Three hundred years ago, Russian workers were busily rushing to create the 25-galley fleet ordered by Peter the Great. Within five months construction crews produced a fleet of warships that clinched the country's first sea battle and launched it into the ranks of major naval powers.
In the last 20 years of the Soviet Union, there was a massive build-up of the navy under Admiral Gorshkov, aimed to make the Soviet Union capable, in military parlance, of "power projection" thousands of kilometers away from the nation's shores. Shoals of vessels supposedly for civilian purposes, such as research ships, tended to the warships in far-flung oceans. Beneath the waves lurked the world's largest fleet of submarines, many of them nuclear powered.
These days, the heirs to Russia's grand shipbuilding tradition face a daily struggle to stay afloat. Older warships are being sold for scrap, while construction and repair wharves in Russia's second city and biggest shipbuilding center are more often empty, or else busy producing whatever possible to stay alive -- including, in one case, literally the kitchen sink.
When the Soviet Union fell apart, orders for new warships dried up. As it takes about five years to build a major naval vessel, it is only now that the full impact of the end of the naval build-up is being felt in Russia's shipyards.
"This year, we're celebrating the 300th anniversary of the Russian Navy, but everything is being done only in halves," said Anatoly Strashuk, marketing director of the Vyborg Shipbuilding Factory. "Instead of supporting the industry, the government has done the reverse."
The collapse of the Soviet Union stripped away the Ukrainian shipbuilding cities, notably Nikolayev, where aircraft carriers and other major surface vessels were laid down. The shipyards in Murmansk have retreated to repair operations only, while Vladivostok's Dalzavod Shipyard has lost out even on this: Repairs for Russian ships in the Far East are now generally done in shipyards in Taiwan and Singapore.
Construction of surface vessels has been scaled right back, said Captain Richard Sharpe, editor of Jane's Fighting Ships. A new carrier has been commissioned into service, and one new nuclear-powered cruiser has been ordered, but little else.
Much of the Soviet naval build-up went into the submarine fleet. The Sevmash submarine complex in Severodvinsk, close to Arkhangelsk, became one of the world's largest shipyards, and there were other centers in Komsomolsk-na-Amur and at Nizhny Novgorod.
Severodvinsk is a survivor, one of the only navy yards to have naval work. The Russian navy continues to deploy some half a dozen of its nuclear powered submarines a year. Severodvinsk has also turned to production of offshore drilling platforms.
Attempts to sell surface warships abroad has produced few takers. Once again, the emphasis is on submarines, which have been ordered by China and Iran -- which Western countries decline to supply. Russia is happy to oblige, though only with diesel powered, not atomic, craft.
Given their technology and experience, Russian shipyards should have much to offer in making merchant ships.
"Shipyards have an enormous potential in Russia," said Borys Krejniuk, director of Russian and Polish projects for the Danish-based Poul Christensen shipping company. "They have skilled labor. They can build ships to Western standards."
But, in Russia's largest shipbuilding center, the mood is morose. St. Petersburg boasts four large shipyards -- Baltic Shipyards, Admiralteisky Shipyards, Severnaya Verf and Almaz, with a fifth, Vyborg Shipbuilding, close by. The shipyards once enjoyed prestige and patronage, laying down cruisers, destroyers, atomic submarines and icebreakers, but today they must make their way through the uncharted waters of defense conversion and the market economy, hoping to create a commercial niche that will keep them alive.
As he walks past posters praising Baltic Shipyards' progress during the 12th five-year plan, technical director Yevgeny Shanin points out some of the yard's prides and joys -- the Kirov-class cruiser Kalinin and the atomic icebreaker Sovietsky Soyuz.
Today there is plenty of time for Shanin and his colleagues to reminisce on past naval glories. The company has no government orders pending, or in sight. Admiralty Shipyards and Severnaya Verf each have one order apiece, although the Admiralty yards build diesel submarines for export. Almaz still produces small patrol boats for border guards, production that accounts for about half its overall output.
Vyborg Shipbuilding, down the coast from St. Petersburg on the Finnish border, is relatively well placed as it has long specialized primarily on the construction of semi-submersible platforms and rigs, mainly for oil drilling.
The other yards, faced with a lack of orders, have had no choice but to diversify. Almaz, a builder of smaller craft, now produces aluminum yachts, catamarans and hovercraft. Its experience in working aluminum has led it to look for orders building kiosks and street cleaning machines.
