“Ukrzaliznytsia on the brink: who and how brought the company to a systemic crisis
29 October 17:23“Ukrzaliznytsia is the country’s strategic artery, without which not only the economy but also military logistics will come to a standstill. However, today the company is on the verge of systemic collapse. The absence of a financial plan, personnel chaos, broken management, uncontrolled tariff increases, and chronic inefficiency pose a real threat not only to business but also to national security.
Read about the crisis at UZ, its causes and ways out of it in the article by "Komersant Ukrainian". MPs, industry experts, and representatives of the industry share their assessments.
Background: from hopes for reform to systemic paralysis
“After 2014, Ukrzaliznytsia was supposed to become a symbol of public sector cleansing. The change of management, the introduction of supervisory boards, and the arrival of independent directors were all perceived as a step toward reform. But, as market participants recognize, ten years later, the company has not gotten rid of its “corruption legend”.
Financial vacuum and management paralysis
MP Oksana Savchuk emphasizes that the problem starts with the basic – the lack of a financial plan.
It is necessary to adopt the financial plan of UZ for 2025 and 2026. Because the lack of a financial plan leads to inefficiency of middle managers, who cannot carry out the first works or procurement in time,” the politician points out.
According to her, the company has actually been left without a stable management core:
“Today, out of 6 people, only 3 remain. And these specialists are mostly from Ukrposhta, while the railroad specialists have been transferred to the status of advisors.
In addition, Savchuk draws attention to the flawed personnel policy and short-term contracts:
“Good specialists are not ready to go to work on contracts for a period of 3 to 12 months. Longer-term contracts should be introduced. At least 3 years,” suggests the MP.
She adds: “The government should stop relying on ‘manual managers’ because the cost of mistakes in wartime is too high:
“The chairman of the board of UZ must be a specialist, because the security challenges are extremely serious. An unprofessional person can worsen an already difficult situation… The Cabinet of Ministers has already delayed the supervisory board, and this has led to the lack of a financial plan and, as a result, to a deterioration in performance.
Kalenkov: a “legendary corrupt company” that burns money
The president of Ukrmetallurgprom , Oleksandr Kalenkov, is even more harsh in his assessment of UZ’s performance:
“This situation did not appear today, this situation has been in place for several years, as long as we have known Ukrzaliznytsia, it is a legendary corrupt company that burns a lot of money.
He reminds us that after 2014, everyone was waiting for a reform, but:
“Over the past 10 years, virtually nothing has changed… Ukrzaliznytsia has remained a non-transparent structure that burns money through its inefficiency,” the expert believes.
Kalenkov names the key structural problem as the forced subsidization of passenger transportation at the expense of freight transportation.
“This year, Ukrzaliznytsia is expected to receive about UAH 7 billion from passenger transportation. And it will spend more than 30 billion. This is not a business,” he adds.
“At the same time, instead of subsidizing the unprofitable segment, the government simply allows the company to raise freight rates, which actually punishes the industry:
“Tariffs have been rising since 2022, and then in the summer by 70%. Already, UZ tariffs are higher than in Eastern Europe. This makes Ukrainian products uncompetitive… ArcelorMittal is considering a significant reduction in production due to UZ’s tariff policy. This is 5% of Ukrzaliznytsia’s total cargo turnover. And it may lose it,” the expert explains.
“The situation is critical”: a warning for business
The situation is not just difficult now, it is critical. If the state does not intervene, we may lose not only a large part of the business that uses UZ, but also Ukrzaliznytsia itself,” warns Kalenkov.
“He directly points out who should be responsible:
“The main shareholder of the company is the state represented by the Cabinet of Ministers… The Cabinet makes personnel decisions, financial decisions, and approves the financial plan. It has all the powers to restore order.
He adds that it is the Cabinet of Ministers and the Ministry of Infrastructure that should close the passenger transportation deficit (over UAH 24 billion), publicly disclose the financial plan and assess the actions of the company’s management and Supervisory Board (which was minimally renewed this year – ed.).
“Sky-high salaries, zero efficiency” – parliamentary control without influence
Mykola Velychkovych, a member of the Parliamentary Committee on Transport and Infrastructure, confirms that the crisis at Ukrzaliznytsia is not a consequence of the war, but the result of years of inaction.
According to him, the company has not implemented any of the announced structural reforms.
“A lot of time was wasted in previous years, and no significant reforms took place at Ukrzaliznytsia… It was announced that UZ would be divided into several parts – traction, passenger and freight transportation, infrastructure. But not a single reform has been completed. It has begun and has not ended,” the politician says.
Velychkovych harshly criticizes the work of the Supervisory Board, which, despite its high salaries, remains virtually out of parliamentary control.
“Our committee has tried to meet with the Supervisory Board so many times… It is completely ignored. We have sky-high salaries for the Supervisory Board members, but we see no efficiency,” he says.
He adds that “this is a matter of responsibility of the Cabinet of Ministers. It is their responsibility in full.”
Experts and policy makers argue that Ukrzaliznytsia can no longer exist in the current management model.
Without a clear financial policy, a responsible Supervisory Board, long-term contracts for management, and transparent state support for the passenger sector, the system will collapse.
All the experts the editorial board spoke to point out that the Cabinet of Ministers is not just the main shareholder. It is the one that has political and legal responsibility for the survival of a strategic company that still remains the country’s largest state monopoly.
In early October, the Cabinet of Ministers of Ukraine approved a new composition of the Supervisory Board of Ukrzaliznytsia.
It includes four independent members:
- Elżbieta Ewa Bieńkowska (Poland), former Minister of Infrastructure of Poland and European Commissioner;
- Gepard Hafer (Germany), a logistics expert who worked for Deutsche Bahn;
- Maxim Moklyak – former acting head of the State Fiscal Service in 2015;
- Anatoliy Amelin – entrepreneur, co-founder of the Ukrainian Institute for the Future.
The state representatives are:
- David Lomdzharia (Georgia) – Chairman of the Supervisory Board of Ukroboronprom;
- Serhiy Leshchenko, former Member of Parliament, former journalist;
- Oleksandr Kamyshyn, former chairman of the board of Ukrzaliznytsia, former Minister of Strategic Industries (still working, he was appointed in 2024).
Only on October 28 did it become known that the Supervisory Board of Ukrzaliznytsia re-elected Hepard Hafer as its chairman and Serhiy Leshchenko as deputy chairman of the Supervisory Board.
It should be added that the Prime Minister of Ukraine, Yulia Svyrydenko, recently announced that the government has allocated additional funds for the protection and restoration of energy facilities and Ukrzaliznytsia. She promised that the construction of engineering protection for critical infrastructure would be accelerated.
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