MOSCOW — VTB Group chief executive Andrei Kostin said Monday that Russian banks are ready to restructure part of Russian Railways’ roughly 4 trillion-rouble debt load as long as the central bank keeps current reserve requirements on those loans unchanged. The conditional offer, delivered in an interview with Reuters, highlights how the growth of Russian Railways’ debt and punishing interest rates have pushed the state-owned carrier and its lenders into weekly crisis talks with the government, Dec. 1, 2025.
Reserve rules now hold key to Russian Railways debt talks.
Under a temporary relief scheme introduced this year, the Bank of Russia has allowed lenders to change the terms of corporate loans without increasing provisions, provided borrowers continue servicing their debts and submit a three-year financial plan. Kostin said Russian Railways’ main creditors want that treatment rolled over into 2026 so they can extend maturities and postpone interest payments on Russian Railways’ debt without simultaneously locking up scarce capital on their own balance sheets as the government debates how else to shore up the network.
VTB, Russia’s second-largest lender and Russian Railways’ biggest creditor, is taking part in weekly meetings with government officials and central bankers to shape that plan. “Banks are ready to restructure loans and defer payments, provided that the central bank does not increase reserve requirements for these loans,” Kostin said, making clear that any relief for the company hinges on the regulator’s willingness to keep its stance unchanged.
Years of mounting costs behind the rail monopoly’s debt
The strain has been building for years. In a 2024 Reuters report, a company planning document suggested Russian Railways’ annual interest bill could jump to about $7 billion in 2025—almost six times its 2023 level—as the central bank repeatedly hiked rates after the invasion of Ukraine. A separate analysis of its Asia pivot earlier this year found that cargo volumes fell to a 15-year low as sanctions, labour shortages, and capacity bottlenecks choked traffic on key eastern corridors.
High borrowing costs are squeezing many Russian companies, not just the railways. The Kremlin-linked Centre for Macroeconomic Analysis and Short-Term Forecasting recently estimated that interest payments now consume about 39% of corporate pre-tax, pre-interest profits, according to an analysis by The Moscow Times, pushing a growing share of firms into what it called a “financially vulnerable” zone. That backdrop makes Russian Railways’ debt both a symptom of wider balance-sheet stress and a potential flashpoint if a major state employer is forced into deeper cuts.
Debt conversion rejected as banks push alternative fixes.
Officials have floated more radical fixes. Last week, the government studied options such as raising freight tariffs, cutting taxes, or tapping the National Wealth Fund for support, alongside a proposal to convert about 400 billion roubles of Russian Railways debt into shares—a step that could have saved tens of billions of roubles in interest, according to a previous Reuters exclusive. Kostin said leading banks rejected the conversion plan, warning that regulators frown on large holdings of non-core assets and that fresh equity stakes in the railway would further strain lenders just as they face tougher capital rules from 2026.
The resistance also reflects banks’ own vulnerabilities. Kostin has warned that Russian lenders may need around 1.7 trillion roubles of additional capital over the next five years to meet stricter requirements, even as profits remain high, according to a separate Reuters interview published Monday. That sensitivity helps explain why creditors prefer restructuring Russian Railways debt—stretching payments and relying on future cash flow—over taking ownership and adding a politically sensitive asset to already stretched balance sheets.
The latest talks come after a turbulent few years for the company and its banks. In 2022, Western sanctions forced VTB and other issuers to route some hard-currency bond payments through rouble accounts, and a group of investors declared Russian Railways in default on one of its foreign bonds, as Business Insider reported. Both companies were later singled out in a sweeping U.S. Treasury sanctions announcement targeting major state enterprises and their access to Western capital markets. For now, Kostin’s comments suggest that as long as reserve rules stay where they are, the state’s rail champion will rely on the same banks that helped build its debt pile—postponing, rather than resolving, the question of who ultimately bears the cost.
