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Russian Billions Go to British 'Phoenix'

18.06.12
Text: Central Navy Portal
Billions of Russian defense budget's rubles may fall to a British company currently facing the verge of bankruptcy. Curiously enough, that firm was entrusted by defense minister Anatoly Serdiukov in his notorious resolution to equip Russian Navy warships with metal furniture.

Metal furniture Strongbox Marine Furniture. Strongboxmarine.com
Pursuant to the documents available to Central Navy Portal, "throughout 2011 the Company's cash position deteriorated and in early January 2011 the Company were unable to pay its workforce and trade creditors". On that occasion, The London Gazette published a short "obit" unfortunately unnoticed in Russia.

The work is humming in Russian shipyards, but new ships still cannot take aboard exclusive British-made furniture enacted by Serdiukov. Surprisingly, products of the defunct company vanished into the foggy Albion will nevertheless beautify cabins of our corvettes and frigates while the money raised by persistent lobbying will surely "beautify" someone's pockets.

Fogs over Albion

Name of Strongbox Marine Furniture Ltd (SMF) was mentioned in Russian press for the first time in November 2011, and then Russian defense minister Anatoly Serdiukov approbated the Resolution No. 235/1/1/5899 hitting the headlines at once.

Building of Strongbox Marine Furniture at London's outskirts. Google Street View
In Russia, reputation of SMF became scandalous as well. Nobody could clearly explain why "overall reequipment of living and service premises of new Russian Navy ships" (then goes the long list of projects) must be accomplished "with the use of Strongbox shipboard metal furniture"? Are our manufacturers worse than the British ones? And how much will this whim cost Russian budget?

However, wave of indignation arisen after publishing of Serdiukov's resolution on Central Navy Portal could be much higher if only anybody in Russia knew a little more about Strongbox, a British company which took the Russian Navy's trustful hand along with the budgetary wallet.

The fact is that the company is very strange even by Russian standards. Incorporated over four years ago on the ruins of Strongbox Technologies Limited, SMF immediately entered upon production and planting of furniture for offshore platforms, civilian vessels and warships. Such enthusiasm could be explained by the fact that the new-born firm did have wide experience both in business and in bankruptcy. Throughout his business career, SMF director Mr. Stephen Edmunds went bust not once, an insider told Central Navy Portal. For instance, Strongbox Systems Ltd bankrupted in September 2004, and Strongbox Broadcast Products Ltd became insolvent in April 2006 (both were related to Edmunds, say British businessmen). So, when Strongbox Marine Furniture happened to be on the brink of ruin on February 14, 2012, London was not impressed much. And Moscow did not cock up ears. Even though both were pretty well aware that the company of Steve Edmunds was gearing up for entering unless had already entered into business relationship with Russian Navy and at a set time would have to face liability not to creditors but to higher command of Russian Navy.

Extracts from RSM Tenon docs

"The Company [Stronghold Marine Furniture Ltd] was incorporated in 14 December 2007. Stephen Edmunds is the sole shareholder and director of the Company.

The Company was dormant until August 2008 when the Company purchased the business and assets of Strongbox Technologies Limited out of Administration. The Company manufactured and installed marine furniture for offshore, marine and warship vessels.

...During the height of the Company's trade, the Company employed around twenty six full-time employees. The Company did not operate a pension scheme for the benefit of the employees.

...The Company took the decision in 2009 that it needed to expand its marketing internationally and as a result developed its website and undertook other marketing activities. The Company started to market more aggressively to try to attract more international business.

...During early 2011, the Company started to manufacture the main naval furniture's contract [signed with the Royal Navy], however due to manufacturing delays this prevented the Company from manufacturing sufficient quantities of stock to make a sufficient profit to pay for the hire purchase repayments on the plant and equipment. Throughout 2011 the Company's cash position deteriorated and in early January 2012 the Company were unable to pay its workforce and trade creditors and decided at that stage to seek the advice of RSM Tenon".


Perhaps, such tranquility comes from the fact that although the entrepreneurial gentleman Stephen Edmunds went bust many times, he did it fortunately and at a profit again and again? One of London reporters told Central Navy Portal that "Steve Edmunds' companies have a history of going into receivership and immediately starting as new company with a similar name. Because his companies are limited he is not personally responsible for the debts and walks away free. In the UK, we call the companies that start as soon as the old one has gone bust Phoenix Companies"...


