Belarusian Railway 2023 Results. Part 1: Performance Assessment

The year 2023 has concluded. Belarusian Railway has been actively and increasingly transporting freight and passengers, while pro-government propaganda extols its successes. However, ‘on air' there is only talk of growth in export freight traffic and passenger numbers. Why then are all other indicative data on Belarusian Railway's operations exclusively classified as ‘For Official Use Only'?

Some of Belarusian Railway's 2023 performance results are already known. But let's take a closer look at certain ‘achievements' that are carefully concealed by Belarusian Railway and the government.

It should be noted that these are quite illustrative, but not yet final results – the article's materials are prepared based on official Belarusian Railway reports ‘For Official Use Only' for 11 months of 2023*, thematically grouped and published by us in four parts as separate articles (to save our readers' time, – ed.). Today is the first part.

Economy and Finance

Revenue from Belarusian Railway's core activities (transportation) for the 11 months of 2023 amounted to 3.73 billion rubles (approximately $1.15 billion USD at the current exchange rate), or 117% compared to the same period in 2022 (as a reminder, for the entire year 2023, this indicator was 4.1 billion rubles, or 118% ).

This revenue includes:

Income from export transportation amounted to $158.9 million USD (133.8%), with a share of 22.4% in the total revenue from core activities.

In absolute terms, Belarusian Railway's revenues look quite positive. However, this is not due to the personal qualities, actions, or diligent work of its managers. Primarily, revenues were influenced by a basic increase in freight and passenger tariffs by up to 20% in 2023. There are also other important issues in the tariff topic: the so-called railcar component (referring to the monetary value in the tariff for the cost of providing a railcar by the carrier or operator) and others. But more on this in the second part – in the next publication.

The 33.8% growth in export transportation revenues further indicates the intensification of freight exports. This would be good if not for the high cost of delivery through Russian ports. Therefore, exports are being increased in an attempt to offset losses from inefficient logistics with higher volumes of supplies.

The ‘contribution' of the management is undeniably confirmed by Belarusian Railway's financial results for the 11 months of 2023:

Belarusian Railway management, while declaring the unprofitability of intra-republican passenger transportation totaling 598.7 million rubles , naturally find justifications, pointing out that the magnitude of the loss was influenced by reasons seemingly beyond their control and state ‘social' policy, which restrains tariff increases.

They fail to mention that these losses are not so much from unprofitable tariffs as from irrational business management of passenger transportation and unreliable accounting of expenses for them, among which only a third is guaranteed to relate to these services (including direct and indirect costs). However, this information is so concealed that it is only accessible to a few Belarusian Railway employees, and even regulators like the Ministry of Antimonopoly Regulation (MART) and the Ministry of Transport are ‘unaware'.

Belarusian Railway states in its reports: “according to reporting data for 9 months of 2023, the loss from passenger transportation amounted to 482.5 million rubles (including losses from reimbursement of expenses directly attributable to passenger transportation – 226.9 million rubles), of which in regional economy class services – 243.6 million rubles and 124.0 million rubles respectively (repair and maintenance of multiple-unit rolling stock, fuel and electricity costs, locomotive crew salaries)”**. This implies that the total amount of these losses includes necessarily inherent indirect costs. It is precisely here that the ‘deception' is hidden, based, as stated above, on deliberately unreliable expense accounting (this is a special and unique methodology developed by the Belarusian State University of Transport a very long time ago – more than 20 years ago).

Well, the reasons for the loss cited by Belarusian Railway in the same reports: “the need to cover such expenses from profit as a negative balance of exchange rate differences” (177.3 million rubles) or “servicing borrowed funds attracted for the implementation of infrastructure projects, the purchase of rolling stock, and financing current operations” (259 million rubles) – are the height of management's profanation, thanks to which losses multiply.

In order to somehow improve reporting figures in 2023, Belarusian Railway also ‘worked' on reducing costs. And the corresponding plan was approved. Savings were estimated at 254.1 million rubles for 11 months of 2023.

However, behind the cost savings is far from the implementation of new and effective technologies or technical means, as a rational and efficient manager would do. Instead, it is a typical Belarusian Railway reduction in funding for repair programs and the renewal of fixed assets. Although there were also certain and partially valid attempts to reduce costs. More on this in the second part – in the next publication.

