Russian Shipbuilding Agency
Rossudostroyenie
The Shipbuilding Agency comprised 180 enterprises of which more than 80 were state-owned. The remaining enterprises consisted of joint stock companies with different shares of government capital or with "golden" shares. In the 1990s, for a number of objective and subjective reasons there occurred a dramatic slump in the shipbuilding industry and in all other areas of the economy.
On 09 December 1999 the Russian Government passed the provision on the Russian Shipbuilding Agency. Under that provision, Russian Shipbuilding Agency (Rossudostroyenie) became a federal body of the executive power branch that implemented control, permissive, and regulation. In addition, it held responsibilities in other fields within the shipbuilding industry such as research, development, manufacturing, and updating and utilization of products of military and civic shipbuilding. The Agency's main task was formation and fulfillment, together with Russian Ministry of Science and Technology and Defense Ministry, of research and industrial policy directed to the manufacture of competitive products and the introduction of advanced technologies in the field of the shipbuilding. Some of the enterprises that earlier been subordinated to the former Ministry of Shipbuilding, which include the agencies on conventional arms of the former Defense Industry Ministry, agencies on control systems, enterprises of the former Ministries of Electronics, Radio Industry, and Industry of Communication Facilities, were transferred to the authority of the Agency of Shipbuilding.
The shipbuilding industry was traditionally one of the leading defense industries in Russia. Since the beginning of the defense conversion process, state military orders had been reduced from 60 percent of total production to 5-10 percent, and Russian shipbuilders sought new markets and expanded existing product lines. In 1999 only 9 percent of the entire state defense order was allocated for the purchase of arms and military equipment. Its subsequent growth was minimal. In Soviet times, by contrast, the order for the navy had been as high as 25 percent. Faced by tough western and eastern competition, Russia was pressured to introduce new technology and construction practices in order to maintain its competitiveness.
Russia possesses 40 shipyards; however only seventeen among them has the capacity to build vessels greater than 122 meters in length and only five among them has the capacity to build large ocean ships. St. Petersburg is the most important center of shipbuilding in Russia since three of the country's main shipyards are located there, as well as many supporting industries (machine building, compressor manufacturing industry, ship design bureaus etc.).
Russian shipyards are not able to compete with the shipyards of South Korea, China, Germany and other European countries, where during recent years modern robotic shipbuilding technologies were implemented. Russia fell behind these countries in terms of level of production management, technology, construction period and prime costs. Due to this, Russia was threatened with the possibility that it could lose its competitiveness unless the shipyards were modernized. Modernization of each shipyard during the time period required no less then $500-600 million. According to experts, robotics and new technologies would not have made the shipyards highly profitable if they were installed in old yards.
Thus, in the mid-1990s the Council of the Ministry of Economy of Russia decided to create a modern shipbuilding complex. The investment project was included in the State program for the conversion and restructuring of the defense industry of the Russian Federation. This program, which is a Russian analogue to the US "Moritex" program, was called "Russian Shipyards" and received presidential status. The program envisioned the merging of the three St. Petersburg shipyards (Baltiysky Zavod, Severnaya Verf and Admiralty Verf), and the subsequent creation a joint ship-assembly complex in the form of a joint-stock industrial corporation. The project of unifying the yard would cost approximately $650 million. Of this amount, 30% would go for the transfer of a number of machine building workshops to other enterprises in St. Petersburg and to the redevelopment of 150 Ha of freed property in the center of the city. It remained unclear at the time how the project would be financed.
Shipbuilding in Russia is very different from other sectors of industry: very long terms of project completion (sometimes more than 30 months); very high project costs ($30-50 mln.); and a need for high capital investments. According to some estimates, Russia needs annual fleet renewal of 150-200 ships, requiring an investment of $2.5-3.5 billion. However, Russian ship-owners do not have money to finance the construction of new vessels.
