Regarding the dynamic development of western and central regions, we can count on re-orientation of up to 2% of the entire container transit volume between Europe and Asia to the Russian-Belarusian-Kazakh company by 2020. 

– These plans can hardly be carried out without solving another issue of strategic importance – creating an efficient model of investments into railways development. Unfortunately, such a model has not been developed yet.

– The European practice has already proved it, and nobody doubts now that advanced development of transport infrastructure is the locomotive of economic growth. Even amid the global financial crisis, European railways development was financed as a matter of priority at the pre-crisis level. This trend still continues. This support is especially noticeable in Germany, where the state invests €2.5 billion into infrastructure renewal per annum. In Austria, this sum is more than €2 billion per annum, in France and Great Britain – approximately €1 billion, and in Switzerland – €0.7 billion.
According to the state support level, developed European states have left Russia far behind. How much funds should our state allocate to develop railway infrastructure? In short, reaching an efficient level of investments is possible if 1.5% of the GDP is given over for it (the current figure is just 0.7%). RZD’s suggestions about the mechanisms of infrastructure development financing have been fixed in the state programme of the RF transport system development, which is to be finalised and approved before the end of 2012. In particular, it envisages development of financial instruments to transform pension assets into investments made for this purpose. Adequate mechanisms have been found and are actively applied in Norway and other countries. Meanwhile, we continue to keep money, which does not work now to provide the economic development of the country.

– Governmental officials and sector experts note that the company has reserves to increase efficiency and to search for additional resources.

– Within the framework of the state tariff regulation, Russian Railways uses all available opportunities and works actively to form sources for investment financing. An active project is underway to improve the company’s efficiency using internal optimization measures. This method, however, is finite. Thanks to it, the company may save an additional RUB 24 billion in 2013, but the difference between the real price situation in the market and the parameters, on which the country’s social and economic development outlook depends, causes a forced increase in expenditures due to reasons beyond the company’s control. And this neutralises gains from inner optimization. I understand how difficult it is to identify cost fluctuations due to changes in the economy, but I would like to give one example. According to the real price situation, the increase in prices for diesel fuel in 2012 is estimated at 15-16%. The forecast which was the basis for railway tariffs, envisaged the increase would only be 0.9%. In other words, in practice the price is sixteen-fold higher than it was planned when our tariffs were calculated.
Also, to solve infrastructure problems, the company uses funds from selling stakes in its subsidiaries, but this source is almost exhausted. Last year, we completed perhaps the largest deal in the history of privatization in Russia, when we sold the shareholding in Freight One. We have no such stakes now.
The third source is efficient loans. We are the largest company and most respected borrower in the Russian transport sector today. Meanwhile, even state-guaranteed additional loans will cause a decrease in the company’ investment attractiveness and damage its balance.

– Speaking about the subject of development of an efficient model of investing into railways, what do you suggest?

– In our opinion, to provide infrastructure projects financing, interaction between the state and RZD should be carried out in accordance with the Transport Ministry’s offer – as the mechanism of a regulatory network contract based on long-term tariffs (five years, or at least three years). The efficiency of these mechanisms has been proved by the experience of Germany, France, and Great Britain. For example, the required volume of the state’s support to carry out priority projects of railway infrastructure development in the Eastern part of Russia to 2016 amounts to RUB 291 billion. Of that, RUB 208 billion is to be invested into the Baikal-Amur Mainline, and RUB 83 billion – into the Trans-Siberian Railway.
I would like to explain my idea of the efficiency of investments into railway infrastructure from the standpoint of the state’s interests. The Institute of Economic Forecasting of the Russian Academy of Science analysed the prognosticative model complex developed with the help of the intersectoral balance methods. According to their results, every rouble of additional expenditure or investment made by RZD provides an increase in the output in adjacent sectors by 1.5 roubles if the level of imports remains as high as it is nowadays; or an increase in the output in the adjacent industries by 2.35 roubles in the case of 100% import substitution and fulfillment of the Russian industry’s need for the railway transport. We are carrying out a consistent policy targeted at usage of materials and machines made in Russia. We follow the same methodology when we organise work, in which foreign partners will participate. 
What are the consequences of insufficient investments in infrastructure projects?  For example, in 2011-2015 losses from insufficient transportation of cargo from the GDP viewpoint will amount to RUB 2.3 trillion, and in 2011-2020 – RUB 5.8 trillion. According to these figures, the losses are much more serious for the GDP than the deficit of investments into removing bottlenecks. The research carried out by the Institute shows that there are reserves to optimise the tariff loading among the sectors and increase tariffs on cargo transportation without serious negative impact on prices growth and reduction in the output of main cargo-generating sectors.

