Putin Settled Haggle Over Prices For Subs

10.11.2011 Controversies between defense ministry and JSC United Shipbuilding Corporation (USC) over prices for nuclear submarines have been settled on Nov 9 in Severodvinsk, Arkhangelsk region in presence of premier Vladimir Putin. Russian defense ministry signed all contracts which had been in the center of heated debates for months. With conclusion of those most significant and large [RUR 280 bln] contracts, documentation of State Defense Order 2011 has been finished.

Prior to signing documents, Putin held a meeting to discuss naval component of State Defense Order 2012 with vice premiers Igor Sechin and Sergei Ivanov, defense minister Anatoly Serdiukov and president of USC Roman Trotsenko. According to Putin's press secretary Dmitry Peskov, "the meeting was very long". Putin started the panel discussion in the morning and talked over all issues, i.e. prices, technologies, deadlines etc.

After the 'round table', defense ministry and USC signed 7 contracts. Most of them provide development and construction of nuclear-powered ballistic missile submarines (Project 955A Borei) and nuclear-powered attack submarines (Project 885 Yasen). Modernized submarines will be designed by Rubin Central Design Bureau and Malakhit Maritime Engineering Bureau; their construction will go on at Sevmash shipyard (Severodvinsk).

Borei-class subs carry the newest submarine-launched ballistic missiles (SLBM) Bulava currently undergoing tests. Totally, it is planned to build eight submarines of the kind; the first one (SSBN Yury Dolgoruky) passes sea trials, other three are at different completeness stages. Yasen-class submarines are armed with fourth-generation cruise missiles. It is planned to build up to 10 such submarines; the lead one (SSGN Severodvinsk) has been already launched and undergoes trials. The second sub of the project (SSGN Kazan) is being constructed under modernized project Yasen-M.

Among other contracts signed were those for construction of a Project 21300 rescue ship at Admiralteyskie Verfi shipyard and modernization of Project 11442 nuclear-powered missile cruiser Admiral Nakhimov (former Kalinin) which had been waiting for general overhaul since 1999 at Sevmash shipyard. After repair, Admiral Nakhimov will be stationed at Pacific Fleet, reports RIA Novosti referring to a spokesman for defense industry. Modernization of Admiral Nakhimov is essential because the only operable ship of this class Petr Veliky will be laid up for repairs in the nearest years, said Andrei Frolov.

According to USC spokesman, "defense ministry and USC signed agreement of mutual obligation to plan State Defense Order for the period of 2012-2013".

As Putin said after the signing ceremony, amount of the contracts exceeded RUR 280 bln. Thus, problems with the last and most financially large 5% of State Defense Order 2011 have been resolved. Deputy defense minister Alexander Sukhorukov earlier said that except for contracts with USC, defense order was 95% contracted.

"Defense ministry is ready to accept any price, but it should be economically sound and reasoned by calculations. And we have great problems with USC in this area", Sukhorukov said then. The parties managed to agree upon prices only on Nov 1 after months of long-standing disputes.

Vice premier Igor Sechin said "all contracts we had been engaged in for the recent four months on the instructions of prime minister have been signed". He added that the first contracts were tied in Aug.

"These are unprecedented contracts; they provide our shipyards and associated enterprises with guaranteed workload up to 2022. We are satisfied with profitable prices, so shipbuilders have gained their object", pointed out president of JSC United Shipbuilding Corporation Roman Trotsenko. However, Putin reminded that companies involved in defense order will be responsible for all spendings.

In 2012 the government is not about to repeat mistakes of defense order contracting made in 2011.

In one or two weeks the military industrial commission will consider draft State Defense Order 2012-2014 with the view to fulfill Putin's instructions and submit the document for signature by Dec 1, said Sergei Ivanov, vice premier and chairman of the military industrial commission.

According to him, customers and executors of defense order will be able to tie contracts even since Dec 1. The contracts cover the period until 2016. "Only in this year USC companies will receive over RUR 10 bln", Ivanov said.

State Arms Program 2011-2020 provides about RUR 4.7 trillions for large-scale modernization of the Navy, reports Russian government's press service. Federal budget 2011 appropriates over RUR 85 bln for construction of nuclear subs, frigates, and ship repair, and over RUR 93 bln – in 2012. After meeting with vice premiers and representatives of shipbuilding industry, Putin said that full-scale reequipment of armed forces is the nationwide goal which must be fulfilled.