Russia is pouring billions into rail-system upgrades as trade with China surges

BUSINESS INSIDER:  Moscow is doubling down on its trade partnership with Beijing, outlining plans to invest billions in two key rail lines, Bloomberg reported.

Russian President Vladimir Putin called for a shipping capacity increase on the Trans-Siberian and Baikal-Amur Mainline, railroads that link Russia with China to the south. Meanwhile, around $4 billion is set to be spent on railroad infrastructure, and further investments could be approved this month.

It's a testament of tighter relations between the two nations, a partnership that has kept Russia afloat since its 2022 invasion of Ukraine.

In January and February of this year, bilateral trade totaled $37 billion, with Chinese exports into Russia jumping 12.5%. It's a momentum that extends from 2023's record volumes when trade totaled $240 billion.

"The two sides' political mutual trust continues to deepen. Russian natural gas is reaching households in China, while Chinese cars are driving on the streets of Russia," Foreign Minister Wang Yi said last week, describing the relationship as a "new paradigm."

Emphasis on rail improvements could also be a result of Russia's rising sea route difficulties, as Western sanctions increasingly curtail Moscow's efforts to export crude and other commodities. Recent months have witnessed tighter enforcement of a Group of Seven price cap on Russian oil, leading to sanctions on 50 vessels by early February.

The West's stricter approach is also eroding Russian trade with other key markets. For instance, Indian refineries have demonstrated diminishing willingness to pick up Russia's products, despite becoming the biggest buyer of Moscow's seaborne crude in 2023.