Key Directions for Transportation: Time for Decisions to Come to Life
– You have mentioned development of the Far East. If we talk about some global trends, the attention to this region and to Siberia is very noticeable. They speak about launching a state corporation that will be engaged in Transuralia (territory to the east of the Urals, including the Kurgan and the Chelyabinsk regions of the RF), and about increasing the loading volume to the Far Eastern ports and China. What steps should railmen take and what measures should the government take to use this trend most efficiently?

– Analysing the issues of the Far East and Siberian development, the need to support the competitiveness of the national commodity transport network and to coordinate transport modes in order to reduce the cost and improve the quality of the service is to be defined as a state priority.
Looking at railway infrastructure development, the priorities were set in 2008, when the government approved the Strategy of Railway Transport Development in the Russian Federation to 2030. The relevance of these priorities was proved during the crisis in 2008 and later, when the total cargo flow on the network was falling, but freight volume directed eastwards was increasing. Serious economic changes took place in the global market. Together with the Transport Ministry and the Ministry of Economic Development, we had to update the General Scheme of Railway Network Development to 2020 in accordance with the decisions made by the Government at its conference in Kemerovo.
One of the key issues of the General Scheme is the development of infrastructure in the east of Russia, where the carrying capacity is almost exhausted now. In 2010-2011, these questions were discussed many times, offers were developed and submitted to the ministries and departments. I would like to emphasise once again that the increase in the railway cargo turnover is forecasted to reach 40% at the Russian railway network before 2020, and it is supposed to grow by 150% at the Baikal-Amur Mainline (the BAM), and to increase three- or even fourfold at the railway approaches to the ports of the Vanino – the Sovetskaya Gavan transport node. 
To provide the planned transportation volume, the General Scheme and relative infrastructure programme envisage construction of an additional main track at the BAM to make the mainline double-track, development of the Transsib and approaches to the Far Eastern ports and lines providing transportation between Russia and North Korea, and traction rolling stock renewal. 
Regarding the shortage of investment sources, including those for traction rolling stock renewal, RZD offered to discuss the opportunity of state support for development of the leasing mechanism in the railway sector, as it is done in aviation. This includes subsidizing a part of leasing payments by the state, and implementation of additional measures for tax stimulation. 
RUB 181 billion and RUB 737 billion are needed for the Transsib and the BAM development to 2020. I would like to emphasise that these investments should be made until 2020. These are enormous sums, and they can hardly be taken from the operating profits of RZD, which is regulated by the state. Already now, before any momentous decisions about these mainlines are taken, we are ready to invest RUB 15 billion per annum. It means that by 2016 RZD will have given RUB 60 billion, while the total number of investments should exceed RUB 350 billion by that time. I would like to underline that it contradicts the approved policy, which envisages that RZD must invest its own means into payback projects. 
Modernisation of the BAM does not seem to be a project which will pay for itself in a commercially reasonable period of time. Nevertheless, we think it must be done, and we count on governmental support in future.

