Gennady Voskresensky

    Each and every ship delivered to a customer is a quintessence of enormous labor not only by shipbuilders but also by workers of allied industries, such as metal producers, machine-builders, instrument-makers... Figuratively speaking, the shipbuilding industry as a whole is kind of an indicator of country’s economic development. Today we are proving that in Russia this indicator is world-high». That is how Igor Gorynin, the general director of the Prometey federal scientific center, is assessing the importance of the shipbuilding industry. And his opinion is hard to refute.The situation prevalent in the early 1990s immediately comes to mind. In those years the collapse of the Soviet military industrial complex was irreversible. «After a unified single system of managing the shipbuilding industry was destroyed, the Ministry of Defense completely refused services of shipbuilders», recalls Oleg Edyshev, one of the top managers at the Admiralty shipyards. «With the state planning and regulations abolished many monopolists in allied industries started imposing their terms on shipbuilding enterprises. As a result, by the mid-1990s prices for materials began growing faster than the rates of prices for ships. Along with high costs there emerged one more problem: contractors often disrupted work failing to supply needed equipment on time. Because of frustrated contracts enterprises encountered a gigantic credit indebtedness», he said.
So, it seemed that there was no way out of troubles. But, luckily enough, the industry produced a few competent and vigorous managers, who took a number of effective measures aimed at restructuring available facilities and changing ways of dealing with suppliers and contractors. These measures permitted to make operations of enterprises steady and soon the situation in the Russian shipbuilding industry started to improve.
In 2000 and 2001 the industry’s enterprises reached high rates of production growth, which averaged from 127 % to 130% a year. This upsurge was secured mainly by increasing export naval orders. For example, if the shipbuilding industry accounted for about 20 % of the total arms export by the Russian military industrial complex (or $800M out of $4B) in 1999, two years later, in 2001, its export share grew up considerably: the amount of deals exceeded $3B.
Military production and services - above all, to orders of foreign partners - are becoming Russian shipbuilders’ top priority. This fact was repeatedly stated by participants of the round-table debates on problems of the military industrial complex held at the recent St. Petersburg economic forum. A more detailed discussion of the subject took place during one of the industry’s scientific and engineering conferences. To get any additional information Eurasian Metals’ reporter went to the Rossudostroeniye agency, which is Russia’s successor to the Ministry of Shipbuilding that takes care of some of its responsibilities. Here is what its general director Vladimir Pospelov told him:
«Exports were always profitable and today they are twice as profitable since the potential of the domestic market is limited. In contrast to the past, when we sometimes shipped not exactly the most advanced machinery, we now offer foreign customers the newest specimens. It helps us not only win competition but also maintain the scientific and production potential. In the last two years the export of Russian-built ships has experienced a strong boom not seen since the mid-1980s».
When asked to elaborate on what types of Russian ships exactly are in demand on the world market, Pospelov said: «It goes for all of our naval products. But, nevertheless, submarine battleships are of the greatest interest». Just like export shipments of SU aircrafs saved the Russian aircraft industry, the export of diesel electric submarines helped the shipbuilding industry keep afloat in the most difficult times. Stressing that Russia possesses an advanced high-capacity scientific and production base for submarine shipbuilding Vladimir Pospelov reminded that «exactly this base permitted the country to create the huge fleet - more than half of all submarines in the world - in the years after WWII».
Rossudostroeniye’s general director did not rule out that diesel electric submarines would be the basis of the Russian shipbuilding exports in the next two decades. As is expected, a large-scale replacement of nonnuclear submarines will start in the world in 2003 - they were designed, built and commissioned in the past thirty years. Thus, the Russian-made submarines may reasonably compete for a considerable share of this market. Currently, an overwhelming majority of submarines for export are built at Russian and German shipyards. «Russian submarines offered for export sales match the best foreign ones and, by a number of characteristics, they are even superior», Vladimir Pospelov said. Their special advantages have to do with means of detection.
The agency’s general director mentioned as an example submarines of project-877KM and project-636. «They are among submarines with the lowest noise. An export submarine of the new Amur generation is being built now on the basis of project-677, which is used for the Russian fleet. The work is being done on a few modifications of submarines of this type, including those with air-independent power plants. It should permit to increase several times the underwater cruising range and to bring some combat capabilities of nonnuclear submarines closer to capabilities of the nuclear ones», he pointed out.
The major customers are China and India. According to Vladimir Pospelov, «two destroyers of project-956E (the Sovremenniy type) with powerful missile and artillery systems have been built recently for China’s Navy. There are plans to build several more of this type. The most important export contract is for building three frigates of project-11356. All of them have been launched already and they will be handed over to the customer between 2002 and 2003. There is a possibility that building ships of this type will be continued».
In Vladimir Pospelov’s words, the important breakthrough on the market of naval machinery was the delivery to the Greek Navy of two air-cushion landing barges of project-12322 (the Zubr type), which are the largest in the world. «For the first time a new Russian-built combat ship was added to the armory of a NATO member-country».
It should be noted that the success of the Russian naval machinery was made possible not only by shipbuilding companies but by enterprises of other industries as well. Ships of the latest designs have the highly efficient equipment and they are built with new metals and materials. All this should ensure the competitiveness of this type of export products in the future. In this connection Vladimir Pospelov referred to «a guided missile cutter of the new Scorpio generation of project-12300», works on which have been started last year. «The cutter is being equipped with arms that have no analogies. It is designed with the use of the Stealth technology so as to detect ships with infrared and radio-locating rays», he added.
«Rossudostroeniye’s enterprises are participating in designing the whole number of ships, vessels and boats, including the licensed ones, which have capabilities that greatly exceed those of similar foreign types. But the matter is that today our many research studies in designing new types of naval machinery are inadequate and this may have a negative impact on future developments», Vladimir Pospelov concluded.
Nevertheless, positive trends, which have become evident lately, permit Russian shipbuilders to feel quite confident. They are counting on a further growth of export orders. First of all, these orders will be secured by building a new patrol ship (a corvette) with the displacement of 1,900 tons, which was designed by the Almaz TsMKB enterprise. The design is based on the Stealth technology. The tender for building it was won by the Severnaya Verf JSC. Works have already been started on the hull of the head ship for the Russian Navy. It plans to acquire up to 10 ships of this type in the future.
Almaz has also worked out the export version of the design. The cost of one ship amounts to about $530M. Iran and Vietnam are among the leading would-be customers. There is a possibility that a licensed building of corvettes will be set up.
Two head submarines are being built for the Russian Navy at the Admiralty shipyard in St. Petersburg. They belong to the fourth generation of the Amur-650 type (project-677E) and Lada (project-677) called Saint Petersburg. The third frigate has been launched at the Baltic shipbuilding yard to the order from India, which amounts to about $1B. By all indications, India’s military budget can permit buying even larger ships.
Implementing projects in shipbuilding means orders for contractors in other sectors of the country’s economy. For example, the patrol ship will have a new A-190 gun, which was designed by the Arsenal machine-building plant in 2001. And it is obvious that new artillery requires new metals and alloys, materials and compositions, testing and introduction of production technologies.
Building a merchant fleet has also become more active lately. In August 2001 the Saturn icebreaking tugboat built to the order of the Portoviy Flot JSC was off the stocks of the Pella Leningrad shipbuilding yard. «Saturn is the first tugboat accepted on the account of our company», Valery Tunitovsky, the technical director of Portoviy flot, told Eurasian Metals. In his words, the tugboat costs $3.2 million. As for the Pella yard specializing in building rowboats it is the first vessel of this type. The enterprise is planning to build up to 20 tugboats for different customers. That means that Pella will be building from two to four tugboats a year and this will ensure a 100% utilization of its capacity as well as capacity of its allied enterprises.
Another well-known enterprise, the Avangard shipbuilding yard in Petrozavodsk, has started building a series of fishing boats. Works are being done under the government program «Updating the fishing fleet of the Republic of Karelia». The program opens up fairly good prospects for the enterprise’s development. However, the yard’s top managers are rather cautious when discussing the subject. The reason is the yard’s shaky financial basis. Though lacking current capital, Avangard does not rush to obtain bank credits because interest rates are too high. At the same time its shareholders and managers would like to find a strategic investor.
«We recognize the efficiency of cooperating with the banking capital. The only problem is to find new forms of interaction. As far as we are concerned, we are ready to consider different options to create certain financial links between the shipbuilding industry and its allied enterprises», says Alexander Kostunin, the chairman of Avangard’s board of directors.

