Raising the standards of the shipbuilding industry

Established at the behest of Vladimir Putin in 2007, the United Shipbuilding Corporation (USC) is not to be confused with other Russian state corporations. It is an open joint stock company, although 100% of shares are state-owned.
The idea of creating the USC has been around for a long time in the corridors of Russian power. How did it come about?

Shipbuilding in Russia is the kind of industry where the majority of facilities are state property, so it's very dependent on direct support of the state - all the more so in the present economic crisis. Shipbuilding faces some huge challenges: rapid and far-reaching modernisation of production capabilities, technological improvements and optimisation of economic processes.

If this had not been done, would it have spelt the end of Russia's right to be called a maritime power?

It's not about names or titles - it's about securing future development and maintaining our competitive position. The USC was set up precisely in order to preserve and develop Russian shipbuilding's scientific and production potential. It's a giant holding, designed to bring together dozens of state-owned production facilities, design bureaux and research institutes.

How is the relationship between naval and civil shipbuilding seen?

There needs to be a sensible balance. Alongside developing defence programmes, we will build high-tech ships for the civil sector. We won't be trying to build everything, but we'll be selective in where we see a promising niche for ourselves that isn't already covered.

For example?

Tankers, gas carriers and cruise liners are areas where leading shipbuilders are already long established. I'm not going to waste time on these. But technical and auxiliary ships, oil and gas platforms, ice-breakers for Arctic waters and northern river estuaries - these are our areas. We are already putting a few deals together and hope to secure some firm orders. I'm sure we'll find partners in other countries too; as recently as mid-February, we signed a memorandum on co-operation with Samsung Heavy Industries Co. Ltd in South Korea.

And what does that give you?

The document enables us to share experience and take part in projects aimed at developing shipbuilding in both countries, and to improve economic, technical and production co-operation on issues related to developing and introducing the latest technologies in modern ship design and construction. This Korean firm actually specialises in building ships for civil use - ice-breaker tankers and liquefied gas carriers. This is what we badly need.

By happy coincidence, the memorandum was signed at the same time as the opening of a liquefied gas production facility on the island of Sakhalin, attended by the leaders of Russia and Japan.

Yes, that was no coincidence. Our countries need reliable ways of transporting gas, so that is a field for mutually beneficial co-operation. For the South Koreans, the fact that 100% of the USC's shares are held by the state provides a strong guarantee that the partner relationship between the two sides is secure.

Let's get back to co-operation on defence equipment. Where does India fit into your plans?

India has always been a long-term partner for us. Our best shipyards and design bureaux - Rubin, Malakhit, the Neva design bureau, the Admiralteyskiy organisation (in St Petersburg), Sevmash and Zvezdochka (in Severodvinsk), and the Yantar facility in Kaliningrad - are working on contracts we signed with India in recent years.

The Yantar yard is building three frigates for the Indian Navy: how is the work going?

I don't see any serious grounds for concern. Any issues that arise are being resolved in a businesslike manner.

RIR Dossier: industry
The industry comprises 168 companies, employing 160,000 people in more than 100 ship-repairing enterprises and about 2,000 subcontractors. In 2008, total sales exceeded 150 bn roubles. To increase the industry's competitive edge, the Russian government adopted the "Strategy for Industry Development until 2020," which will bring together Russia's key shipbuilders under the USC.

RIR Dossier: USC
On 21 March 2007, then-President Vladimir Putin signed a decree creating an open joint stock company, the United Shipbuilding Corporation (USC). Three sub-holdings were created as daughter companies: the Western Shipbuilding Centre (comprising 8 companies), the Northern Shipbuilding and Ship Repair Centre (13 companies) and the Far Eastern Shipbuilding and Ship Repair Centre (5 companies). Another 8 companies fall under the USC.
It was decided to privatise everything, including defence yards and design bureaux that were still state enterprises: the Sevmash and Admiralteyskiy yards, and the Almaz, Rubin and Malakhit design bureaux.

The ship is afloat, but its price is being discussed

Negotiations between India and Russia concerning the cost and schedule for completion of the aircraft carrier Vikramaditya are being held in both countries. Russia's delegation, led by Alexander Fomin, recently visited Delhi.

Alexey Smirnov, RIR

The people directly responsible took part in these talks: Nikolay Kalistratov, general director of the Sevmash shipyard, and head of pricing Tatyana Arkhipova. They had the opportunity to explain their position on all contentious issues in direct dialogue with their Indian customers.

Five years ago, Moscow and Delhi concluded a deal for the Russian cruiser Admiral Gorshkov to be repaired and refitted as the aircraft carrier Vikramaditya for the Indian Navy, and at the same time 16 naval aircraft would be supplied for it. Russia also undertook to train the carrier's Indian crew - about 1,500 strong - and create the infrastructure to allow the ship to be stationed in the Indian Ocean.

The overall value of the contract was not made public, but it was announced that the work would be completed to a very tight deadline, the end of 2008. Initial forecasts, however, were defeated by reality: so much had to be dismantled, rebuilt and refitted that at times it seemed quicker and cheaper to build a new one.

"Our shipbuilders ran up against a whole pile of things that were new to them," said Anatoliy Isaykin, head of Rosoboroneksport, Russia's state defence export agency. Explaining why this happened, he said: "The fact the aircraft carrier would have to be virtually rebuilt was not taken into consideration."

Moreover, the Indian Navy's inspection group was monitoring work on the ship almost round the clock, and every time a dilemma arose, to retain an old feature or to replace it with something new, it insisted on replacement. Obviously, this also took time and required a huge number of workers and additional expense. The original schedule shifted, which understandably left the customer dissatisfied. It got to the point where Sevmash was in a stalemate situation: work was at its most intense but the finance, due to come in separate instalments, had dried up.

According to Sevmash's general director Nikolay Kalistratov, recently the firm has been covering the costs of modernising the ship from its own internal reserves and by taking loans. But that cannot continue indefinitely, especially in times of crisis.

Three months ago, after intensive work on the hull, the aircraft carrier was taken out of dry dock and now it's afloat again in Sevmash's finishing yard. From the outside, the ship looks completely fresh and ready for action, but as far as the "innards" are concerned, there's still a great deal of work to do.

"The finishing yard will be installing large-scale equipment and doing internal installation and finishing," the company told us.

It's planned to complete repairs and refit by 2010, but a further two years will be needed to carry out trials - mainly to perfect the ship's air operations.

The renovated Vikramaditya's emergence from dry dock was timed to coincide with India's Navy Day. Speaking at that time in Severodvinsk, Commodore Madhusudanan, leader of the monitoring group, stated, "An important stage in the refit has been completed. There is no doubt that the aircraft carrier will become the flagship of the Indian fleet."

For this to happen in 2012, as specified in the revised timetable, India must ensure there is sufficient finance, the general director of Sevmash stated on his return from India. As far as the justification for the expenditure is concerned, the shipyard is ready for this. According to Kalistratov, the first 3,000 pages of accounts have already been delivered to the customer.

"The Russian side has expressed its position on price according to the contract," Tatyana Arkhipova added on her own behalf. "In addition, agreement has been reached with the customer on advance payments to continue the work underway at Sevmash."

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