Repair plan execution:

Note: locomotive repair is not comparable to railcar repair in terms of complexity, duration, and cost. And the state of locomotives and multiple-unit rolling stock is eloquently demonstrated by the incessant and almost daily breakdowns, about which there are many articles on our website. For example, recently – about a burned-out commuter train (see here or here).

And another relative evidence of the lack of renewal:

In such a ‘deplorable' financial state, Belarusian Railway is unable to maintain its fixed assets and means of production in normal condition – this is 100% of investments in fixed capital, provided that the plan is formed at least to maintain a normal state (and here we see reporting data compared to the previous period, meaning already insufficient investments). Any talk of development is out of the question.

For survival and to ensure current operations with working capital, there is no other option but to ‘beg' for either deferrals on loans and credits, or to cover current payments with new loans. The so-called credit debt restructuring carried out by Belarusian Railway in 2023 ultimately deferred $49 million USD of the total payments on financial obligations for 2023, which amounted to $415 million USD.

This in itself is a detrimental decision for Belarusian Railway, creating an illusion of stability by postponing accumulating debts in the hope that ‘tomorrow things will suddenly get better on their own.' This is despite Belarusian Railway's unprofitability and insolvency in both 2022 and 2023.

Transportation Operations

The situation with transportation performance indicators is as follows:

Total volume of export container transportation of potash fertilizers – 140 thousand TEU (a 1.9-fold increase), including to the ports of the North-Western region of Russia (Bronka port) – 30.2 thousand TEU.

In addition to the export of the most common goods – mineral fertilizers and petroleum products (for more on this topic, see here, we will not repeat ourselves), the structure of exported goods also includes woodworking products, cellulose, lumber, sugar, meat and dairy products, and powdered milk.

Loading of main goods (excluding fertilizers and petroleum products):

• RUPP “Granit” – 14.6 million tonnes (110.3%);
• organizations of the Belarusian Cement Company (BCC) – 3.4 million tonnes (102.7%);
• OJSC “Berezastroymaterialy” – 151.0 thousand tonnes (100.7%);
• OJSC “Keramin” – 148.6 thousand tonnes (99.6%);
• OJSC “Gomelsteklo” – 135.1 thousand tonnes, or 106.8%.

Passenger turnover – 4,933 million passenger-km or 105.7% .

It is evident that what truly matters and has the main economic effect on Belarusian Railway's operations is the support from Russia. This applies to both freight and passenger transportation.

Despite the fact that freight transportation to Russian ports is much more costly and inefficient for producers compared to previously traditional routes to the ports of the Baltic states and Ukraine (there is plenty of material on this on our website), for ‘Lukashenka's' Belarusian Railway, this support under sanctions is the only salvation from complete collapse.

At the same time, the change in export logistics does not have a catastrophic impact on Belarusian Railway, as goods are transported one way or another, and although significant discounts on its tariffs are ‘sensitive,' they are largely offset by a substantial increase in export volumes.

Regarding passenger transportation, there are also ‘positives' as international traffic volumes are growing (as Belarusian Railway openly and officially stated, growth to 106.2% of the previous year’s level for 7 months of 2023, with 87% of this being transportation to Moscow and St. Petersburg) and are very profitable. This is why RZD is increasing its presence in this segment (for example, see here and here). As for intra-republican transportation, the prospects are very bleak, as we recently covered.

However, without the support of the ‘elder brother,' which comes at an incomparably higher price – the sovereignty of Belarus – and with ‘such' leaders, Belarusian Railway is a complete and incapacitated bankrupt.

In the following parts of our publications, we will discuss various decisions by Belarusian Railway and the government, their results, and their impact on Belarusian Railway's condition and railway transport in terms of tariff policy, logistics, provision of freight railcars and passenger multiple-unit rolling stock, legal regulation, optimization of Belarusian Railway personnel and structure, and other issues. We will also examine how the government ‘saved' and helped Belarusian Railway in 2023 from final degradation (throughout 2023, we covered this ‘process', see here, here and here).

* In the article text, italicized sections are quotes in ‘as is' format without any corrections, including spelling errors
** Not everything can be published immediately, maintaining a moratorium for the safety of sources. We constantly write about this, and to avoid annoying readers with this forced but unchanging phrase under lawlessness in Belarus, we include it in a note

Belarusian Railway 2023 Results. Part 2: Overview of Decisions
Belarusian Railway 2023 Results. Part 3: Overview of Decisions (continued)
Belarusian Railway 2023 Results. Part 4: Conclusion