– There are other popular directions…

– Yes, there are. Recently we held a conference of the scientific and technical council of RZD. It was devoted to the project of the commercial port of Ust-Luga, which, in my opinion, is one of the key projects for Russia. In carrying it out, we expect to be able to compete for cargo flows in this area and to enhance the country’s export potential. I have a peculiar interest in Ust-Luga: in the early 2000-s I was engaged in construction of port capacities there, and then, as the President of RZD, I provided construction of railway approaches to the port. Russian Railways purchased a 25% stake in the port and joined the shareholders’ council of the Ust-Luga Company. In fact, purchase of stakes in large Russian ports is one of our strategic goals, because it allows us to participate in the port infrastructure development, influence tariffs, and set an efficient through rate for consignors. 
Nowadays, RZD as a co-owner of the port is building a transport and logistics complex in the zone, and is carrying out the strategy of combined transportation. There are a lot of problems there. One of them is financing, with which RZD still copes, although the decision on allocation of state investments has been taken, and this was discussed at the conference mentioned above.
I would like to emphasise once again that Russia needs such projects as Ust-Luga. Foreign trade partners of the RF are interested in them as well. In the last four years, cargo transportation volume via the port grew threefold to 22 million tons. We believe that the throughput will triple before 2015, and amount to 120 million tons per annum before 2020. Therefore, Ust-Luga will become the largest port in Russia and a strong competitor to all ports at the Baltic Sea.

Stake in Young People
– Amid the instability in financial markets, negative prognosis of economic development, the railway structural reform seems to have fallen by the wayside. In view of the latest events in the sector – self regulatory development in the transportation market, appearance of own and rented rolling stock park, etc. – do you think that any amendments should be put into the Target Market Model approved in 2011?

– Today we are at the final stage of the sector reform and we still continue to discuss the contradiction of the railways’ status – either it is a business or an instrument to solve social and geopolitical issues, where the state plays the main role. Obviously, public needs for the network development do not always coincide with the profitability of these directions, that is why classic market laws do not work here no matter how hard market fundamentalists insist on it. A lot of European countries came to the same conclusion – in the last 10-15 years they undertook liberalization and structural reform of the transportation market. The results of the reform were different. 
In 2011, scientists at the University of Leeds (Great Britain) researched how separation of infrastructure from transportation activity impacts on the efficiency and competitiveness of the EU railways. It proved that there was no positive interconnection between such separation and the increase in the cargo turnover or the railways’ share in the transport market. Also, the scientists made a conclusion that competition did not have a direct influence on the efficiency of railways and it should not be a goal in itself. I think that the final results of RZD’s structural reform should be analysed from the same standpoint.
The company follows the terms of the reform, fulfilling all the tasks set by the government. It has been confirmed at the level of the RF government and the Chairman of the RF government, whose assessment is the most respected for me as for the head of a state company. The problem is that the lawmaking mechanism needed to carry out the process is lagging, so there appears some imbalance in the market. What do we observe now after the liberalization of the cargo transportation sector? A decline in the efficiency of wagon park use, and an uncontrolled increase in the private operators’ revenues caused by the lack of any regulation of the wagon constituent in tariffs. And it is considered normal!     
Operators complain a lot, however, they are not poor – there are a lot of senior managers of private cargo transportation companies in the Forbes list. In its turn, RZD earns money for the state (its shareholder) working on the regulated tariff. Moreover, the Ministry of Finance and the Ministry of Economic Development always tell us about the necessity to restrain the growth of the infrastructure constituent in the tariff. Because of this the company constantly lacks funds to invest and has to apply to the state for donations to maintain the infrastructure properly. Meanwhile, the entire margin, which could be earned on the open market and spent on railway network development, belongs to a private railcar owner. In my opinion, this imbalance contradicts public interests. One of the consequences of the situation is the decline in the safety level on the railway network. Accidents caused by railway machinery defects have become more frequent. Amid the total liberalization of rules in the sector, it is difficult to understand whom to blame for the accidents; there is no system of strict technical control. Meanwhile, it is RZD that remains responsible for every force majeure which happens on the railway network. 
From time to time, there appear new initiatives to continue to undermine the single system. Their motto is “the market will regulate everything.” Primarily they concern privatization of locomotive haulage as soon as possible. Meanwhile, most countries consider separating locomotive haulage from infrastructure inefficient. I am surprised that people standing for market principles do not think about the specifics of railways, where the losses from the unplanned disintegration of the single infrastructure can be very serious. 

– We started our talk with global challenges and RZD’s reaction to them. It would be a quite logical final question – what sources of strategic development does the company invest in to exploit arising opportunities efficiently and neutralise emerging risks?

