Difficult times ahead for Russia’s USC

USC is likely to face problems because of the sanctions imposed by the West on the country and some of Russia’s leading banks, which may result in the revision of their credit portfolio and the reduction of lending to the national shipbuilding industry.

USC’s present overall debts are estimated at about RUB150 billion (USD$4,5 billion) and the company plans to continue raising funds for development. However, the sanctions could seriously restrict the company’s access to low interest loans from Western banks.

At the same time there is a possibility that the company may even face difficulties obtaining loans in its own country if sanctions are imposed on Russian state-owned banks, such as Sberbank and VTB, which could cause them to revise their credit portfolios, favouring projects with shorter payback periods than offered by shipbuilding.

Such a possibility has caused Alexey Rakhmanov, newly appointed USC president, to raise concerns. According to him, the lack of funds could jeopardise USC’s reorganisation plans, which involve a shift to a matrix structure for the company from regional distribution of shipyards.

Mr Rakhmanov adds that the lack of credit could affect a number of major investment projects, primarily in merchant shipbuilding, which require participation by foreign partners. For example, several projects concerning the St Petersburg Baltic Plant, Northern Shipyard and Admiralty Shipyards could be affected. All of these were expected to become centers of Russian commercial shipbuilding, and to introduce large-block shipbuilding practices, with possible assistance from South Korean shipbuilders.

USC analysts say that much will depend on the future situation in the Russian oil and gas sector and the planned implementation of a number of large offshore projects, such as the Shtokman natural gas field in the northwestern part of the South Barents Basin. However, the outlook for military shipbuilding looks more promising, following recent announcements of plans for massive rearmament of the Russian navy.