Defense Ministry to Sign Borei Contract on May 25

23.05.2012 Russian Defense Ministry and United Shipbuilding Corporation (USC) will sign a contract on Project 955 Borei strategic nuclear submarines for Russian Navy on May 25 in Severodvinsk, said a USC top-ranking spokesman on Tuesday.

"The contract on construction of Borei-A and Yasen class submarines will be signed on Friday [May 25]", the insider told Interfax.

According to him, prior to the contract signing on May 25, there will be an extended meeting on that problem with participation of representatives of Defense Ministry, Ministry of Trade and Industry, Rosoboronexport, and United Shipbuilding Corporation.

The contract has not been signed so far due to contradictions over price between defense ministry and USC.

On May 5, an official in governmental committee responsible for military shipbuilding said that defense minister Anatoly Serdiukov on Apr 27 was trying to tie a contract for five Project 955A Borei submarines. He brought the price stated by United Shipbuilding Corporation 29% down saying it was groundlessly overrated. Serdiukov invited the corporation's directors to sign the contract on May 2, but shipbuilders did not accept the invitation, obviously, being unsatisfied with the 30-percent price cutting.

According to unofficial sources, USC wanted to make about RUR 130 bln for construction of five Borei-class subs, i.e. somewhat RUR 26 bln per submarine. As for shipbuilders, that is a minimal price and would barely give any profit. On the contrary, the military say USC included non-production costs into the end item price.

Earlier on, USC president Roman Trotsenko said the corporation would build 60 various ships for Russian Navy throughout 8 years, including six Project 885 Yasen nuclear submarines and Project 636 diesel electric subs.

An insider in USC reported that Indian aircraft carrier INS Vikramaditya (former Admiral Gorshkov) modernized in Severodvinsk would take the sea for the first time on May 25.

"As is planned, Vikramaditya will head out on May 25. Now the ship is being prepared for the trials", said the interviewee.

As for him, the ship will pass "the whole range of sea trials".

The USC spokesman confuted media reports that the carrier's trials would be allegedly postponed due to staff changes in Navy command.

"There will be no delays. The date was agreed upon long ago and meets the working schedule in full. The aircraft carrier will be handed over to the client in accordance with the contract, on Indian Navy Day, December 4", emphasized the interviewee.

Recall that the contract for modernization of Russian aircraft-carrying cruiser Admiral Flota Sovetskogo Soyuza Gorshkov was tied with India in 2004. The contract provided allocation of $974 mln for the ship's recovery and modernization, and $530 mln for sixteen fighters MiG-29K and deck-based ASW helicopters Ka-31 and Ka-27.

In Jan 2007, India suspended payments on the contract. In Nov that year, Russia brought up a question about additional financing.

After the visit of Russian president to India in Dec 2008, Indian government's security committee approved opening of price-revising negotiations. As for unofficial sources, now the contract value is about $2.3 bln.