Russia Turns to Domestic Shipbuilding

Russia plans to boost its shipbuilding capability by creating a shipbuilding cluster for construction of vessels and marine equipment that will attract foreign investments.

According to the Russian Government’s decree On the development of shipbuilding in Russian Far East, issued last week, the cluster will be established on the basis of Far Eastern Shipbuilding and Ship Repair Center OJSC (subsidiary of United Shipbuilding Corporation OJSC).

The cluster will include:

– consortium established by the closed joint stock companies Gazprombank and Rosneft in the form of the closed joint stock company “Modern Shipbuilding Technologies”. The share of the consortium in Far Eastern Shipbuilding and Ship Repair Center is 75% of shares minus 2 shares;

– United Shipbuilding Corporation with the share of 25% plus one share.

The new cluster is expected to build over 160 ships by 2025, predominantly intended for the development of the Russian Arctic sea shelf, as announced by Dmitry Rogozin, Russia’s first Deputy Prime Minister and chairman of the Marine State Board.

The total order value, the majority of which will be assigned to  Zvezda shipyard, will amount to USD 22.2 billion.

Project implementation will be controlled by United Shipbuilding Corporation,

USC has been included in a wave of sanctions introduced recently by the United States against Russian companies. Even though the sanctions have been characterized as nothing critical,  financial transactions with payments in USD will be hampered, according to the Corp. President Alexey Rakhmanov. Rakhmanov  added that the company is mulling ways of switching to payments in alternative currencies, such as the Chinese Yuan Renminbi (RMB) and that “is not fantastic.”

On November 13, 2013 Rosneft, Gazprombank, Sovcomflot and Korean shipbuilding company Daewoo Shipbuilding & Marine Engineering Co. signed a Memorandum of Understanding on key terms of cooperation to establish shipbuilding and industrial cluster in the southern part of Primorskiy Krai (Russian Far East).

The parties agreed to jointly complete the construction and launch a new shipyard – shipbuilding complex Zvezda – in 2016, to establish a Russian-Korean engineering center for shipbuilding and marine equipment for offshore projects. The companies also agreed key terms for technology exchange, localization of production and contracts placement.