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. Last Updated: 07/27/2016

Yakunin Tells How He'll Reinvent the Railroad

MTRussian Railways plans to offer compartments like this one, operated by the privately owned Grand Express train.
With fashionable wrap-around sunglasses obscuring half her face, it's impossible to guess where the girl on the billboard is looking. More likely than not, though, she's looking into the future.

Next to her, in meter-high lettering, is the slogan "Let's Go by Train!" Beyond that is the new streamlined logo of the state rail monopoly, Russian Railways.

The intended message is clear. Russian Railways, or RZD, often criticized for ponderous journeys, bad service and outmoded trains, is reinventing itself.

Its rebranding campaign, splashed across billboards in major Russian cities, is the most visible part of a major development plan for the railways, company president Vladimir Yakunin explained in a recent interview.

The program would open up the railroads to foreign investment and could eventually see the company partially privatized. Elsewhere, improvements from single-sex train cars to better food, DVD rentals and Internet access should make traveling by train more comfortable.

Last month, Yakunin presented his vision for modernization to President Vladimir Putin. The immensely ambitious plan envisions sinking 13.7 trillion rubles ($500 billion) into a radical overhaul of the country's rail network through 2030.

To raise the money, the company is asking the state to contribute 20 percent and regional administrations another 5 percent of the cost. The rest would come from the company's own funds and private investment.

"It is not just that we are asking with a stretched-out hand, 'Just give us money,'" Yakunin said, speaking in English.

"Take 20 percent out of 13 trillion. It is peanuts compared to the budget of Russia," he said.

Foreign investment into the company is not restricted by new regulations on strategic industries, so billions of dollars of private investment could come from abroad, he said.

"For me the nationality of the money doesn't matter. We never divided whether this is Russian private investment or international private investment," he said.

Although the plan is likely to evolve significantly over time, it does offer an overarching vision for the company, former Transportation Minister Sergei Frank said.

Moreover, he said, the company has been making much-needed changes under Yakunin, who served as deputy transportation minister under Frank.

"Since Yakunin has arrived, they really started to take practical steps in the reform process rather than just preaching about the necessity for reform," Frank said in an interview.

To raise the necessary funds for its reform, the company intends to privatize some of its transportation holdings while keeping the company itself 100 percent state owned.

The company is creating a series of subsidiaries that will eventually be partially privatized, leaving the parent company intact and in control.

First up to be privatized will be part of Russian Railways' immense rolling stock assets, bundled together into the recently formed Pervaya Gruzovaya Komania, or the First Freight Co., and the container company Transcontainer.

Some time in the next year, at least 10 percent of First Freight will be privatized, Yakunin said, with plans for a further sell-off being drawn up after that.

Transcontainer will be privatized in several stages, with 10 to 15 percent of the company sold off by the end of the year and 25 to 30 percent offered on Moscow stock exchanges in 2008.

After that, the company will look to sell off many of its locomotive and car repair units, Yakunin said, without giving a time frame. The company is also considering creating a series of joint ventures to develop the infrastructure for a high-speed train network, he said.

Yakunin said he was open to the idea of reducing the state's stake in the RZD parent company from 100 percent, as it aims to become commercially viable in the long term.

Oksana Onipko / MT
Vladimir Yakunin

"We are considering the possibility, or theoretical possibility, of being public, that means selling shares on the market. Why not?" Yakunin said.

The law, however, prohibits the company from selling part of its infrastructure or mortgaging the infrastructure.

Even before the advertising campaign began, the company had been trying to remake its image. A big change has been the introduction of a new management culture and new personnel, said Anna Belova, who co-authored the government's rail reform program through 2010.

Belova said recent company reforms were in line with the original plan.

As to where the $500 billion in investment would go, the company wants to build around 20,000 kilometers of track -- more than what was built during the 70 years of the Soviet Union. Once laid, lines would finally stretch all the way to Magadan, in the far northeast.

The company also is looking abroad, with long-mooted plans to extend the rail link to North Korea, South Korea and even Japan.

Yakunin was upbeat about the prospects of these projects, saying there was "very serious" interest in expansion both to the west and east of Russia. "Cooperation between railway systems is less controversial than any other sort of integration between Russia and Europe," he said.

In addition to new tracks, Yakunin's plans call for the creation and then expansion of the high-speed network. At least 15 routes have been earmarked for high-speed trains, Yakunin said. By 2012, the time it takes to travel from Moscow to St. Petersburg will be more than halved to 2 1/2 hours. Eventually the journey from Moscow to Berlin will take eight to 10 hours, rather than a day and a half.

But high-speed trains on long-distance domestic routes are not in the cards. Yakunin said the 1,600 kilometers between Moscow and Sochi, site of the 2014 Winter Olympics, was too far. "Can you give me an example of such high-speed trains anywhere? No," he said.

Trains on such routes would increase their speed but not necessarily become high-speed routes, he said.

Despite the reforms and increases in ticket prices in recent years, little seems to have actually improved for the average passenger.

Yakunin, however, was bullish about the quality of service and comfort on trains, comparing it favorably to the service provided in Western Europe and particularly Britain.

"From the point of view of modern rolling stock or wagons, then we have setbacks. But speaking about the environment, speaking about the comfort, speaking about the meal, then everything is better," he said.

Other improvements touted by the railroad include the phased introduction of single-sex cars on all routes over the course of this year. Services such as DVD rentals, playrooms for children, Internet access, libraries of classic Russian literature and free mobile phone charging facilities are also being offered on some trains.

Even passengers travelling on the cheapest tickets are breathing easier, with the installation of climate control systems in the platskart cars.

"I don't like platskart wagons, and I don't like setting up climate control in these wagons because this is silly. But still we have to answer some demands of the society," Yakunin said.