Office of Strongbox Marine Furniture. Strongboxmarine.com
Indeed, in 2011, right after "the Company's cash position deteriorated and in early January 2012 the Company were unable to pay its workforce and trade creditors" (quotation from documents of RSM Tenon administrated the company), a new company appeared Strongbox Accommodation Furniture Ltd (SAF) headed by Mrs. Julie Leaver also known as Edmunds' secretary. That was just the firm which finally purchased assets of SMF for 250,000 pounds sterling. Take note, it happened on 14 February 2012, on the very same day SMF went bust! The 'phoenix' arose from ashes again.

But what 'ashes' remained then? Previous phone number seems to be the same, but the phone is picked up by Julie Leaver all the time answering with accustomed invariability that "today Mister Edmunds left the office earlier. Please call tomorrow". What else remained is the building which looks like a shed in London's industrial suburbs with proudly pranked signboard Strongbox. However, even renowned Sherlock Holmes could not puzzle out which of Strongboxes dwells there now. And the last thing remained is an aftertaste of something dishonest verging on fraud and kind of unusual in the law-abiding Britain. Honestly speaking, business conduct of Strongbox strongly resembles "Russian style" of 90's. Is there any Russian-rooted character in this story?

Strangely enough, there is. It may be just a coincidence, but one of directors in the newly founded SAF was a certain Eduard Ivanov, citizen of Saint Petersburg, Russia.

Russian insider

"Eduard Ivanov? Is it he who used to work in Teply Dom"? That was a reaction of Russian furniture manufacturers on our question about the new British top manager.

As it turned out, his name was known as well as the company Teply Dom which is habitually mentioned in line with MorNefteGazEngineering Ltd and Marine Complex Systems Ltd. Some people even call this trio a "company grouping". Obviously, there is a deal of truth in it, because if one trusts SPARK Interfax market analytic system, the abovementioned companies have not only common commercial interest (furniture market) but names of leaders, too. Lyubov Belous, Vladimir Reznikov, Pavel Zubkov those names can be met both amid founders and directors of the "company grouping". For us, the most interesting here is Marine Complex Systems Ltd (MCS), since it is just the company mentioned by Anatoly Serdiukov in his featured Resolution No. 235/1/1/5899 and acts as authorized dealer of Strongbox Marine Furniture in Russia.

At least now it is clear how come the businessmen with good Russian name appeared in London in February 2012. To make sure of that, we phoned to MCS presenting ourselves as potential clients interested in foreign-made metal furniture. "Mister Ivanov is on the business trip at the moment", the answer was. "But if you give your phone number, he will call you back".

We gave the number, and Eduard Ivanov unexpectedly did. He affirmed he was "dealing with Strongbox metal furniture", and being sure that we were potential clients, offered to sell us furniture.

So what? a meticulous reader may ask. Is anybody to be accused of knitting Russian and British business?

Of course not. But when this business directly touches on the national defense industry, it must be transparent to the maximum. Unfortunately, Strongbox Marine Furniture has nothing to do with this assertion.

Eduard Ivanov became director of Strongbox Accommodation Furniture in February 2012, shortly after publicly declared insolvency of SMF and sale of its assets to SAF by RSM Tenon's joint administrators. As was said above, somewhat a month before that SAF was headed by Julie Leaver, ex-secretary of Stephen Edmunds. By the way, in the brief phone talk with our reporter Mrs. Leaver confirmed her promotion, however, saying she was a director "at the very beginning". Thus, the more critical stage implying application of the purchased assets was entrusted to the native of Saint Petersburg along with another manager, Stephen Acres (also registered as SAF director).

What it may tell about? Does it mean that Marine Complex Systems in pursuance of further contracts with Russian shipyards established control over British production by hands of its employee? Or it is just a friendly swap of workers between companies counting on the long-term cooperation? Anyway, the "Russian insider" gives Marine Complex Systems a sort of confidence in prospective orders. And this confidence is definitely nourished not by financial standing of SMF turned to ashes in February but the "green light" for its production in Russia where the British "phoenix" is arising again.

Mistress of the sea

Although weak in the UK, Strongbox Marine Furniture represented by its dealer MCS is conquering Russian shipyards. It is even rumored in Russian business community that Marine Complex Systems is pulled by one of the top-ranking government officials.