Both Baltic Shipyards and Severnaya Verf have chosen the path of holding companies, splitting their plants into sections that must fend for themselves. At Severnaya Verf, the most successful unit is busily putting out steel sinks, while another unit produces furniture. A new mini-port handles 1,000 containers a month.
Shipbuilding at the yard, however, is a different matter. In January, work was suspended and the employees put on temporary leave. Only 40 percent of them are now back at work.
"The sections not in any way connected to shipbuilding are doing the best," said Vadim Volostnykh, director of economic development for the shipyard, who feels the holding company structure is the best route. "Smaller firms are more flexible. It's easier for them to find partners."
This strategy may be helping the factory as a whole plod through its difficulties, but it does not bring much satisfaction to Bremer Vulkan, the German shipbuilder, itself in deep financial trouble, which holds 14 percent of the company and has brokered arrangements with an Austrian company that has ordered a total of six bulk carriers from the yards. "What do we need to be involved in building sinks for?" asked Wolfgang Eckhardt, the local BVV representative.
Another foreign investor is the Norwegian-based Kvaerner shipbuilding company, which holds 19 percent of equity in the Vyborg yards, with an option for another 13 percent if it fulfills the conditions of the recent investment tender.
The state-owned Admiralty Shipyards seem to be no worse off than their privatized counterparts. Yury Uchayev, deputy chief of the shipyard's economic department, said "We looked at the issue of privatization in 1994. But we looked around at our neighbors and saw that privatization hadn't helped them all that much."
Russian shipping companies, such as the Baltic Shipping Company, are too broke to order ships, or, as in the case of the Vladivostok-based Far Eastern Shipping Company, prefer to order abroad.
The shipbuilding industry cannot rely on banks to help it ride the economic storm, as domestic interest rates are so high. "Western banks are ready to give us credit at their regular rates but demand guarantees from the government," said Shanin of Baltic Shipyards. "And that is very hard to secure."
"Once the finance problem is solved, [the Russian yards] could be a big threat to foreign shipyards," Krejniuk of the Poul Christensen company said.
But Russian price competitiveness is waning. According to Volostnykh, it is now cheaper to import steel from Germany than to buy Russian. Baltic Shipyards' Shanin said they try to keep their prices for bulk carriers 15 percent lower than prices in the Western market, to remain competitive.
"There's a lot of insecurity in what's going on now," said Vyborg Shipyard chief of sales and marketing Anatoly Strashuk. "[Investors] are weighing and judging what's going on."
In theory, there could be an international market for Russian-built cargo ships and tankers. While Bremer Vulkan is in severe financial trouble related to its yards in Eastern Germany, shipyards in Poland, with much lower costs, are doing well. Szczecin Shipyards, ranked among the top 10 shipyards in the world, has 55 orders lined up through 1998, mostly for large container vessels. During the past four years, it has launched 49 such vessels.
Experts have cited low costs and good construction quality as among the primary reasons for Poland's success in reviving its shipyards. The job was easier than it is in Russia: Soviet central planning generally allocated the building of commercial vessels to satellite states, while yards back home concentrated on naval ships.
Naval vessels tend to be slim with sharp prows, designed to cut fast through the water. Bulk carriers are broad and bulbous, but normally they can be built in the same yards, said Captain Sharpe of Jane's Fighting Ships. However, construction practices and technology can be quite different, with an emphasis in military design on damage control features and a much greater complexity.
Poland and other former Eastern Bloc countries were thus spared much of the pain brought about by defense conversion. "In Poland, Bulgaria and Romania, they had this experience in building commercial ships," Krejniuk said.
While shipyards in Asia rarely take more than one year to complete orders, Russian yards usually require twice as long.
Szczecin's major advantage over Russian yards is that it has managed to improve its efficiency and produce ships in nine to 10 months. "If St. Petersburg yards could build a ship in 10 months, they would have a line-up of orders easily," said one Western consultant, who asked not to be named.
Higher quality may be a reason for the long turnaround time. Russian naval vessels had a reputation for being well-built.
Industry structure is another reason. Russian shipyards are still used to doing everything in the construction process themselves. If they were to begin subcontracting, they could improve their efficiency and speed of construction.
Inefficient management may also be to blame. According to the Western consultant, shipyards often spend too much time and energy shopping around for the latest, state-of-the-art equipment rather than concentrating on improving management and labor practices.
