Russian Navy

Talks on Borei Price Cutting Failed

05/28/2012

Text: Lenta.Ru
Photo: Project 955 SSBN Alexander Nevsky. sevmash.ru

Russian Defense Ministry failed to come to terms with United Shipbuilding Corporation (USC) regarding cost reduction of Project 955 Borei-A nuclear submarines, writes Kommersant. The negotiations were held on May 25 in Novo-Ogarevo with participation of president Putin in order to settle disputes on price issues between defense ministry and USC.

State Arms Program 2011-2020 provides RUR 124 bln for construction of five Borei-A nuclear-powered ballistic submarines. Defense ministry wanted to achieve a 30% cost reduction, down to RUR 87 bln, and USC on the contrary insisted on a 5% cost increase, up to RUR 130 bln. The corporation explained increase in the contract value as unplanned expenses.

According to the newspaper, Russian Defense Minister Anatoly Serdiukov on May 2 unilaterally signed the Borei contract at the cost of RUR 87 bln. President of United Shipbuilding Corporation Roman Trotsenko refused to sign that document. As a result of talks held on May 25, the parties said they were satisfied with new terms of the contract, although defense ministry failed to reduce price to desired level. USC is expected to receive RUR 124 bln for construction of Borei-class subs and will be entitled to request for additional financing.

Although the contract was supposed to be signed on May 25, that did not happen. According to Kommersant, the parties only exchanged the cost-accounting documents. They will be a basis for the contract to be tied within the next few days. The newspaper's informed source pointed out that figures set out in those docs would not be changed any more. Officially, this information has not been confirmed.

Defense ministry and USC have been arguing on the Borei construction program for two years now. Due to that conflict, the contract for designing of Project 955A subs was signed only in Nov 2011. Being responsible for those issues at the time, Igor Sechin recommended the corporation to accept the military's requirements. Later on, Vice Premier Dmitry Rogozin headed the committee, backed shipbuilders and obliged the defense ministry to justify the need for cost reduction of Borei subs.

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