Marine Complex Systems: new minion of Russian Navy. pro-fabric.ru
Indeed, how else to explain the fact that formerly little-known company suddenly gained the lead? Before debut in Serdiukov's resolution, MCS was reputed only thanks to participation in minor civilian contracts. The company used to cooperate with Russian Navy as well, carrying out insignificant works on rescue tug Zvezdochka, Indian aircraft carrier Vikramaditya modernized by Sevmash shipyard, corvettes and frigates built by Severnaya Verf or Yantar. If what said in the MCS booklet is true, its employees primarily worked on interior covering of ship premises. There is no information about any large deliveries of furniture in that period because shipyards normally either produced furniture in own workshops or purchased furniture through interbranch cooperation, for one, in Zvezdochka Ship Repair Center in Severodvinsk.

And then, bingo, breakthrough and unprecedented luck! Thanks to one signature of defense minister, Marine Complex Systems gained an amazing opportunity to equip series of prospective warships with Strongbox furniture. Such decision is based on a shady tender which conditions and judges remained unknown. Was the tender held at all? Or it was enough only to persuade the then Navy commander Vladimir Vysotsky to watch the MCS booth at International Maritime Defense Show 2011 and convince him that the firm having no production capacities in Russia would supply shipyards with furniture-assembling equipment in time and without delays?

And now this thought must be knocked into heads of shipbuilders. By all appearances, there are some results. As an insider at Amur Shipyard told Central Navy Portal, the yard recently suspended registration procedure of furniture delivery contracts with Zvezdochka center for Project 20380 lead corvette Sovershenny. They say, it was done by direction of design bureau and by approbation of Navy command. Most likely, the shipyard is expecting new drawings being urgently redesigned by the Almaz bureau in order to plant metal furniture delivered by MCS. The second hull corvette Gromky would be probably equipped with metal furniture at initial stage. Speaking of Severnaya Verf shipyard, MCS will deliver Strongbox furniture only beginning from the fifth hull, Project 20385 corvette Gremyaschiy. And then will come Project 22350 frigates (beginning from the second hull) and Project 11356 frigates built by Kaliningrad shipyard Yantar (beginning from Admiral Grigorovich).

It is still unclear though, what happened to the resolution of defense minister Serdiukov and how things go? Will dormition of Strongbox Marine Furniture noticed only by London business press intervene in its realization? And whose authorized dealer is Marine Complex Systems now? Is it that firm being currently buried by liquidating company RSM Tenon on the Thames riverside?

We failed to have these questions answered by the fresh-baked "mistress of the sea". Distantly polite receptionists stood sentinels over comfort of their bosses both in Saint Petersburg (Marine Complex Systems) and in London (Strongbox Marine Furniture). Written requests emailed to the companies have not met any success either. Our reporters could not find out anything about plans of MCS to establish production in Russia, although the company's leaders declared that at the very beginning.

Perhaps, managers of both companies have certain reasons to keep mum. Take note, according to experts, only one standard contract on production and planting of furniture and sanitary equipment in a warship, say, a Project 20380 corvette would bring 100-150 millions of rubles. And if the question is dozens of contracts, that would mean billon-size profits. Thus and so, in this particular story silence is literally golden. And it remains to be seen whether Strongbox-produced furniture would cost Russian Navy at the price of gold.

Reference

Russian Defense Ministry's Resolution No. 235/1/1/5899 "On the full-scale refurnishing of living and service premises in Russian Navy ships being designed, built, repaired, and modernized with the use of up-to-date finishing materials, accessory equipment, and metal furniture" was approved by Defense Minister Anatoly Serdiukov on November 9, 2011. Text of the resolution was earlier endorsed by Russian Navy Commander-in-Chief Admiral Vladimir Vysotsky and Deputy Defense Minister Alexander Sukhorukov. The document was signed by high-ranking officials responsible for combat readiness of armed forces, in particular, Russian Navy. The resolution provides that all newly built Russian warships must be equipped with furniture made by British company Strongbox Marine Furniture Ltd. Among ships planned to be furnished with British-made products are frigates (Project 22350, Project 11356) and corvettes (Project 20380/20385, Project 21631, and Project 21630).


