Russian Railways’ cargo volumes dropped 5.4% in August 2025 compared to the previous year, marking the third consecutive quarterly decline as sanctions and war costs devastate Moscow’s economy.

According to Ukraine’s Center for Countering Disinformation, the state railway monopolist transported just 92.2 million tons in August, down from 97.2 million tons in August 2024.

Over eight months, total shipments fell 7.1% to 738.8 million tons compared to 2024 levels.

Economic backbone crumbles under pressure

The railway data exposes how deeply the war has damaged Russia’s economic foundation. Russian Railways handles 87% of the country’s cargo transport excluding pipelines, making freight volumes a direct indicator of industrial activity across key sectors from construction to metallurgy.

The steepest declines hit Russia’s most strategic industries. Construction materials shipments collapsed 15%, ferrous metals dropped 17.3%, and coal fell 3.6%.

Oil shipments decreased 4.9% due to refinery maintenance issues, while grain transport plummeted 30.7% following poor harvests and export restrictions.

Earlier data published by Russia’s own Interfax on 12 August showed similar patterns through July, with cargo volumes down 6.2% over the seven months to 739.3 million tons. Domestic shipments fell 8.9% to 437.9 million tons, while international cargo dropped 2.1% to 301.4 million tons.

Sanctions bite deeper as infrastructure crumbles

The transportation crisis reflects broader economic stagnation gripping Russia nearly four years into its war against Ukraine. Western sanctions have severed access to critical railway components, forcing the state monopolist to trim its planned investment program by nearly 40%, cutting spending from 1.3 trillion rubles to 834 billion rubles for 2025.

The company now faces deficits of 2,500 engineers and 3,000 locomotive crews, forcing cancellation of approximately 200 train services daily.

Ukrainian drone strikes continue targeting Russian rail infrastructure. For example, a recent attack on 21 August struck a railway substation in Voronezh Oblast, disrupting military supply lines and civilian cargo movement.

War economy shows strain

The railway decline parallels Russia’s broader economic struggles. Military spending consumes 6.3% of GDP—the highest since the Cold War. The war economy’s temporary GDP boost masks structural problems, including chronic labor shortages and vanishing productivity gains.

Transport indicators typically warn early about economic downturns, as reduced cargo volumes signal decreased industrial production and weakening domestic demand. The consistent quarterly declines suggest Russia’s economic foundation continues deteriorating under the weight of sustained warfare and international isolation.

The Center for Countering Disinformation reported on 10 August that Russian Railways was forcing employees to take unpaid “vacations” due to financial constraints—another indicator of the state monopolist’s mounting difficulties.

Russia’s metallurgy industry suffered its worst performance since Moscow launched its full-scale invasion of Ukraine, with production plummeting 10.2% in July compared to the same month last year, according to Rosstat data cited by Ukraine’s Center for Countering Disinformation.

The metallurgy collapse delivers concrete evidence that Western sanctions are systematically degrading Russia’s capacity to sustain its war against Ukraine and signals that Moscow faces mounting difficulties maintaining current military production levels.

Key metallurgy companies report massive losses

The industry’s flagship enterprises are buckling under the pressure.

Magnitogorsk Metallurgical Plant—a critical supplier for Russia’s defense sector—slashed steel output by 18%. In comparison, Mechel reduced sales by 11% and Tubular Metallurgical Company lost up to 22% of sales. Companies are reporting billion-ruble losses.

Magnitogorsk reported profits plummeting ninefold to 5.6 billion rubles ($62 million) in the first half of 2025, while revenues dropped by a third. The company’s cash flow turned negative, with expenses exceeding income by 4.9 billion rubles (approximately $55 million) in the second quarter alone.

Magnitogorsk supplies steel for armored vehicles and artillery systems, while companies like Tubular Metallurgical produce materials essential for missile manufacturing. Each percentage point of production decline means fewer tanks, shells, and weapons systems reaching Russian forces.

Broader corporate crisis grips Russian economy

The metallurgy sector’s troubles reflect a deeper crisis across Russian industry. According to Rosstat data cited by Izvestia, nearly one-third of Russian companies reported losses in the first half of 2025—the highest level since the pandemic.

Coal mining enterprises suffered the most, along with utilities, transportation, and scientific research businesses—all sectors supporting military-industrial production.

The Purchasing Managers’ Index (PMI)—a key indicator that measures changes in business conditions with readings below 50 signaling declining activity—fell to 47.0 in July for Russian manufacturing, down from 47.5 in June, marking the steepest decline since March 2022.

Sanctions systematically choke supply chains

Already a month ago, Reuters reported companies reducing their production levels, client demand declining, and customers having financial difficulties—all of this impacting both output and new orders.

Ukraine’s Center for Countering Disinformation identified what it called “obvious” causes behind the metallurgy collapse: sanctions, loss of foreign markets, sharp drops in domestic metal demand in construction and machinery, plus restrictive Central Bank policies limiting investment.

Experts cite expensive credit, weak demand, tax increases, sanctions, and rising costs as the main drivers of corporate losses.

Weak demand could leave steelmakers unable to sell up to 6 million tons of production—nearly 10% of last year’s output.

Industry outlook

Severstal CEO Alexander Shevelyov called the second quarter “extremely difficult for the industry,” estimating that weak demand could prevent steelmakers from selling up to 6 million tons of production. This represents a massive loss of potential military materials.

For Ukraine’s allies, the data suggests their sanctions strategy is working as intended—systematically degrading Russia’s long-term military capacity rather than delivering immediate knockout blows.

The Center for Countering Disinformation assessment warns of the collapse risks “mass layoffs, factory shutdowns, and further economic decline in regions critically dependent on metallurgy”—problems that will further constrain Russia’s defense production capacity while creating domestic political pressure on the Kremlin.