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Russian Shipbuilding - 2007-after

In 2007 the Russian Ministry for Industry and Energy (Minpromenergo) launched a strategy for the further development of the shipbuilding industry. In the strategy document two areas stood out: Russia's military capabilities, and the development of petroleum resources on the Arctic continental shelf.

The strategy had two main elements: development of a state investment program for civilian shipbuilding and reorganization of the industry. All in all, the program represented a very ambitious policy of modernizing Russia's shipbuilding industry. The goal was that the industry by 2016 is to be competitive and able to cover much of Russia's shipbuilding needs, and even conquer a 'significant share' of the world market. The total cost of the federal target program 'Development of civilian marine engineering for the period 2009-2016' was estimated to be 136.4 bill roubles (approx US$ 5.5 billion).

Even if the sums were large, when spread out over the years and between the various sub-programs, their contribution will not necessarily be strongly felt. Some observers are concerned with the approach. It is an attempt to force through modernization and innovation by decree, which is reminiscent of the centrally planned economy. It was a top-down approach, where little was said about incentives for innovation from below.

In defense of the program, one can argue that, given the problem description in official documents, the situation in the sector was so serious that only a concentrated infusion of capital and concrete tasks from above can bring it back on its feet. But if this was true, the goals sounded overly ambitious. The other main element of the shipbuilding strategy was a comprehensive reform of state management of the maritime industry.

This reform entails establishing a state holding company, the Unified Shipbuilding Corporation (Obedinennaya sudostroitelnaya korporatsiya - OSK). This would be the umbrella organization over three regional state-owned holding companies and one nonregional one, with special areas of competence within naval production. The aim of the reform is to establish an integrated structure that gives the state full control over key decisions, but it was also clear that an important goal is to secure cooperation between yards. The reform was very much in line with the strong centralization trend seen in Russia and a belief that central administrative agencies will be the most likely providers of a new and efficient structure in the shipbuilding complex through active intervention.

The shipbuilding industry in Russia was clearly regarded as a sector of national significance, both militarily and within the civilian sector, justifying strong state involvement. This point was further augmented by the large military presence in Russian shipbuilding: as of 2008 military orders made up 77 per cent of the order books at Russian yards. Very few yards had an exclusively civilian profile.

The strategy as a whole was strongly geared towards promoting a Russian naval industry able to meet the demands of national customers, and to a certain degree be able to compete effectively on the world market, on its own. In light of the backwardness of Russian naval industry, the lack of reference to international collaboration needed for future development pointed up what the strong rhetorical discourse of national self-preservation in Russia today. Foreign (Western) interests were perceived mainly as ideological and economic competition - not as potential partners. But even if the potential and role of foreign interests was not highlighted in policy documents, and even if the use of Russian yards remained a strong overall concern, there was still considerable scope for foreign involvement in various ways. In the offshore platform under construction for Gazprom at Vyborg, only the hull was built in Russia. Everything above deck came from various foreign suppliers. The same was the case with the ill-fated production platform for the Prirazlomnoye field under construction in Severodvinsk. The goal of rapid development of the Arctic continental shelf relying primarily on the domestic shipbuilding industry does not look attainable. Russia would either have to accept more foreign involvement, or scale down its offshore ambitions.

Under the Memorandum of Cooperation established with Samsung Heavy Industries (Republic of Korea) the prospects for construction and enhancement of several Russian shipyards were outlined. Russia intended to share up-to-date technologies, buy equipment and materials both for production purposes and the ships under construction.

In May 2008, Prime Minister Vladimir Putin was clear in his statement during a visit to the Admiraliteyskie yard in St. Petersburg: "... foreign ships are built faster, are of a higher quality, and importantly - are still cheaper." In policy statements coming from the new Russian president Dmitriy Medvedev it was possible to discern a critique of the strong tendency of central control and transfer of industrial assets to state companies, so dominant in Putin's second term. ".. any additional strengthening of the role of the state, increasing its presence in the economy is not foreseen. On the contrary, we will take action to reduce the presence of the state in the economy."

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Page last modified: 30-01-2016 19:11:58 ZULU