Russian shipbuilders to refuse services of Rosoboronexport

22.11.2010 United Shipbuilding Corporation (USC) submitted a corporate development plan to Russian government and requested authorization for the status of "military technical cooperation constituent". According to Kommersant, this status will help USC to approach the world arms market and export its production without intermediary of Rosoboronexport which is the major exporter of Russian finished defense products. Consequently, the latter might lose up to one fourth of export contracts.

So far, it is uncertain whether the request of USC would be approved by Russian government which presently studies the corporation's development concept. Now the document is envisaged by appropriate authorities. According to Russian legislation, Rosoboronexport and other 21 companies enjoy the status of military technical cooperation constituent; by the way, only the major governmental transactor has the right to sell the whole range of finished Russian arms and military equipment authorized for export. Other companies can only export after-sale services and various constituent parts.

Rosoboronexport conducts the greater part of Russian arms export. Russia made $8.8 bln for arms export contracts in 2009 including $7.4 bln through Rosoboronexport. It is curious that Zvezdochka (Severodvinsk) and Admiralteyskie Verfi (St. Petersburg) shipyards are authorized to export their products without intermediary, except for finished military hardware. Both yards are USC members.

Obviously, India, Algeria, and Indonesia are potential customers of USC products. In particular, Project 22350 frigates participate in Indian Navy's tender. Besides, there's some certain probability that India would buy Project 677 submarines, one more Project 971 nuclear-powered sub, and additional parcel of Project 11356 frigates. Algeria shows interest in Project 22350 frigates and Project 20382 corvettes. Possibility of Russian-Indonesian contract for two Project 636M submarines cannot be ruled out as well.

Appearance of a new Russian exporter at the world arms market may have negative impact on sales volume of naval equipment, reports Kommersant. According to preliminary estimate, in 2010 volume of Russian defense export will make about $10 bln including $2.6 bln got by naval arms exports. Meanwhile, Rosoboronexport has been working at global market for a long time and delivers great volumes of military products, so it can offer lower prices for customers and take lower commission charges for intermediary from manufacturers. USC won't be capable to provide this for a long time.