– Since we are talking in the year of the sector’s 175th anniversary, I would like to say that I am always eager to meet young people, to share my experience with those who can make use of it. I’d like them to understand that work in the railway sector is very interesting. Young specialists have good prospects in RZD in terms of both – wages and promotion. We are a dynamically developing transport corporation, which provides 2% of the national GDP, has an clear strategy of development until 2030, and is highly regarded by the market.  It is fair to say that world leading companies think it is an honour to be our partners and carry out joint projects. Despite the large amount of “hardware” in the railway sector, it is the people, the team, who make the company a success. They are the driving force of reforms and innovations, they have a new railway mentality and different competences.  
As the head of the company, I must understand what specialists and managers may join our team tomorrow, to what degree they will be ready to fulfill the tasks set for us, and, which is most important, whether they will be ready and able to take responsibility for the further development of the company and the entire country. Apparently, the next generation is ready for it. And I am glad to know it.
    [~DETAIL_TEXT] => 
Global Challenges and Global Solutions
– Mr Yakunin, in one of your speeches you mentioned the following idea: there are changes in the economy, there are changes in the railway sector, and Russian Railways should change as well. What is central to the current global transformation and how does the company face new challenges?

– The transport community as well as a lot of experts think that the “golden age” of the railway transport starts today. It is a worldwide trend. Europe, for example, intends to make railways an alternative to road transport, and the environment is one of the reasons behind it. According to the European Commission’s White Paper, 30% of road freight over 300 km should shift to other modes such as rail or waterborne transport by 2030, and more than 50% by 2050. There is a similar plan for passenger transportation. I mean the increase in the potential demand for the “5+” transport service (fast, cheap, comfortable, safe, regular), and transportation according to the “wheel-rail” principle, and high-speed mainlines development to coincide with it. The trends mentioned above are relevant for Russia as well.
Speaking about less global but very important things, we participate actively in the formation of the Common Economic Space of Russia, Kazakhstan, and Belarus. We and our colleagues from other countries agreed to launch a joint cargo transport company for container transportation by railway. It will be a network-wide operator, which will have sales points in the main industrial centres in Eurasia. The company will be established on the basis of existing and working assets, therefore, no significant investments will be needed at the initial stage. Kazakhstan is to give its shareholdings in a number of subsidiaries of Kazakhstan Temir Zholy, the Republic of Belarus is to give terminals owned by the Belarusian Railway in Brest and assets of Belintertrans. We are going to transfer RZD’s stake in TransContainer to the capital stock. In our opinion, it is more efficient than to sell it to an external investor, into which we are being prodded.    
Since we are working towards harmonising economies and forming the Common Economic Space with neighbouring countries, transport and logistics are key elements. Integration processes in Eurasia give us a unique chance to join efforts, and it will be silly of us not to make use of it. Logistic services are a very profitable business, but Russia, Kazakhstan, and Belarus are poorly rated according to the level of logistic development. The launch of a global company and a competitive product is a definite step forward to develop this business direction. Regarding the dynamic development of western and central regions, we can count on re-orientation of up to 2% of the entire container transit volume between Europe and Asia to the Russian-Belarusian-Kazakh company by 2020. 

– These plans can hardly be carried out without solving another issue of strategic importance – creating an efficient model of investments into railways development. Unfortunately, such a model has not been developed yet.

– The European practice has already proved it, and nobody doubts now that advanced development of transport infrastructure is the locomotive of economic growth. Even amid the global financial crisis, European railways development was financed as a matter of priority at the pre-crisis level. This trend still continues. This support is especially noticeable in Germany, where the state invests €2.5 billion into infrastructure renewal per annum. In Austria, this sum is more than €2 billion per annum, in France and Great Britain – approximately €1 billion, and in Switzerland – €0.7 billion.
According to the state support level, developed European states have left Russia far behind. How much funds should our state allocate to develop railway infrastructure? In short, reaching an efficient level of investments is possible if 1.5% of the GDP is given over for it (the current figure is just 0.7%). RZD’s suggestions about the mechanisms of infrastructure development financing have been fixed in the state programme of the RF transport system development, which is to be finalised and approved before the end of 2012. In particular, it envisages development of financial instruments to transform pension assets into investments made for this purpose. Adequate mechanisms have been found and are actively applied in Norway and other countries. Meanwhile, we continue to keep money, which does not work now to provide the economic development of the country.

