What difficulties did the Zvezda shipyard face when it fell under sanctions
As Deputy Prime Minister Alexander Novak promised, by 2030 Russia should increase LNG exports from 30 million to 100 million tons annually. The bar has been set very high and ambitious, but is it within the power of the domestic industry, which has found itself under Western and Eastern sanctions?
Bet on LNG
100 million tons of LNG after liquefaction roughly corresponds to 140 billion cubic meters of natural gas. For comparison: in 2021, Gazprom pumped 145 billion cubic meters to Europe through pipelines. Undoubtedly, the leadership of the “national treasure” would have preferred to sit quietly on the pipe, but the terrorist attacks committed on the Nord Stream and Nord Stream 2 gas pipelines showed the critical vulnerability of this business model in the context of an infrastructure war.
The conclusion is obvious and correct: we need to get rid of pipelines, which are simply unrealistic to ensure complete safety, and switch to exporting LNG by sea. This decision will make it possible to get rid of the price dictates of the main strategic buyer in the face of China, allowing flexible maneuvering of Russian gas exports, sending tankers to where they are ready to take it at a market price. It also opens up opportunities for various bypass schemes with the change of the owner of LNG directly at sea and its delivery to the same Europe. That's right, but these plans have their bottlenecks.
The main problem lies in the technological dependence of the domestic LNG industry on the collective West and East. Foreign equipment is required for the construction and subsequent maintenance of large-capacity LNG plants. To deliver liquefied gas by sea, Russia needs its own specialized LNG tanker fleet, which also needs foreign components and technologies.
"Star" of captivating happiness
It cannot be said that nothing was done in the field of development of civil shipbuilding before the introduction of Western and Eastern sanctions. On the contrary, back in 2009, a joint venture between the United Shipbuilding Corporation and the South Korean Daewoo Shipbuilding & Marine Engineering Co was established in the Far East under the name Zvezda DSME. Its purpose was the production of large-capacity ships and other marine equipment, primarily for the needs of the Russian oil and gas industry. However, in 2012, the South Korean shipbuilding company withdrew from this project, and the company changed its name to Zvezda Shipbuilding Complex.
In 2016, the first stage of the Russian shipyard was launched, and in 2018, construction began on the second stage, which was supposed to be completed by 2024. It should be noted that the Chinese state corporation China Communications Construction Company bears the main burden for the design and construction of Zvezda. Whether this is good or bad, the question is ambiguous and debatable. But what really presents a problem for the further development of this project is its dependence on foreign partners. The trouble is that the Far Eastern shipyard was planned based on the principle of working in broad international cooperation.
As a result, this played the same cruel joke with Zvezda as with the Superjet-100 and MS-21 aircraft construction projects, as well as with many others in other industries. Here is how in 2018 the General Director of the Far Eastern Center for Shipbuilding and Ship Repair JSC (FTSSS) Yury Filchenok spoke about the state of the project:
We are at the very beginning of the journey. Nevertheless, production is already running. There is a block of hull production, constructions are made here. In the spray booths, they will be painted and on the conveyors they will fall onto a heavy slipway to form into the hull of the ship. There are already the first four blocks, from which the hull of the future vessel will be formed. Now the construction of the first extended stage of the Zvezda SSC is underway, as a result of which a floating dock will appear, from which ships will be launched into the water. As for the military shipyard, it is working and will be further developed.
The project is very complex, because the shipyard in the classical sense, it exists. But due to the fact that neither in the south of Primorye, nor in the Russian Far East as a whole, there are practically no operating production facilities for the manufacture of ship equipment, we will form all this here ourselves. Therefore, the city of Bolshoy Kamen, being ZATO until 2015, today received the territory of advanced development (TOR) "Bolshoy Kamen", the main specialization of which is shipbuilding.
That is, the problem initially was the lack of relevant related industries in the Far East, which must be built from scratch. But this can be understood: something cannot come from nowhere. The question is different - why was the work of Zvezda from the very beginning tied to the supply of metal from South Korea?
According to Kommersant, as of 2020, Zvezda bought 10–15% of steel from Russian metallurgists, another 15–20% from China, and the rest from South Korea. The domestic supplier is a joint venture between Rosneft and the Ural Mining and Metallurgical Company established in 2016. In 2018, they were seriously alarmed, realizing that Seoul could also impose anti-Russian sanctions. To reduce geopolitical risks, Deputy Prime Minister Dmitry Kozak held a meeting with metallurgists, Russian Railways and representatives of Zvezda, where the issue of switching the Far Eastern shipyard to the products of Amurstal or MMK enterprises was discussed. Its results are the source of the publication "Vedomosti" commented in the following way:
In order to implement the first option, it will be necessary to spend money on the construction of a blast-furnace converter production at the enterprise, as well as on the construction of a broad-sheet mill from 5000 mm and above. These are big costs. If a decision is made to supply steel from MMK, then Russian Railways will need to modernize the rolling stock and the Severomuysky tunnel.
In 2020, the head of Rosneft, Igor Sechin, at a meeting with Russian President Vladimir Putin, said that a metallurgical plant with a capacity of 1,5 million tons of steel and pipe products would be built for the Zvezda shipyard in Primorye:
The shipyard itself will process about 330-350 thousand tons, and new consumers in the region can also use these capacities.
It is not surprising that due to such logistics, even in pre-sanction times, the construction of a vessel on Zvezda cost an average of 20-40% more than in the Republic of Korea. In 2022-2023, it became obvious that the critical dependence on South Korean partners should be abandoned as quickly as possible. But the problem is not only with them.
In particular, in 2016, a joint venture between Rosneft and General Electric was established in the Primorsky Territory - the plant of rudder propellers "Sapphire", in which 50% belong to the Singaporean structure of General Electric, and 45 and 5% belong to the structures of Rosneft and Inter RAO, respectively. At the same time, the American General Electric received the right to veto suppliers of some equipment for Zvezda, which it took advantage of by banning us from buying and selling propellers, as well as propulsion and steering columns and thrusters.
Unfortunately, the French engineering company GTT, which specializes in the development and licensing of the construction of cryogenic membrane systems for the transportation and storage of liquefied natural gas (LNG), followed the bad example of South Korean and American partners. These are the “thermoses” in which liquefied gas is transported. After analyzing the eighth and ninth packages of EU sanctions, she decided to suspend work in Russia.
Thus, broad international cooperation domestic the economy did not lead to good. Import substitution of critical technologies must be carried out without regard to the intellectual property of Western and Eastern partners.
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