Saint Petersburg, Baltic Shipbuilding Yard JSC. An India-ordered frigate at the fitting-out wharf.

The fact that such a scheme of cooperation is feasible is manifested by the Vyborg Shipbuilding yard JSC, which in April 2001 launched a new fishing trawler built to the order from Norway. This is first project completed after the yard’s protracted idleness. As its general director Sergei Zavyalov put it, «just a year ago no one, even the most daring optimist, would have believed this».
The prospect became the reality thanks to joint intensive efforts by many organizations, enterprises, authorities and credit institutions, Sergei Zavyalov stressed. «In present conditions the financial capital justifiably wants to operate in the economy’s real sector. And our fruitful effective interrelations with one of its representatives is an example of such a desire», he said.
The core of «the system of harmonious relations» is to be the mechanism to determine pricing and joint calculation of products’ prime cost. The yard should provide its partners with some of confidential information on products’ prime cost and production technology. The agreement on profit distribution serves as the basis of their interrelations.
Acting basically as a strategic partner, the banking capital is about to start financing the yard’s promising projects. The credit line has been opened for building three seine trawlers. Ships of this type will permit the Vyborg shipbuilding yard to enter Europe’s dynamically developing market.
As the industry’s representatives state, having necessary technologies and financial resources shipwrights intend to provide the Russian fleet with the most advanced ships in close cooperation with European enterprises and design agencies. This will mark the country’s return to its previous position in shipbuilding and seafaring.