– Governmental officials and sector experts note that the company has reserves to increase efficiency and to search for additional resources.

– Within the framework of the state tariff regulation, Russian Railways uses all available opportunities and works actively to form sources for investment financing. An active project is underway to improve the company’s efficiency using internal optimization measures. This method, however, is finite. Thanks to it, the company may save an additional RUB 24 billion in 2013, but the difference between the real price situation in the market and the parameters, on which the country’s social and economic development outlook depends, causes a forced increase in expenditures due to reasons beyond the company’s control. And this neutralises gains from inner optimization. I understand how difficult it is to identify cost fluctuations due to changes in the economy, but I would like to give one example. According to the real price situation, the increase in prices for diesel fuel in 2012 is estimated at 15-16%. The forecast which was the basis for railway tariffs, envisaged the increase would only be 0.9%. In other words, in practice the price is sixteen-fold higher than it was planned when our tariffs were calculated.
Also, to solve infrastructure problems, the company uses funds from selling stakes in its subsidiaries, but this source is almost exhausted. Last year, we completed perhaps the largest deal in the history of privatization in Russia, when we sold the shareholding in Freight One. We have no such stakes now.
The third source is efficient loans. We are the largest company and most respected borrower in the Russian transport sector today. Meanwhile, even state-guaranteed additional loans will cause a decrease in the company’ investment attractiveness and damage its balance.

– Speaking about the subject of development of an efficient model of investing into railways, what do you suggest?

– In our opinion, to provide infrastructure projects financing, interaction between the state and RZD should be carried out in accordance with the Transport Ministry’s offer – as the mechanism of a regulatory network contract based on long-term tariffs (five years, or at least three years). The efficiency of these mechanisms has been proved by the experience of Germany, France, and Great Britain. For example, the required volume of the state’s support to carry out priority projects of railway infrastructure development in the Eastern part of Russia to 2016 amounts to RUB 291 billion. Of that, RUB 208 billion is to be invested into the Baikal-Amur Mainline, and RUB 83 billion – into the Trans-Siberian Railway.
I would like to explain my idea of the efficiency of investments into railway infrastructure from the standpoint of the state’s interests. The Institute of Economic Forecasting of the Russian Academy of Science analysed the prognosticative model complex developed with the help of the intersectoral balance methods. According to their results, every rouble of additional expenditure or investment made by RZD provides an increase in the output in adjacent sectors by 1.5 roubles if the level of imports remains as high as it is nowadays; or an increase in the output in the adjacent industries by 2.35 roubles in the case of 100% import substitution and fulfillment of the Russian industry’s need for the railway transport. We are carrying out a consistent policy targeted at usage of materials and machines made in Russia. We follow the same methodology when we organise work, in which foreign partners will participate. 
What are the consequences of insufficient investments in infrastructure projects?  For example, in 2011-2015 losses from insufficient transportation of cargo from the GDP viewpoint will amount to RUB 2.3 trillion, and in 2011-2020 – RUB 5.8 trillion. According to these figures, the losses are much more serious for the GDP than the deficit of investments into removing bottlenecks. The research carried out by the Institute shows that there are reserves to optimise the tariff loading among the sectors and increase tariffs on cargo transportation without serious negative impact on prices growth and reduction in the output of main cargo-generating sectors.

Key Directions for Transportation: Time for Decisions to Come to Life
– You have mentioned development of the Far East. If we talk about some global trends, the attention to this region and to Siberia is very noticeable. They speak about launching a state corporation that will be engaged in Transuralia (territory to the east of the Urals, including the Kurgan and the Chelyabinsk regions of the RF), and about increasing the loading volume to the Far Eastern ports and China. What steps should railmen take and what measures should the government take to use this trend most efficiently?