"They need the equipment, but they really need to change the way they work," he said.
-- Simon Baker contributed to this article.
In the last 20 years of the Soviet Union, there was a massive build-up of the navy under Admiral Gorshkov, aimed to make the Soviet Union capable, in military parlance, of "power projection" thousands of kilometers away from the nation's shores. Shoals of vessels supposedly for civilian purposes, such as research ships, tended to the warships in far-flung oceans. Beneath the waves lurked the world's largest fleet of submarines, many of them nuclear powered.
These days, the heirs to Russia's grand shipbuilding tradition face a daily struggle to stay afloat. Older warships are being sold for scrap, while construction and repair wharves in Russia's second city and biggest shipbuilding center are more often empty, or else busy producing whatever possible to stay alive -- including, in one case, literally the kitchen sink.
When the Soviet Union fell apart, orders for new warships dried up. As it takes about five years to build a major naval vessel, it is only now that the full impact of the end of the naval build-up is being felt in Russia's shipyards.
"This year, we're celebrating the 300th anniversary of the Russian Navy, but everything is being done only in halves," said Anatoly Strashuk, marketing director of the Vyborg Shipbuilding Factory. "Instead of supporting the industry, the government has done the reverse."
The collapse of the Soviet Union stripped away the Ukrainian shipbuilding cities, notably Nikolayev, where aircraft carriers and other major surface vessels were laid down. The shipyards in Murmansk have retreated to repair operations only, while Vladivostok's Dalzavod Shipyard has lost out even on this: Repairs for Russian ships in the Far East are now generally done in shipyards in Taiwan and Singapore.
Construction of surface vessels has been scaled right back, said Captain Richard Sharpe, editor of Jane's Fighting Ships. A new carrier has been commissioned into service, and one new nuclear-powered cruiser has been ordered, but little else.
Much of the Soviet naval build-up went into the submarine fleet. The Sevmash submarine complex in Severodvinsk, close to Arkhangelsk, became one of the world's largest shipyards, and there were other centers in Komsomolsk-na-Amur and at Nizhny Novgorod.
Severodvinsk is a survivor, one of the only navy yards to have naval work. The Russian navy continues to deploy some half a dozen of its nuclear powered submarines a year. Severodvinsk has also turned to production of offshore drilling platforms.
Attempts to sell surface warships abroad has produced few takers. Once again, the emphasis is on submarines, which have been ordered by China and Iran -- which Western countries decline to supply. Russia is happy to oblige, though only with diesel powered, not atomic, craft.
Given their technology and experience, Russian shipyards should have much to offer in making merchant ships.
"Shipyards have an enormous potential in Russia," said Borys Krejniuk, director of Russian and Polish projects for the Danish-based Poul Christensen shipping company. "They have skilled labor. They can build ships to Western standards."
But, in Russia's largest shipbuilding center, the mood is morose. St. Petersburg boasts four large shipyards -- Baltic Shipyards, Admiralteisky Shipyards, Severnaya Verf and Almaz, with a fifth, Vyborg Shipbuilding, close by. The shipyards once enjoyed prestige and patronage, laying down cruisers, destroyers, atomic submarines and icebreakers, but today they must make their way through the uncharted waters of defense conversion and the market economy, hoping to create a commercial niche that will keep them alive.
As he walks past posters praising Baltic Shipyards' progress during the 12th five-year plan, technical director Yevgeny Shanin points out some of the yard's prides and joys -- the Kirov-class cruiser Kalinin and the atomic icebreaker Sovietsky Soyuz.
Today there is plenty of time for Shanin and his colleagues to reminisce on past naval glories. The company has no government orders pending, or in sight. Admiralty Shipyards and Severnaya Verf each have one order apiece, although the Admiralty yards build diesel submarines for export. Almaz still produces small patrol boats for border guards, production that accounts for about half its overall output.
Vyborg Shipbuilding, down the coast from St. Petersburg on the Finnish border, is relatively well placed as it has long specialized primarily on the construction of semi-submersible platforms and rigs, mainly for oil drilling.
The other yards, faced with a lack of orders, have had no choice but to diversify. Almaz, a builder of smaller craft, now produces aluminum yachts, catamarans and hovercraft. Its experience in working aluminum has led it to look for orders building kiosks and street cleaning machines.
