Impact of sanctions on Russian civil shipbuilding
March 3rd, 11:36 pm
The St. Petersburg newspaper Fontanka.ru published an article by Lev Godovannik “So far shock. After the sanctions, shipyards are calm only about icebreakers. Engines from China, electronics from Aurora, dollars and euros in suitcases, but there is a big question with processors. "Fontanka" found out the current prospects for Russian civil shipbuilding " .
The main supplies from the EU countries for the construction of our civilian ships are high-power engines and processors. The first can be tried to be replaced in China, the prospect of replacing the latter is not yet clear. Alexander Buyanov, Deputy General Director of the Central Research Institute of the Marine Fleet, spoke about this in more detail :
- Russian shipyards receive from Europe almost all marine engines for civil shipbuilding. These are diesel generators, to which there is practically no alternative. We produce analogues of low power, but when we talk about power from a megawatt, there are quite a few options.
Will it have to be created from scratch?
- Not only this. A striking feature of Russian manufacturers of marine equipment is the complete absence of modern service. The Russian manufacturer supplies some equipment to the shipyard, it is installed, but sooner or later something breaks. Here it turns out that the manufacturer does not provide any repairs or supply of spare parts, not only to the main ports of the world - to Russian ports! Their principle: if it's broken - bring it - we'll fix it. Any shipowner knows that it is impossible to imagine the equipment of, for example, the Finnish shipbuilding concern Wärtsilä without uninterrupted supplies of spare parts to most ports of the world. In Russia, now, apparently, there will be neither ship equipment of this company, nor its service.
— And what about the power equipment for nuclear icebreakers?
“Nuclear reactors, turbogenerators, electric motors and even shafts to which rotation is transmitted are made in Russia, there are no problems here – in the production of icebreakers we are practically independent of foreign manufacturers. But there is also a supply of components.
- And where do the engines on our ships come from?
- Mostly Finnish Wärtsilä, German MAN, in third place is Chinese WinGD.
- Can WinGD completely replace the first two, which, as I understand it, will not give us anything in the foreseeable future?
- I think yes. In fact, there are completely localized technologies of the Swiss Sulzer and Wärtsilä. They make large deliveries to the international market, WinGD engines are put on container ships and large bulk carriers.
- Now our shipbuilding will depend on China?
- I wouldn't put the question that way. Still, we are living the third day in the new conditions - we have to wait. Moreover, Russia is too large a segment of the global shipbuilding industry.
- Probably, there will be problems with the ship's electronics?
- On icebreakers, it is all domestic - from NPO Avrora. This electronics is of quite decent quality, but the question is in the volume and scale of supplies. The big question is whether Aurora will be able to deliver to all ships in Russia.
“But we don’t know how to make microchips."
- Do not know how. AMD and Intel refused to supply them, which will hit shipbuilding just like everyone else. After all, the ship control system is essentially the same personal computer. What could be the way out... honestly, I don't know, and my colleagues don't either. Now everyone is in shock. There are, of course, Russian Elbrus technologies that supply chips to the military and government agencies, but as far as I've heard, there are a lot of complaints.
- A lot depends on South Korea at the Zvezda plant built by Rosneft in Bolshoy Kamen. It looks like the Koreans will join in the refusal of supplies.
- It is sad. With their participation, Zvezda is building gas carriers and tankers of high ice class for Novatek and Rosneft projects in the Arctic. Based on these plans, forecasts are made for the production of gas and oil and the export of their derivatives. If there are no gas carriers and tankers, the chain will collapse.
There is still no full understanding of the scale of the impact of foreign sanctions on Russian shipbuilding. But the shipyards that are part of the state-owned United Shipbuilding Corporation will have to forget about currency accounts. Sergei Glandin, Head of Sanctions Law and Compliance Practice at Pen&Paper Bar Association, spoke about this :
— It is still too early to sum up the results of sanctions against Russian shipbuilding. Do you know the stages of a person's response to stress? Shock, denial, depression, bargaining, acceptance. We are now in the stage of shock, sanctions are just being introduced, it is not entirely clear what exactly they are, new sanctions will appear in a few more days. I think by the end of the week the current stage of this process will be completed, and we will come to the transition from depression to acceptance - then a lot will become clearer.
- The first sanctions against the main owner of Russian shipyards - the state-owned United Shipbuilding Corporation - appeared back in 2014, after the annexation of Crimea.
- Quite right, but now Promsvyazbank has undergone blocking sanctions, where most of the shipbuilding plants associated with the defense industry are serviced. Clients of this bank who have foreign currency accounts will not be able to use them. Promsvyazbank can now only work with rubles, and those who wish to operate in foreign currency will have to open accounts in international banking groups - in Raiffeisen or Uni-credit, for example.
Promsvyazbank serves nine large industrial enterprises in the region, one way or another connected with shipbuilding, including military ones:
Federal State Unitary Enterprise Morozov Plant
Federal State Unitary Enterprise "Krylovsky SSC"
JSC Baltiysky Zavod
PJSC "Vyborg Shipbuilding Plant"
JSC "KB Arsenal"
PJSC SZ Severnaya Verf
JSC Plant Kirov-Energomash
JSC "MZ Arsenal"
NWRC East Kazakhstan region "Almaz-Antey"
- Will USC enterprises be able to do this?
- Not anymore. This is only for those who did not fall under the sanctions.
— But in our country, all shipbuilding is either at USC or at Rosneft. Both are under sanctions.
- Rosneft is still under sectoral sanctions. She, for example, is prohibited from long-term borrowing with a maturity of more than 14 days. Other sanctions against Rosneft do not apply to shipbuilding, they relate to the development of gas and oil fields beyond the Arctic Circle. It is forbidden to supply equipment from the USA and the European Union there. And there are no blocking sanctions yet, which means that foreign currency accounts are working as usual.
- Did I understand you correctly: USC member enterprises cannot open foreign currency accounts anywhere at all?
— Quite right. They will be sent to any European or American bank.
- And what will happen to the money that they now have in foreign currency accounts?
— In foreign banks, all funds are blocked. They are, but the owners cannot manage them until the sanctions are over. And the owners of foreign currency accounts in the same Promsvyazbank will have to convert all the currency into rubles. Another option is to come and pick up suitcases of cash euros or dollars. They will not be able to make any other banking currency transactions. Any attempt at a foreign exchange transfer will result in the freezing of the corresponding amount by a US or European correspondent bank.
Lev Godovannik for Fontanka.ru