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The Company
History

History

  1. 1842-1913
  2. 1914-1991
  3. 1991-2001
  4. 2001-2003

1842-1913

The Tsarskoje Selo railwayThe Ministry of Communications of Russia was officially founded in 1865, but the Government had started improving the country’s transport system as early as 1649, when Tsar Alexey Mikhailovich issued a Code on the Protection of Navigation. His son, Peter the Great, established a Commerce College to supervise roads, and in 1798, Paul I established a Department of Water Communications.

The Department of Railways was created in 1842 and supervised the construction of Russia’s first railway line, which linked the imperial capital St. Petersburg with Moscow (1842-1851). In 1862, railway lines were completed between St. Petersburg-Warsaw and Nizhny Novgorod.

On 15 June 1865, an edict of Alexander II established the Ministry of Communications, which absorbed the Department of Railways.

Russia’s first Minister of Communications, Pavel Melnikov, was not only an outstanding scientist, talented engineer and manager, but also a superb publicist for the new means of transport. Melnikov was instrumental in developing Russia’s railway system and wrote the first book On Railways in Russian. He also published countless monographs and articles on a wide range of topics concerning railways, helping the Ministry of Communications to become one of the most respected ministries in Russia and to make service on the railways highly prestigious.

But Melnikov’s activity didn’t stop there. He also educated a galaxy of excellent railway engineers, including Konstantin Pos’et, who went on to become Russia’s Minister of Communications from 1874 to 1888 and build railways in the European part of Russia and beyond, extending the network further afield, laying lines through the Donets Basin and Woodlands to the North Caucasus and Transcaucasia to link up the Volga, the Urals and Central Asia.

The Trans-Siberian Railway was begun in 1891 and completed in 1905. In 1900, the Russian railway network boasted a route length of 44,900 kilometres. By 1913, the system comprised of 58,500 km of track and was transporting some 132,000 tons of freight and 185,000 passengers every year.

 

1914-1991

Trans-Siberian RailwayThe First World War and the subsequent Russian Civil War from 1917 to 1921 wrought havoc on the Russian economy and railway system. Between 1914 and 1921, more than 60% of the railway network, 90% of the locomotives and 80% of the carriages were destroyed. Not until 1928 did traffic volume recover to the pre-war levels of 1913.

The new Soviet Government set up a People’s Commissariat of Communications, and by 1940, the railway network was carrying nearly 600 million tons of freight a year and had expanded to a total length of 106,100 km.

The Second World War again took a heavy toll on the railway network. The European part was totally destroyed and 40% of carriages and 50% locomotives were lost. Nevertheless, the railways played a vital role in the war effort, transporting soldiers, military equipment and freight to the front lines and shipping dismantled factories and industrial equipment from European Russia to the Urals, far beyond the reach of the advancing German armies.

From 1950 to 1990, Soviet Union Railways, the world's largest unitary rail system during this time, increased route length from 115,000 kilometres to more than 145,000 km. Extensions included a second Trans-Siberian line, the Baikal-Amur Magistral (BAM) between Ust-Kut on the Lena River and Komsomolsk-na-Amure (on the Amur), a distance of 3,200 km. Begun in the late 1970s and running through permafrost for almost half its length, the builders of BAM had to cope with winter temperatures as low as -76° F (-60° C). BAM carried the first trains along its entire length in October 1989.

By 1975, freight volume on Soviet Union Railways had grown threefold to 3,621.1 million tons. 38,900 kilometres of track were electrified and electric locomotives accounting for 51.7% of traffic, with diesel for 47.9%.

1988 saw the peak volume of traffic in the Soviet Union, with the railway system transporting 4,116 million tons of freight and 4,395.9 million passengers.

The collapse of the Soviet Union in 1991 saw the unitary Soviet Union Railways broken up into individual national railway systems based on the former Soviet republics. However, the successor railway companies realised immediately that they would be viable only if the cohesion and integrity of the Soviet rail network were maintained. As a result, they made strenuous and successful efforts to cooperate closely and established various co-ordinating bodies, such as the Council for Rail Transport of CIS states.

 

1991-2001

Baikal-Amur MagistralIn 1991, the Soviet Ministry of Communications developed a programme for the reconstruction and development of the railway industry up to 2000 which laid the basis for the further development of Russia’s railways. On 20 January 1992, the Ministry of Communications of the Russian Federation was founded.