Both Baltic Shipyards and Severnaya Verf have chosen the path of holding companies, splitting their plants into sections that must fend for themselves. At Severnaya Verf, the most successful unit is busily putting out steel sinks, while another unit produces furniture. A new mini-port handles 1,000 containers a month.
Shipbuilding at the yard, however, is a different matter. In January, work was suspended and the employees put on temporary leave. Only 40 percent of them are now back at work.
"The sections not in any way connected to shipbuilding are doing the best," said Vadim Volostnykh, director of economic development for the shipyard, who feels the holding company structure is the best route. "Smaller firms are more flexible. It's easier for them to find partners."
This strategy may be helping the factory as a whole plod through its difficulties, but it does not bring much satisfaction to Bremer Vulkan, the German shipbuilder, itself in deep financial trouble, which holds 14 percent of the company and has brokered arrangements with an Austrian company that has ordered a total of six bulk carriers from the yards. "What do we need to be involved in building sinks for?" asked Wolfgang Eckhardt, the local BVV representative.
Another foreign investor is the Norwegian-based Kvaerner shipbuilding company, which holds 19 percent of equity in the Vyborg yards, with an option for another 13 percent if it fulfills the conditions of the recent investment tender.
The state-owned Admiralty Shipyards seem to be no worse off than their privatized counterparts. Yury Uchayev, deputy chief of the shipyard's economic department, said "We looked at the issue of privatization in 1994. But we looked around at our neighbors and saw that privatization hadn't helped them all that much."
Russian shipping companies, such as the Baltic Shipping Company, are too broke to order ships, or, as in the case of the Vladivostok-based Far Eastern Shipping Company, prefer to order abroad.
The shipbuilding industry cannot rely on banks to help it ride the economic storm, as domestic interest rates are so high. "Western banks are ready to give us credit at their regular rates but demand guarantees from the government," said Shanin of Baltic Shipyards. "And that is very hard to secure."
"Once the finance problem is solved, [the Russian yards] could be a big threat to foreign shipyards," Krejniuk of the Poul Christensen company said.
But Russian price competitiveness is waning. According to Volostnykh, it is now cheaper to import steel from Germany than to buy Russian. Baltic Shipyards' Shanin said they try to keep their prices for bulk carriers 15 percent lower than prices in the Western market, to remain competitive.
"There's a lot of insecurity in what's going on now," said Vyborg Shipyard chief of sales and marketing Anatoly Strashuk. "[Investors] are weighing and judging what's going on."
In theory, there could be an international market for Russian-built cargo ships and tankers. While Bremer Vulkan is in severe financial trouble related to its yards in Eastern Germany, shipyards in Poland, with much lower costs, are doing well. Szczecin Shipyards, ranked among the top 10 shipyards in the world, has 55 orders lined up through 1998, mostly for large container vessels. During the past four years, it has launched 49 such vessels.
Experts have cited low costs and good construction quality as among the primary reasons for Poland's success in reviving its shipyards. The job was easier than it is in Russia: Soviet central planning generally allocated the building of commercial vessels to satellite states, while yards back home concentrated on naval ships.
Naval vessels tend to be slim with sharp prows, designed to cut fast through the water. Bulk carriers are broad and bulbous, but normally they can be built in the same yards, said Captain Sharpe of Jane's Fighting Ships. However, construction practices and technology can be quite different, with an emphasis in military design on damage control features and a much greater complexity.
Poland and other former Eastern Bloc countries were thus spared much of the pain brought about by defense conversion. "In Poland, Bulgaria and Romania, they had this experience in building commercial ships," Krejniuk said.
While shipyards in Asia rarely take more than one year to complete orders, Russian yards usually require twice as long.
Szczecin's major advantage over Russian yards is that it has managed to improve its efficiency and produce ships in nine to 10 months. "If St. Petersburg yards could build a ship in 10 months, they would have a line-up of orders easily," said one Western consultant, who asked not to be named.
Higher quality may be a reason for the long turnaround time. Russian naval vessels had a reputation for being well-built.
Industry structure is another reason. Russian shipyards are still used to doing everything in the construction process themselves. If they were to begin subcontracting, they could improve their efficiency and speed of construction.
Inefficient management may also be to blame. According to the Western consultant, shipyards often spend too much time and energy shopping around for the latest, state-of-the-art equipment rather than concentrating on improving management and labor practices.
"They need the equipment, but they really need to change the way they work," he said.
-- Simon Baker contributed to this article.
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