There is not enough space for everybody on Russia’s rail network. The Federal Antimonopoly Agency (FAA) came out in support of a longer fuel prioritisation on the rails, in order to guarantee sufficient deliveries during difficult economic times. However, the prioritisation will likely hurt other – less happy – industries that also rely on rail for their logistics.
The prioritisation of fuel on the rail network was supposed to expire on 1 September. It would have been relegated from the third position in the priority list down to the sixth, or depending on the fuel’s destination, even lower than that.
Already in July, oil companies protested the upcoming deprioritisation of their products, saying that it would lead to difficulties with deliveries, writes the Russian publication Kommersant.
On the other hand, analysts and representatives of other sectors pointed out that oil companies are “not alone on the network” and that the “immortalised” priority for oil products would lead to significant losses for other economic branches. Regardless, the FAA has now come out in support of an extension beyond this year.
Priority rules on Russian rail
The first two categories include freight trains prioritised by law, including emergency and military transportation. The third category has freight prioritised by presidential decree, which is the current category for fuel and some coal. Further down the list are regular priority categories. Since the official priority list was suspended in 2022 due to the war in Ukraine, monopolist Russian Railways has been managing the regular categories.
The continuation of the fuel measure indeed seems likely to lead to problems for other rail users. According to Kommersant, 60 per cent of all freight on Russia’s Far East railways already falls into the third category, which consists of freight prioritised by presidential decree. Space for other goods is becoming tighter and tighter.
RZD cannot comply
Even in the current situation, Russian Railways (RZD) has already been unable to comply with the prioritisation as ordered by the president. Besides coal, the third priority category also includes a predetermined volume of coal to be transported east. This includes approximately 100 million tonnes from the leading coal-producing region Kemerovo.
However, earlier this year, it became clear that RZD was already behind in meeting these coal priority quotas. The prioritised transportation of coal has led to a decline of 13 million tonnes in the loading of more profitable goods. Subsequently, it seems unlikely that the continued prioritisation of fuel will spare other rail users.
Nevertheless, the extension of fuel prioritisation does not come as a surprise. A Kommersant source says that delays in fuel delivery will ultimately lead to more inflation, something which the Kremlin has been vocal about wanting to prevent.
No quick solution
The underlying reasons for the fuel priority arrangement are manifold and cannot be solved rapidly. Due to sanctions, RZD is not able to keep up its locomotive fleet at a sufficient level. It reduces its capacity to meet all transportation demand, let alone grow that capacity. A staff shortage also hinders RZD’s capacity to run enough trains with sufficient personnel.
But perhaps more importantly, Ukraine’s attacks on Russian oil infrastructure have limited Russia’s fuel production capacity and put a strain on logistics. For example, a large fuel depot went up into flames in the Rostov region. This inevitably means that Russian Railways will need to use more trains to transport fuel from depots further away. For as long as hostilities continue, Russian rail users will need to fight their own battles for a place on the infrastructure network.