Positive dynamics in the industry's development had been observed since the year 2000. Fixed assets were being renewed. Such plants as Sevmashpredpriyatiye and Baltiisky Zavod were carrying out reconstruction and retooling. In shipbuilding it wsa possible to maintain all the basic technologies that leading countries possess. Such arms programs as there were in the Soviet Union, when more than 10 nuclear-powered submarines used to be annually made, are out of the question. Russia must have a navy which will ensure its interests in the World Ocean with regard to the real state of the country's economy. The President has signed a naval doctrine, the groundwork principles for maritime activities. Chairman of the Government of the Russian Federation Mikhail Kasyanov held the first meeting of the maritime collegium, where a comprehensive approach was defined toward the accomplishment of the tasks outlined in these documents.
The formation of holding companies had been predetermined by market demands and by the actual state of Russia's defense-industrial sector by the start of the 21st century. There will be combined in them the scientific, technological and staff potential of the industry. These structures will have to ensure the implementation of the arms programs, the output of competitive products, and the development of newest technologies. For example, the Ocean Systems structure would encompass scientific organizations and enterprises of the industry that historically used to produce sea radar complexes and shipboard artillery control systems.
There were some positive trends in the introduction of our arms and technologies into world markets. Thus, in 2000 deliveries of naval ships accounted for about 27 percent of the total volume. These figures were planned to be surpassed. There are prospects for our submarines, high speed boats and other vessels, in particular air-cushion ships. Supplied to Greece, they have received a high assessment. In 2001 Russia helped to build a complex in India that will help to make a breakthrough in civilian ship design.
Today it is important not merely to sell equipment, but also to back it with life-cycle services, both for foreign customers and for the Navy of Russia. The industry is ready to accompany each ship during its entire life cycle, including with the guaranteed supply of spare parts, tools and accessories. At the same time, in spite of the insufficient financing, by re-equipping production we have been able to organize the production of new ship-borne accumulators with an increased cycle of operation.
Following the termination of the Mikhail Kasyanov government on 24 February 2004, President Putin restructured the country’s defense agencies. The Conventional Weapons Agency, Shipbuilding Agency (Rossudostroyenie), and Control Systems Agency were all disbanded. Their functions and responsibilities were transferred to the Ministry of Industry and Energy under the authority of the Federal Industry Agency (FAP).
The Russian shipbuilding suffered from a shortage of orders. By 2006 a total of 95% of the total tonnage of civil vessels built for the previous decade by the orders of Russian ship-owners, had been built abroad. Only 5% were built in Russia. At that, civil goods’ production was decreasing. For the period January–October 2006 the reduction constituted 3,2%. The peculiarity of the situation is that production for export had increased by 19,7% and for the domestic customer it has decreased by 15,1%. During the first 10 months of the 2006 a total of 20 vessels of different purpose had been constructed, with 141 vessels are under construction.
Bank’s interest rates for credits are too high in Russia, and foreign banks do not finance construction of vessels in Russia. Therefore, it is more favourable to build tankers and dry-cargo ships abroad. Besides, in Russia taxes and duties are high, which increases the cost of a vessel by 20-25%, and the conditions for the investments inflow are absent, too. Hence, one may not expect development of the branch at the expense of civil orders.
The Russian shipyards have traditionally specialized on warship construction, and civil ships have been built abroad. As the result, in Russia production costs are high, the production cycle is long, mechanization is low, labor intensity is high. As the result, 44% of vessels are built against the state defense order, and 33% more are accounted for by the military ships’ export.
By 2006 there were many new ships under construction at shipyards. And the volume of financing required for their construction was much more than the state defense order can provide. Nevertheless, it did not prevent the development of state strategies and of the programs of development of the Navy, development of the shelf sea, construction of high-speed vessels, etc. At that, the state-of-the-art ships equipped with effective arms are built for foreign customers, and the Russian Navy, because of long period of construction, got, as a rule, the ships which are 15-20 years old.
