Improvement of fiscal policy in transport is carried out in the following areas:

Country

RZD participates in cross-border railway joint ventures and railway construction and management projects in Armenia, China, Finland, Germany, Iran, Libya, Mongolia and North Korea.

Year of entry (and goal)

• Germany: Trans Eurasia Logistics (TEL) was founded in 2008 as a joint venture with Deutsche Bahn. The goal of the joint venture is to boost transport volumes by improving service quality and creating a unified end-to-end service for freight transportation. Moreover, partnership with Siemens AG was carried out (creation of the Sapsan high-speed electric train).

• Finland: ContainerTransScandinavia was set up as a joint venture in 2007 by TransContainer and VR Group Ltd (Finnish Railways). The countries’ railways have all the necessary conditions for effective work: in 2010, Russia and Finland are maintaining exclusive tariff terms for transportation of containers, coal, petrochemicals, and a range of other cargoes.

• China: Container Transport Corp. (CRCT), a joint venture set up in October 2009 between TransContainer and China Railway, is working to provide the full range of transport-logistics services for container freight on China-Russia and China-Europe rail routes.

• Japan: Russian Railways subsidiaries TransContainer and Russkaya Troika signed agent agreements with major Japanese forwarding agents, to promote their services on the Japanese market. In view of the positive reception from Japanese businesses to the demonstration of the Trans-Siberian Railway’s potential, we believe there to be good prospects for attracting Japanese freight.

• Spain: 1) The signing in October 2007 of a cooperation agreement between Russian Railways and ADIF – Spain’s Railway Infrastructure Administration – was an important stage in the development of links between the two countries’ railway companies. The parties agreed to exchange information in the field of staff training and to exchange groups of specialists, as well as to provide technical assistance and conduct joint feasibility studies and research on enhancing the rail network. 2) Russian Railways, JSC High-Speed Railways and the Spanish infrastructure company INECO SA signed a contract in 2008 to facilitate cooperation on the development of rail transport infrastructure in Russia. According to the contract, INECO will provide consulting services in the design, construction and operation of high-speed railway lines, conduct research into the construction of high-speed rail infrastructure and carry out feasibility studies.

• France: 1) French, German and Russian railways signed a cooperation agreement to develop further passenger traffic between European capitals in December 2011. 2)The French company Altstom won a tender to supply high-speed trains for the St Petersburg – Helsinki service. Allegro trains have been operating between the two cities since 12 December 2010. 3) Geismar supplies Russia’s railways with a variety of different machines and equipment. On 28 April 2008, Russian Railways and Geismar signed an agreement to create a joint venture. In October 2008, it was decided to manufacture jointly small tools and equipment at the Metallist-Remputmash Experimental Factory in the town of Sovetsk in Russia’s Kaliningrad region. In 2009, a contract was signed with the Remputmash Kaluga Plant to supply 750 items of track tools manufactured under a joint venture. In 2010, a track tool produced by the Remputmash Kaluga Plant was acquired together with Geismar, and PEM-LEM complexes were purchased to replace track switches. Further cooperation with Geismar is under consideration.

Industry/ business area

RZD used different entry methods that related mostly to the following RZD’s business areas:

• Freight transport;

• Long-distance passenger transport;

• Provide infrastructure services;

• Construct infrastructure facilities;

• R&D

Those areas represent the main ones. They have a strategic importance and bring the highest profit.

Entry mode

Joint ventures (as with German companies, Finnish, Chinese, French ones), partnerships (as with German companies), agent agreements (as with Japanese organizations), cooperation agreements (as with Spanish organizations, French and German ones),

Motives

Pull factors for internationalization (i.e. growth opportunities).

The issue of increasing the role of international rail transportation between Europe and Asia has recently been growing in significance. The Asia-Pacific region, especially China, is still growing despite the global recession, so great potential for boosting foreign trade remains, including with the European Union. Russia can play an important role in this trade as a natural transport bridge linking Europe and Asia. One of the main goals set out in the Strategy for Developing Rail Transport in Russia up to 2030 is therefore deep integration into the Eurasian transport system.

So, joint ventures with Chinese and Japanese organizations play a big role in establishing strong presence in Asian market, while partnerships with most powerful European organizations help in boosting transportation of freight and people from Russia to Europe and back.

Thus, the main motives for internationalization of RZD are market seeking motive – motive to get access to the new markets and motive of sales potential offered by foreign markets, another motive (for ex., Spain case) is the access to local knowledge and expertise.

Firm specific advantages used on the foreign market

- It should be emphasized that the company does not actually fully compete in the foreign markets, it just provides transportation services from Russia to abroad and back, it doesn’t compete with, for example, Chinese companies on providing transportation services within China. However, company uses its knowledge and competencies in making partnerships and joint ventures, and it is the only

First mover or follower

- First-mover (but it is almost the only rail player right now)

Type of state involvement in the process of internationalization

As RZD is the national railway company, its strategy and development is fully controlled by the government. For example, when Russia won the bid for the 2018 World soccer championship, the government took upon itself the obligation to build proper transportation infrastructure, including high speed rail lines to all cities hosting the championship. RZD now, with state funding, has to realize this directive.

Funding for the strategic development of general rail transport comes from the national budget, regional budgets and private investors, including RZD itself.

So, firstly state partly sponsors international activities, secondly, state representatives are the Board members who decide upon all most important company decisions.

Evaluation of the success of the internationalization

Internationalization is not over, but so far it is successful, company follows its strategic plan reaching one goal after the other. It has many successful international cooperations, and Russian Railways is a member of the Organisation for Railway Cooperation (OSJD) and the International Union of Railways (UIC).