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Meeting with Russian Railways CEO Oleg Belozerov

May 25, 2020, The Kremlin, Moscow

Vladimir Putin met with Russian Railways Chief Executive Officer – Chairman of the Executive Board Oleg Belozerov to discuss the operation of the Russian railway system and the company’s investment activity.

President of Russia Vladimir Putin: Mr Belozerov, not so long ago, we discussed the current situation in the transport sector in general and agreed to have a meeting specifically on the state of the Russian railways. Historically, it is the key transport sector for Russia considering the size of its territory, the amount of cargo operations and its significance for the national economy in general.

However, I asked you to particularly focus on the company’s investment activity. Investment programmes of our largest natural monopolies serve as an important factor for the economic and social wellbeing of workers as well as the economic status of many industries that provide services to Russian Railways, among other companies.

Let’s start with this issue.

Russian Railways CEO Oleg Belozerov: Mr President, first of all, I would like to thank you for your constant attention to the railway industry and the decisions that were made at the recent meeting. Those decisions were of great help to us. Our performance was quite solid even before 2019. But in 2019, according to the official auditors’ report, we achieved unprecedented results – all this was due to our investment programmes. Of course, we needed your support in order to maintain the scope of investment and move forward.

I would like to start by saying just a few words about our healthcare subdivision. RZD-Medicine is involved in fighting COVID-19. We are cooperating with constituents, with the regions on 17 territories. We are part of the effort to fight the infection in Moscow, Voronezh and on Sakhalin. In other regions, we have taken over emergency help. We changed the routing and are actively involved in this process.

As I already mentioned, we made a good headstart in 2019. It would be false modesty to deny that we are leaders in safety, energy efficiency and environmental friendliness, and this has been confirmed by international organisations. Let us say our security index is 22 percent higher than the global average. We became the winners of environmental leaders’ contests. At the same time, I have pointed out environmental sustainability not just as a fact – it also gives us additional financial possibilities.

Vladimir Putin: What kind of possibilities?

Oleg Belozerov: We floated Green Bonds in March – a unique mechanism in terms of their coupon rate at 0.84 percent for six years, worth 250 million Swiss francs. This is the correlation I mentioned – environmentally friendly practices allow us to use unique mechanisms.

At the same time, last year, our net profit rose three times compared to 2018, mainly on the back of higher labour productivity, which grew more than 6 percent over the past three years.

Vladimir Putin: A good level.

Oleg Belozerov: At the same time, last year, the total length of tracks with overhauls overdue decreased by 1,000 kilometres. You pointed out the need to improve the network, and we have achieved this unique result.

At the same time, we wanted to preserve the programme, and thank you very much for your support. In the first four months, we have already invested 122 billion, and bought 163 units of traction rolling stock – locomotives, and that was more than five levels of conversion and reprocessing, as we have reported to you.

Our investment programmes concern almost 2 million workers. We needed the decisions to continue it, and these decisions have been adopted. At the same time, we are working in key areas.

Today, of course, the situation is different from before, but, as I said, within 10 days we had 100,000 employees of Russian Railways shifting to work online, without disrupting our customers’ access to Russian Railways. This was primarily achieved due to the digitalisation that we have been implementing for the last few years.

At the same time, as I reported to you, we continue to work on an unmanned Lastochka train and the virtual coupling of cargo train locomotives, all these being part of our investment programme.

As I reported, the major part of railway operations on Sakhalin switched to the Russian standard last year. Literally right up until last year, our trains were still running on Japanese tracks but last year, we switched to our Russian tracks and launched our new and unique Russian rolling stock. Also, we immediately signed an agreement on transition to prototypes powered by hydrogen fuel cells. This project will require time but we will accomplish it.

And we are not leaving quantum communications behind. In the first quarter of 2021, we want to complete the Moscow – St Petersburg line. It will be launched and we believe that it will increase reliability. Meanwhile, we have seen a growth of cargo operations in several segments. Despite the general decline, there has been an increase in container traffic because digital services are operating. Right now, almost any type of bill of lading can be submitted in one click, followed by all other necessary procedures.

You gave us the job of increasing the speed of trains running across Russia from China to Europe. We have achieved an unprecedented speed of 2,500 km in virually two days.

We are using Building Information Modelling in construction. This is a new technology of digital modelling. When we design a project, BIM provides us with its technical specifications so that we can get a clear picture of how we will use it, how soon and what digital performance indicators we will have. It helps us to significantly optimise expenses.

I would like to note that currently, we have 27,000 people working in construction. Thanks to your decision, by summer we plan to expand our staff by 10,000 people and primarily focus on the eastern territories. We will complete the task you gave us. Not only that but we will exceed your expectations.

It goes without saying that both the comprehensive plan and the performance indicators will be achieved. We have no doubts about this. Thank you.

Vladimir Putin: The eastern territories are quite extensive. There are different directions and each route has its own challenges. Which of them do you find essential?

Oleg Belozerov: Mr President, in fact, we take into account shippers first of all, and we are looking at how to address the tasks that you have set. The key task is now the problem of Kuzbass. Following your instruction, we have finalized export volumes in the memorandum and support our colleagues, but at the same time, we are trying to develop the areas necessary to allow the economy of the Far East to develop too. This is a rather complicated mechanism since all processes are interconnected, but we are trying to find a balance in this area.

Vladimir Putin: The miners of Kuzbass need help.

Oleg Belozerov: Yes.

Vladimir Putin: As far as I understand, your investment programme will shrink one way or another, won't it? How much?

Oleg Belozerov: By about 200 billion rubles. It was 820 billion, and now it amounts to 620 billion. But we calculated what actions will influence which issues. First of all, we reduced investment, for example, in design, which can be slightly shifted.

Vladimir Putin: Investment in design can be reduced, I agree. But investment in the real sector should not see drastic cuts.

Oleg Belozerov: This is our priority – to support all production areas and all related industries. We support both small and medium-sized enterprises and made sure that these sectors receive our investment. Where there is little investment, we can shift a little without reducing staff.

Vladimir Putin: Mr Belozerov, it is clear that it is not worth it investing down the drain or taking high risks. But still, I would ask you and your colleagues to carefully analyse once again the investment opportunities.

Oleg Belozerov: Mr President, after you took the decision, my colleagues and I understand that we will be coming back with proposals in the near future. We have an option where we can further increase the volume using our funds without federal budget support. We know how to do this, but we need time to prepare.

Vladimir Putin: All right.

Thank you.

May 25, 2020, The Kremlin, Moscow