Volodymyr Zhmak, Chairman of the Board of the Ukrainian Railways PJSC, said that the Ukrainian railway suffered greatly from the lack of communication with Russia and the territories not controlled by Kiev.

According to him, the current situation does not meet the interests of the company and the needs of citizens who have relatives in the Russian Federation, Crimea and Donbass.

“It is definitely unprofitable for Ukrzaliznytsia to terminate passenger traffic with Moscow.

The Kiev - Moscow route was one of the most profitable with seven daily trains.

Now all these passengers have gone through Minsk, ”Zhmak said in an interview with the Ukraine 24 TV channel.

Another popular and profitable route, as the head of Ukrzaliznytsia (UZ) said, was Lviv - Moscow.

Zhmak called the lack of a railway connection with the Russian Federation "a negative factor for the economy."

He stressed that the company lost not only a significant share of passenger traffic, but also transit cargo.  

"A sensitive question"

Rail links between Russia and Ukraine were suspended in March last year due to the coronavirus pandemic.

Every year it brought over a hundred million dollars to the Ukrainian budget.

The most profitable route was Kiev - Moscow.

At the end of 2019, Ukrzaliznytsia's profit from the operation of this route amounted to UAH 145.2 million (RUB 378.89 million at the current exchange rate).

After 2014, Ukrainian officials have repeatedly come forward with an initiative to completely stop railway communication with the Russian Federation due to the aggravation of political differences.

However, these plans were never implemented for economic reasons.

  • Freight train on the Ukrainian railway

  • Reuters

  • © Valentyn Ogirenko

"The question is sensitive ... And we must understand that when we block something, we find alternative options for how these trains can travel, and that this money will go to the economy of another country," said the Minister of Infrastructure of Ukraine in October 2019 Vladislav Krikliy.

In an interview with RT, economist and political analyst Alexander Dudchak noted that the termination of railway communication with Russia would result in extremely serious consequences for Ukrzaliznytsia and the republic's economy.

According to him, the idleness in railway traffic, which has continued since spring, will eventually lead to huge losses for the Ukrainian railway operator.

“Let me remind you that before the pandemic, only Ukrzaliznytsia trains went to Russia and back to Ukraine, and last year the losses of the Ukrainian company will be colossal.

It is clear that the quarantine is now, but whether Ukraine will restore movement when the pandemic ends is a big question.

Unfortunately, Kiev is inclined to disregard common sense in favor of Russophobic initiatives, ”Dudchak said.

The management of UZ does not hide the fact that the company's financial situation has become very complicated in the context of the termination of communication with the Russian Federation.

So, at the end of October, during a press briefing, Zhmak estimated the losses of Ukrzaliznytsia at the end of 2020 at 12-14 billion hryvnia (31.31-36.53 billion rubles).

He said that in the current situation the company is counting on "the support of international financial institutions."

At the moment, UZ has not yet published its annual accounts.

However, it is known that in the first six months of 2020, Ukrzaliznytsia's net loss amounted to UAH 8.792 billion (RUB 22.94 billion), while in January-June 2019, the company's net profit exceeded UAH 1 billion (over RUB 2.61 billion ).

UZ's net income from the sale of goods and services in January-June 2020 fell by 19.42% compared to the first half of 2019.

The problems of Ukrzaliznytsia are also mentioned in the annual report of the European Union, dedicated to the implementation of the Association Agreement by Kiev.

The document was published on December 1, 2020.

True, Brussels sees the cause of the crisis in the fact that Kiev is in no hurry to reform UZ.

Under an association agreement with the EU, the Ukrainian authorities must turn the monopolist into a holding company with four vertically integrated companies.

These structures will be responsible for the development of freight traffic, passenger traffic, infrastructure and production assets.

The reorganization of Ukrzaliznytsia is planned to be completed by the end of this year.

  • Passenger railway station in Ukraine

  • Reuters

  • © Gleb Garanich

Alexander Dudchak is skeptical about the reform that the EU insists on.

The expert recalls that the only segment that brings tangible income to UZ is cargo transportation - in January-October 2020, profit in this sector exceeded 9 billion hryvnia (23.48 billion rubles).

The proceeds are used to maintain infrastructure, pay taxes to the budget, pay salaries and subsidize passenger transportation, the loss from which in the first 10 months of last year amounted to 10.9 billion hryvnia (28.44 billion rubles).

“The existence of a unified company of railway services in Ukraine makes it possible to somehow maintain passenger traffic.

If it is not subsidized at the expense of the profit from freight traffic, then it will be necessary either to raise tariffs to amounts absolutely unacceptable for the population, or to find the missing funds from the budget, ”Dudchak explained.

"An unsolvable financing issue"

According to experts interviewed by RT, all the years of the existence of the Ukrainian state, Ukrzaliznytsia has been in a permanent crisis, surviving mainly due to interaction with Russia, loans and a constant increase in transportation tariffs, which allowed the company to make a profit in 2018.

Meanwhile, the key problem of KM remains a hopelessly outdated material and technical base.

As a member of the transport committee of the Verkhovna Rada, Alexander Skichko, previously reported, the fleet of UZ locomotives is 96% worn out, freight cars - by 89%, passenger cars - by 88%, and the contact network needs to be replaced 81% of the equipment.

According to UZ, the depreciation of rolling stock in the passenger transportation segment is indeed approaching 90%.

As Vladimir Zhmak stated, “all our passenger cars were produced in the 80s of the last century, their service life is almost coming to an end”.

He also said that this year, for the first time after the collapse of the USSR, 80 new cars will be purchased for the needs of the Ukrainian railway.

At the same time, according to him, the annual need of JSC "Ukrzaliznytsia" in the renewal of passenger cars is estimated at 250-300 units.

The issue of the deterioration of rolling stock was on the agenda of every Ukrainian government, but none of them has developed a formula for solving this pressing problem, political scientists say.

Ukrainian industrialists complain that railway workers use decommissioned Russian wagons and therefore are in no hurry to place orders for new products.

The industry participants fear that the country's railroad car building industry may stop working this year.

“Today there is a catastrophic situation with the domestic production of freight cars (their localization in Ukraine exceeds 95-97%), primarily due to the colossal surplus of decommissioned cars and cars imported from Russia, for which the service life is being extended.

Therefore, 2021 may become the year of a complete stop of the Ukrainian freight car building industry, ”Andrey Zhariy, CEO of the Ukrainian company Aurum Group, told reporters earlier.

  • Train of JSC "Ukrzaliznytsya"

  • RIA News

Despite the impending collapse of the carriage-building segment, one of the priority directions for Ukrzaliznytsia is the launch of high-speed communication between different regions of the country and the transfer of infrastructure to a narrower European gauge.

Its width is 1435 mm against the existing 1520 mm standard in Ukraine, as well as in other post-Soviet countries. 

In an interview with RT, Vladimir Olenchenko, a senior researcher at the Center for European Studies at the IMEMO RAS, said that most of the problems that the Ukrainian road is experiencing are primarily caused by the "inadequate policy" of the authorities towards Moscow.

According to him, the desire of Kiev to reduce interaction with the Russian Federation as much as possible will result in only new economic losses. 

“The European track and the modernization of infrastructure - all of this sounds beautiful, but the insoluble question of financing immediately arises.

There are no prerequisites for the EU to provide Kiev with the necessary volume of investments.

In general, the Ukrainian economy is still too closely tied to the Russian one.

Therefore, any distance from the Russian Federation hits the railroad and many other industries, ”concluded Olenchenko.