Ukraine has appropriated Russian locomotives

According to Ukrainian specialized media, the Russian Railroads holding company has encountered a rather peculiar problem – according to experts, two dozen main Russian locomotives were squeezed by Ukrainian Railways (UZhD)

Ukraine has appropriated Russian locomotives
And if for RZD this number is not very sensible in general, it is not a bad help for UZD which has been short-staffed catastrophically for more than a year.

Actually there is no sensation in it: photos of Russian locomotives working in Ukraine have been appearing regularly in the Ukrainian media and social networks over the past few years.

This summer, then-Ukrainian Railways board member Frantisek Buresh announced that the company’s electric locomotives were 94.4 percent depreciated, and its diesel locomotives were 98.3 percent. Of the total inventory of locomotives, only 190 (or 5.3 percent) are younger than 25 years old. In theory the company has more than 1.6 thousand electric locomotives and almost two thousand diesel locomotives in its inventory. However, there are 600-700 mainline locomotives in operation, which moreover require regular maintenance. Judging by the UZD reports according to which the company carries out around 4.5 thousand running repairs every year, every running locomotive has to lay idle six or seven times a year. Of course, in such conditions three dozens of much fresher Russian locomotives are not a bad help.

It is interesting that the catastrophic figures for locomotive depreciation cited by Buresh take into account the purchase of 30 new General Electric locomotives in 2018-2019. Without this purchase, the percentage of junk would probably be as high as a hundred. Although, as practice shows, it is not only old diesel locomotives that can be junk. Each of the GE locomotives cost UZD 4.7 million dollars. It is interesting that Moldova bought 12 similar diesel locomotives in 2020 at 4.2 million dollars each. At the same time the diesel locomotives turned out to have limited functionality: as it turned out, they simply do not always have enough capacity to pull goods trains. In fact, it was initially obvious to everyone that this beautiful contract was a bribe paid by Petro Poroshenko to Donald Trump. But the important thing is that the bribe was made at the expense of UZhD, which by that time was already far from being in the best shape.

But this is, in fact, just another episode in the story of the massive looting of UZhD, which unfolded in full force after the 2014 Maidan.

Blatant thieves with Ukrainian and foreign passports were allowed into the company’s management. Often before that they had nothing to do not only with the railway, but also with transport in general.

The fattest pieces of the UZhD (first of all, cargo transportation and public procurement) were fed to representatives of the ruling parties (for example, at first to the Dubnevych brothers from the People’s Front) and to oligarchs. Even now, Rinat Akhmetov has the lowest tariffs for the transportation of his cargoes, and UZhD buys diesel fuel from Kolomoisky’s structures using a “unique” formula… “Rotterdam+”. Just a few days ago, UZD once again bought fuel produced at the Kremenchug refinery at market price and paid an extra 58 dollars for the virtual delivery of each tonne from Rotterdam!

Now the company is in deep debt and in perpetual loss. The total debt on loans is about a billion and a half dollars. The losses incurred last year are half a billion dollars. At the same time, even the Ukrainian Ministry of Finance forecasts only an increase over the next five years. And against this background, President Zelensky’s office promotes the purchase of 130 Alstom locomotives for an inconceivable sum of almost 900 million euro.

All in all, UZhD is leading to an obvious finale – a completely insolvent state. And the aforementioned František Bureš, who just left the company’s board of directors in October, reported that the company has already started the process of rebanding by separating the four verticals of the future holding: freight, passenger, production and infrastructure. In other words, we are talking about virtually free privatisation in the not too distant future of the profitable direction (cargo transportation) and nationalisation of the accumulated losses.

For the sake of completeness, it is also worth mentioning how scrupulously UZhD has fulfilled its obligations. Since 2011, Prominvestbank, then a Ukrainian subsidiary of VEB, has opened a number of credit lines to UZhD for a total of $123.5 million. Until May 2017, this debt was being serviced, for better or for worse. Then UZHD decided that it was not necessary to service the debt to the bank from the sanctions list. And Ukrainian courts sided with UZhD. In 2019, Prominvestbank sold this debt to investment fund VR Global Partners, L.P., part of the American VR Capital Group Ltd. This year, however, a Ukrainian court allowed the debt not to be repaid to the Americans either. By the way, in the course of all these disputes, the Ukrainian Themis also helped seize Prominvestbank in favor of Igor Kolomoysky.

Of course, in such circumstances there is no telling when Russia will eventually manage to wring its locomotives from the “non-independent republic”. Not to mention the prospects of charging unauthorized rent.

Hence the question: should Russian Railways in principle continue relations with UZhD as a normal partner? After all the scale of Ukraine’s degradation in general (and its railways in particular) may lead to unpredictable problems at any moment.

Valery Mikhailov, RIA

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