"We build armorclads"

As is known, metal marine furniture is many times as expensive as the common one. Moreover, it is much heavier. Being interviewed by Central Navy Portal, director of a Russian furniture-producing company said that "without metal furniture, Indian aircraft carrier Vikramaditya would be lighter so that she could easily accommodate one more MiG fighter with fuel and arms reserve".


Corvette Stereguschiy. fleetphoto.ru
After all, do Russian warships need metal furniture? Experts questioned by our reporters could not count all pros and cons. Sure, metal furniture is long-life, robust and, technologically, well-adjustable. However, there are some disadvantages, too. Except for the higher price, metal furniture is three times as heavy as the common one. When being planted, it needs thorough grounding; otherwise, metal will accumulate static electricity.

One more nuance for experts. As is said in the Serdiukov's resolution, British metal furniture will be planted in Project 20380 corvettes. Those are ships with "plastic" deck erection absorbing and redirecting radio waves with the view to reduce the ship's radar signature. What if we put tons of high-grade British metal inside? Will they "shine" brighter? What about magnetic field? Will it be necessary to realign degaussing system? Take note, it needs time and money. Who is to pay Almaz design bureau, Severnaya Verf and Amur shipyards to carry out that works?

Let's face it, none of those questions have answer so far. Perhaps, everything is explained by the following ambitious statement of a Severnaya Verf manager: "As long as we build armorclads, all things must be made of metal".

Despite Government Resolution


Defense Minister Anatoly Serdiukov. mil.ru
For sure, it is by no means patriotic to call defense ministry to waive strengthening of the national navy. However, it is also thoughtless to refuse backing up domestic manufacturers. First sounds of indignation were heard as early as last fall when the Serdiukov's decision took air. Ex-commander of Black Sea Fleet Admiral Vladimir Komoyedov was the most flat-footed saying "it is absolutely unnecessary to import metal furniture from abroad as we can make it on our own. We should back it up [Russian industry], invest money, and get results".

Too bad nobody remembered that interests of the national industry have been already protected by a special document either prohibiting or limiting access of foreign-made commodities to the Russian Federation (Government Resolution No.56 dated February 7, 2011). This resolution imposes restrictions on export of goods, works and services for national defense and security purposes unless production of such goods, execution of works and services in Russia are either impossible or fail to meet the state requirements. But Russian companies do manufacture metal furniture conforming to national standards for a long time. Maybe Strongbox furniture having bypassed numerous pitfalls on its way to Russian market would smoothly pass this resolution too?

Money down the British drain

Lobby is an English word came to our everyday vocabulary from the same country as Strongbox products. Literally, it means backrooms. So, if long-established players of the Russian furniture market say that interests of MCS are lobbied at the top level, they mean backrooms of defense ministry or even the Kremlin's ones.


Extract from RSM Tenon documents. Central Navy Portal
As was told Central Navy Portal by an insider, after the Serdiukov's resolution representatives of Russian party visited Strongbox plant in London. They were satisfied. The next step for MCS is certification test normally held by the Elektropribor Scientific and Research Institute. Planting of metal furniture in Russian warships will be possible only after issuing of appropriate certificate. By the way, inevitability of Strongbox coming to Russia is indirectly proved by the recent appointment of MCS director. This post was given to such influential man as Mikhail Motsak Vice Admiral retired, Hero of Russia, and ex-assistant of Presidential Envoy to Northeastern Federal District.

Thus and so, the resolution issued by Anatoly Serdiukov is being implemented slowly but surely. But who will be finally on velvet?

British businessman Stephen Edmunds will definitely get his share. His company will be safely reincarnated once again, obtain new promising contracts, and RMS Tenon meanwhile will shut down SMF as a bankrupted company. The London Gazette will mention that event in two lines.

Multimillion contracts will certainly settle in budget of Stronghold's Russian dealer, MCS. Dozens of Russian ships will be turned into "armorclads". At least inside, if not externally.

Once Marine Complex Systems really have high-ranking godfathers, the latter ones could triumph, too. Their aesthetic sense will no longer be insulted by scruffy cabins of Russian ships, and personal material wants will be surely satiated as well.

Finally, everyone will be satisfied. Except one thing. Will Russia's interests as sea power be respected in the game that is kicking off? Doesn't it look like a sort of a bad tradition when the second billion of 4-trillion defense budget's rubles trickles westward to the detriment of domestic manufacturers?