No loss-making orders allowed! Putin: Russia's shipbuilding industry must have core technologies

"Why are there so many loss-making contracts?" "Russia has all the necessary conditions to confidently develop its shipbuilding industry in the long term."

Facing comprehensive Western sanctions after the outbreak of the Russia-Ukraine war, Russian President Vladimir Putin emphasized that Russia's shipbuilding industry should actively develop and possess its own core technologies and equipment. At the same time, he strongly opposed Russia's largest state-owned shipbuilding group taking orders at a loss under the guise of maintaining "national interests."

Putin emphasizes that Russia's shipbuilding industry must possess core technologies and equipment

On August 18, Russia held a meeting on the development of the shipbuilding sector. Putin stated at the meeting: "Recently, Russian shipbuilding companies have encountered difficulties in supplying foreign equipment and components for civilian vessels. We know the reason – our Western partners have not fulfilled their obligations out of purely political considerations. We have already discussed similar difficulties in other industries. We agreed to take concrete measures to counter the unfriendly actions of foreign suppliers."

"I want to point out to government officials, and of course, to the directors of shipbuilding companies, that we must do everything possible to implement our production plans, minimize the impact of current negative factors, and avoid these impacts in the future."

"I emphasize that the global situation and the actions of Western partner countries once again show that we should more actively develop our expertise in shipbuilding. I have mentioned this many times. It's impossible to replace every imported component, and it's not necessary to do so, but it is necessary to achieve technological sovereignty in key positions of ship equipment, as well as in the most important production processes and technologies. We need to ensure that as much business as possible related to ship equipment, modification, and repair is carried out in Russia."

Putin reiterated: "Russia has all the necessary conditions for the confident long-term development of its shipbuilding industry, including extensive experience and innovation in shipbuilding, resources and industrial base, as well as the huge potential of Russian engineering and design."

"We need to launch initiatives for Russian shipbuilding companies and their domestic suppliers and customers to support the upgrading and modernization of our shipyards and provide convenient financial mechanisms to complete high-quality modern vessel orders in Russia, including ice-class ships, thereby enhancing the capabilities of the Northern Sea Route and our other Arctic projects."

Putin stated: "Given the long production cycle of ships, it is particularly important to formulate long-term guidelines for the development of the shipbuilding industry; and orders must be drawn up accordingly. It is necessary to formulate schedules for shipyards based on the needs of customers such as transportation, fishing, and energy."

In addition, Putin also proposed that the construction of large-tonnage vessels is one of the main prospective areas for Russia's shipbuilding industry, and the Russian government has decided to subsidize part of the costs for these projects, as they are related to the localization of factories and the creation of cutting-edge technologies in this field in Russia."

Putin questions United Shipbuilding Corporation's loss-making orders

At this meeting, Putin also demanded that the United Shipbuilding Corporation (USC) pay attention to avoiding loss-making orders. In a conversation with USC President Alexei Rakhmanov, Putin questioned why USC had accumulated so many unprofitable construction contracts."

Alexei Rakhmanov presented the future of Russia's shipbuilding industry. Putin noted that USC had signed many contracts that would ultimately lead to losses. Putin questioned: "Why are there so many loss-making contracts?" Rakhmanov explained: "When working with the Ministry of Defense, the company can estimate prices for shipbuilding, but when other customers place orders, it's impossible to immediately calculate the total cost of shipbuilding, making it difficult to determine the final price. The company first considers the interests of the customer, strives to complete the ship construction, and then deals with the money issues."

However, Rakhmanov admitted that this practice might not be entirely correct, saying: "In my opinion, the interests of the Motherland come first, and then our financial situation."

But Putin disagreed with this statement, believing that violating financial discipline is absolutely not in the national interest: "I want to draw your attention to the fact that the interests of the Motherland are directly related to financial discipline, and violating financial discipline is not in the interests of the Motherland."

Putin further pointed out that the interests of customers certainly cannot be ignored, but this does not mean that one can mess up their own affairs because of it. Putin said that the most important thing is to clarify and coordinate all issues related to contract signing in a short period of time."

Not long ago, Rakhmanov declared that given the current Western sanctions against Russia, it would only take three years for Russia's shipbuilding industry to recover and develop. After all, Russia has been under sanctions since 2014, and the shipbuilding industry is prepared for new Western sanctions and the difficulties they face."