– Analysing the issues of the Far East and Siberian development, the need to support the competitiveness of the national commodity transport network and to coordinate transport modes in order to reduce the cost and improve the quality of the service is to be defined as a state priority.
Looking at railway infrastructure development, the priorities were set in 2008, when the government approved the Strategy of Railway Transport Development in the Russian Federation to 2030. The relevance of these priorities was proved during the crisis in 2008 and later, when the total cargo flow on the network was falling, but freight volume directed eastwards was increasing. Serious economic changes took place in the global market. Together with the Transport Ministry and the Ministry of Economic Development, we had to update the General Scheme of Railway Network Development to 2020 in accordance with the decisions made by the Government at its conference in Kemerovo.
One of the key issues of the General Scheme is the development of infrastructure in the east of Russia, where the carrying capacity is almost exhausted now. In 2010-2011, these questions were discussed many times, offers were developed and submitted to the ministries and departments. I would like to emphasise once again that the increase in the railway cargo turnover is forecasted to reach 40% at the Russian railway network before 2020, and it is supposed to grow by 150% at the Baikal-Amur Mainline (the BAM), and to increase three- or even fourfold at the railway approaches to the ports of the Vanino – the Sovetskaya Gavan transport node. 
To provide the planned transportation volume, the General Scheme and relative infrastructure programme envisage construction of an additional main track at the BAM to make the mainline double-track, development of the Transsib and approaches to the Far Eastern ports and lines providing transportation between Russia and North Korea, and traction rolling stock renewal. 
Regarding the shortage of investment sources, including those for traction rolling stock renewal, RZD offered to discuss the opportunity of state support for development of the leasing mechanism in the railway sector, as it is done in aviation. This includes subsidizing a part of leasing payments by the state, and implementation of additional measures for tax stimulation. 
RUB 181 billion and RUB 737 billion are needed for the Transsib and the BAM development to 2020. I would like to emphasise that these investments should be made until 2020. These are enormous sums, and they can hardly be taken from the operating profits of RZD, which is regulated by the state. Already now, before any momentous decisions about these mainlines are taken, we are ready to invest RUB 15 billion per annum. It means that by 2016 RZD will have given RUB 60 billion, while the total number of investments should exceed RUB 350 billion by that time. I would like to underline that it contradicts the approved policy, which envisages that RZD must invest its own means into payback projects. 
Modernisation of the BAM does not seem to be a project which will pay for itself in a commercially reasonable period of time. Nevertheless, we think it must be done, and we count on governmental support in future.

– There are other popular directions…

– Yes, there are. Recently we held a conference of the scientific and technical council of RZD. It was devoted to the project of the commercial port of Ust-Luga, which, in my opinion, is one of the key projects for Russia. In carrying it out, we expect to be able to compete for cargo flows in this area and to enhance the country’s export potential. I have a peculiar interest in Ust-Luga: in the early 2000-s I was engaged in construction of port capacities there, and then, as the President of RZD, I provided construction of railway approaches to the port. Russian Railways purchased a 25% stake in the port and joined the shareholders’ council of the Ust-Luga Company. In fact, purchase of stakes in large Russian ports is one of our strategic goals, because it allows us to participate in the port infrastructure development, influence tariffs, and set an efficient through rate for consignors. 
Nowadays, RZD as a co-owner of the port is building a transport and logistics complex in the zone, and is carrying out the strategy of combined transportation. There are a lot of problems there. One of them is financing, with which RZD still copes, although the decision on allocation of state investments has been taken, and this was discussed at the conference mentioned above.
I would like to emphasise once again that Russia needs such projects as Ust-Luga. Foreign trade partners of the RF are interested in them as well. In the last four years, cargo transportation volume via the port grew threefold to 22 million tons. We believe that the throughput will triple before 2015, and amount to 120 million tons per annum before 2020. Therefore, Ust-Luga will become the largest port in Russia and a strong competitor to all ports at the Baltic Sea.