Contrary to popular and expert belief, however, Soviet and Russian GDP began falling in the 1980s, and not in the 1990s as many maintain. But the collapse of the Soviet Union greatly exacerbated the difficulties faced by the country's economy, and production dropped precipitously in Russia and the other post-Soviet republics. One result was the end of state support for the Russian rail industry and a collapse in investment in the sector. The industry lacked funds for the repair of rolling stock, track and stations, let alone for modernisation, leading inevitably to rapidly aging and obsolescent infrastructure.

Despite this difficult background, the railway system was nevertheless expected to maintain standards and its asset base, while at the same time retaining low fares on loss-making passenger services, which are seen as of vital social importance in Russia due to the low average incomes, low levels of vehicle penetration, lack of roads, huge distances and the remoteness of large parts of the country. As a result, passenger operations were increasingly subsidised by the highly profitable freight.

By the mid-1990s, it had become clear that in order to provide the quantity and quality of rail services now required by Russia’s economy, the railway sector would have to undergo thoroughgoing reform and modernisation.

The policy document Major Guidelines for Railway Transport Development adopted in 1996 by the All-Russia Congress of Railway Workers laid the foundations for the reorganisation of the sector.

The Guidelines advocated an evolutionary approach to reform and took into account the experience of railway reform in developed countries, which, of course, was by no means always positive, as the United Kingdom proved in the early 1990s. A study of different countries in Europe, Asia and America revealed that there was no universal formula or magic bullet for the successful reform of state-owned railway companies, and that all changes necessarily took place against the background of the political, economic and social circumstances in each country.

The reform programme therefore drew on the experience and traditions of Russia’s own railway system over the previous 150 years. At this time, the Ministry of Railways remained the only structure in Russia which still combined state regulation with economic activities. It was therefore concluded that successful reform would require the separation of regulation and oversight from the business side of running railway companies. This separation and the reform in general, however, were to take place without forcing through revolutionary changes and disrupting production and operations

In 1998, President Yeltsin and the Russian Government approved a Concept for the Structural Reform of Federal Railway Transport which laid out the key tasks and objectives for the future.


2001-2003

Electric train of new generation
   The sharp drop in investment following the collapse of the Soviet Union in 1991 left the Russian railway system with a wide range of deep-seated problems. As the 1990s drew to a close, the Russian government increasingly recognised that the railway sector was in need of massive restructuring, modernisation and investment if it was to meet the demands of Russia’s economy and society going forward.

Representatives of the railway sector and other ministries and agencies affected, as well as consultants from Arthur Andersen and McKinsey, worked out a Railway Structural Reform Programme, which was approved by the Russian Government as Decree No. 384 on May 18, 2001.

The Reform Programme envisages three stages lasting up to 2010 and beyond. Its major objectives are to ensure that the railway system can meet the demands of Russia’s growing economy in terms of the quantity and quality of rail transport by updating the production and technical basis, achieving greater efficiency from the resources available and increasing the motivation of railway personnel.

The reform also seeks to address the problems of the railway industry, such as low returns on investment, ageing and obsolescent equipment and a deteriorating market position in the face of competition from road transport and future oil pipelines.

The structural reform was designed to preserve the unity of the railway network and separate the functions of state regulation from operational management.

Structural reform has so far proceeded relatively quickly and efficiently, certainly in comparison to reform in some other sectors of the Russian economy. Phase I of the reform programme was completed in autumn 2003, one year behind schedule, but in line with the evolutionary approach to change favoured by both government and the industry in order to avoid to the disruption and deterioration in services seen in some of the advanced economies due to overhasty reform.

Phase I ended with the establishment of the Russian Railways Public Corporation by Decree No. 585 of the Russian Government on 18 September, 2003. The corporation was registered by the State on 23 September, 2003.

The Russian Federation is the only shareholder of the Company and delegates shareholder control to the Government. The Ministry of Railways retains control of regulation and government policy on railway transport, while Russian Railways manages the Company’s economic operations.

On 9 March, 2004, President Putin signed a decree abolishing the Ministry of Communications. Its regulatory functions passed to the Ministry of Transport and Telecommunications, while its former executive power, as well as service and property management functions, were assumed by the Federal Agency on Railway Transport.

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