MOSCOW (Reuters) – Russia has approved a project to build the first high-speed passenger railway between its two biggest cities, Moscow and St. Petersburg, to be funded with billions of dollars from the state budget, a government directive showed on Thursday.

The government approved the construction of the 679 km railroad, which should allow Russian-made trains travelling at 360 km/hour per hour to get from Moscow to St. Petersburg in 2-2.5 hours instead of the current 4-5 hours, on the first business day of the St Petersburg International Economic Forum.

The railway, which will cost more than 2.3 trillion roubles ($25.97 billion), will be built by a Russian company, VSM Two Capitals, on concession terms using state and private money.

The Russian government plans to allocate at least 300 billion roubles of loans from the National Welfare Fund at 1% in 2025, and subsidies amounting to about 328 billion roubles between 2024 and 2038, the directive showed.

More than 580 billion roubles is needed for the project from the National Welfare Fund, with other funding coming from sources including Russian state-owned banks VTB, Sberbank and Gazprombank, the former minister of transport Vitaly Savelyev said in February.

The head of Russia’s Sberbank German Gref said on Thursday it will participate in financing the project.

Russia has proposed to raise taxes for companies and the wealthy, which may add an extra $30 billion to next year’s budget revenues and allow Moscow to increase spending, including on its war in Ukraine.

($1 = 88.5750 roubles)

(Reporting by Gleb Stolyarov; Editing by Jan Harvey)