Stake in Young People
– Amid the instability in financial markets, negative prognosis of economic development, the railway structural reform seems to have fallen by the wayside. In view of the latest events in the sector – self regulatory development in the transportation market, appearance of own and rented rolling stock park, etc. – do you think that any amendments should be put into the Target Market Model approved in 2011?

– Today we are at the final stage of the sector reform and we still continue to discuss the contradiction of the railways’ status – either it is a business or an instrument to solve social and geopolitical issues, where the state plays the main role. Obviously, public needs for the network development do not always coincide with the profitability of these directions, that is why classic market laws do not work here no matter how hard market fundamentalists insist on it. A lot of European countries came to the same conclusion – in the last 10-15 years they undertook liberalization and structural reform of the transportation market. The results of the reform were different. 
In 2011, scientists at the University of Leeds (Great Britain) researched how separation of infrastructure from transportation activity impacts on the efficiency and competitiveness of the EU railways. It proved that there was no positive interconnection between such separation and the increase in the cargo turnover or the railways’ share in the transport market. Also, the scientists made a conclusion that competition did not have a direct influence on the efficiency of railways and it should not be a goal in itself. I think that the final results of RZD’s structural reform should be analysed from the same standpoint.
The company follows the terms of the reform, fulfilling all the tasks set by the government. It has been confirmed at the level of the RF government and the Chairman of the RF government, whose assessment is the most respected for me as for the head of a state company. The problem is that the lawmaking mechanism needed to carry out the process is lagging, so there appears some imbalance in the market. What do we observe now after the liberalization of the cargo transportation sector? A decline in the efficiency of wagon park use, and an uncontrolled increase in the private operators’ revenues caused by the lack of any regulation of the wagon constituent in tariffs. And it is considered normal!     
Operators complain a lot, however, they are not poor – there are a lot of senior managers of private cargo transportation companies in the Forbes list. In its turn, RZD earns money for the state (its shareholder) working on the regulated tariff. Moreover, the Ministry of Finance and the Ministry of Economic Development always tell us about the necessity to restrain the growth of the infrastructure constituent in the tariff. Because of this the company constantly lacks funds to invest and has to apply to the state for donations to maintain the infrastructure properly. Meanwhile, the entire margin, which could be earned on the open market and spent on railway network development, belongs to a private railcar owner. In my opinion, this imbalance contradicts public interests. One of the consequences of the situation is the decline in the safety level on the railway network. Accidents caused by railway machinery defects have become more frequent. Amid the total liberalization of rules in the sector, it is difficult to understand whom to blame for the accidents; there is no system of strict technical control. Meanwhile, it is RZD that remains responsible for every force majeure which happens on the railway network. 
From time to time, there appear new initiatives to continue to undermine the single system. Their motto is “the market will regulate everything.” Primarily they concern privatization of locomotive haulage as soon as possible. Meanwhile, most countries consider separating locomotive haulage from infrastructure inefficient. I am surprised that people standing for market principles do not think about the specifics of railways, where the losses from the unplanned disintegration of the single infrastructure can be very serious. 

– We started our talk with global challenges and RZD’s reaction to them. It would be a quite logical final question – what sources of strategic development does the company invest in to exploit arising opportunities efficiently and neutralise emerging risks?

– Since we are talking in the year of the sector’s 175th anniversary, I would like to say that I am always eager to meet young people, to share my experience with those who can make use of it. I’d like them to understand that work in the railway sector is very interesting. Young specialists have good prospects in RZD in terms of both – wages and promotion. We are a dynamically developing transport corporation, which provides 2% of the national GDP, has an clear strategy of development until 2030, and is highly regarded by the market.  It is fair to say that world leading companies think it is an honour to be our partners and carry out joint projects. Despite the large amount of “hardware” in the railway sector, it is the people, the team, who make the company a success. They are the driving force of reforms and innovations, they have a new railway mentality and different competences.  
As the head of the company, I must understand what specialists and managers may join our team tomorrow, to what degree they will be ready to fulfill the tasks set for us, and, which is most important, whether they will be ready and able to take responsibility for the further development of the company and the entire country. Apparently, the next generation is ready for it. And I am glad to know it.
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