Under Heavy Sanctions Pressure, Putin Orders Review of Russian Shipyards

Russian President Vladimir Putin tours Zvezda Shipyard, before the invasion (file image courtesy of the Kremlin). — Russian President Vladimir Putin (center) tours Zvezda Shipyard, before the invasion (file image courtesy of the Kremlin).

Western sanctions have been delaying Russia's civilian shipbuilding industry since the invasion of Ukraine began, and the problem is not getting any better for Russian shipping interests, according to state-owned media.

Government-controlled Rossiyskaya Gazeta reports that about eight out of ten Russian ships currently on order might not deliver in the foreseeable future. Out of the 49 that will likely deliver in the year ahead, more than half will need to be redesigned in order to work around the lack of European parts.

Russia's fisheries minister, Ilya Shestakov, illustrated the depth of the problem in a readout of a conversation with Russian President Vladimir Putin. Less than a quarter of the 105 fishing vessels in Russia's planned fleet modernization program have been built to date, thanks in large part to the difficulty of accessing European-built vessel technology.

In response, Putin has ordered his ministers to come up with a new shipbuilding plan to fix the bottlenecks and prepare for the next 10 years of production. His prime minister, Mikhail Mishustin, is leading the review and has until June 15 to deliver.

Previous attempts at adaptation include handing control of the top Russian shipbuilder and about 80 percent of Russian production to state-owned bank VTB; retooling for "Shipbuilding 4.0" digitalized production; increasing state subsidies for shipbuilders; hiring an Indian shipyard to handle small cargo-vessel orders; launching another new shipyard at the port of Korsakov, on Sakhalin Island; and soliciting help from China, the world's biggest shipbuilder and Russia's most important ally.

“We are coming to China because it is number one shipbuilder globally. We need cooperation with China," VTB chief Andrey Kostin told SCMP at a Beijing conference last year. "We might even look to build a new shipyard with China."

These measures may not be enough to reverse the fortunes of the icebreaking LNG carrier program that Russia needs to export gas from its Arctic shores. Samsung Heavy Industries and Hanwha Ocean have both backed out of the lucrative orders that support the program, leaving Russia without key technological partners. Hanwha is holding six completed ships that it will not deliver, and it is said to be looking for a new buyer.