Shock for now. 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 regarding 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 may be replaced in China, the prospect of replacing the latter is not yet clear. Alexander Buyanov, deputy general director of JSC Central Research Institute of the Marine Fleet, spoke about this in more detail:

 — Russian shipyards receive almost all marine engines for civil shipbuilding from Europe.  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 we have to develop this 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 but even to Russian ones!  Their principle is the following: if it's broken, bring it and we'll fix it.  Any ship owner 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.  Now in Russia apparently there will be neither ship equipment nor service of this company.

—And what about the power equipment for nuclear icebreakers?

— Nuclear reactors, turbine generator, 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 practically do not depend on 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, Chinese WinGD is in third place.

—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 say that.  After all, it’s our third day in the new conditions – we have to wait.  Moreover, Russia is a large segment of the global shipbuilding industry.

—Perhaps, there will be problems with the ship's electronics?

—On icebreakers, it is all domestically-produced – from SPA Avrora.  This electronics is of quite decent quality, but the question is in the volume and scale of supplies. It is highly questionable whether Aurora will be able to deliver to all ships in Russia.

—But we don't know how to make microchips.

—We don’t. 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 know 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. 

—Much depends on South Korea at the Zvezda plant built by Rosneft in Bolshoy Kamen. It looks like the Koreans will also refuse to supply.

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 foreign currency accounts.  Sergey Glandin, head of sanctions law and compliance practice at the Pen&Paper Bar Association, spoke about this:

 — It is still too early to summarize the results of sanctions against Russian shipbuilding.  Do you know the stages of a person's response to stress? Shock, denial, depression, bargaining, acceptance.  Now we are in the stage of shock, sanctions are just being issued, it is not entirely clear what exactly they are, and new sanctions will be imposed 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 the picture will certainly 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.

— Absolutely correct, but now Promsvyazbank has undergone blocking sanctions, where most of the shipyards associated with the defense industry are serviced.  Clients of this bank who have foreign currency accounts will not be able to use them.  Now Promsvyazbank can 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 "Plant named after Morozov"
  •  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 PDD enterprises be able to do this?

—Not anymore. This is only for those that were not sanctioned.

—But all our shipbuilding is either at PDD or at Rosneft. Both are sanctioned.

— Now Rosneft is subject to sectoral sanctions.  For example, it 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: PDD members cannot open currency accounts anywhere at all?

Absolutely correct. Any European or American bank will tell them to get lost.

— And what will happen to the money that they now have in foreign currency accounts?

— In foreign banks, all funds are blocked.  They still exist, but the owners cannot manage them until the sanctions are over. And the owners of foreign currency accounts in Promsvyazbank will have to convert all the currency into rubles.  Another option is to come and pick up suitcases filled with 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.


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