Russia may impose sanctions against EU shipbuilders

Dmitry Medvedev, Russia’s Prime Minister, said that after the ban on imports of agricultural products from western countries Russia is “potentially ready to introduce protective measures” for its national shipbuilding. He said that “it should be done sensibly,” because the government “understands the importance of cooperation in this area and adequately evaluates its own capabilities.”

The range of possible measures is very wide, from the growth of tariffs for various types of finished industry products, to a direct ban on their supplies.

In the meantime, an official spokesperson of the Russian Ministry of Industry and Trade said that closure of the Russian market for the supplies of on-board equipment from Europe will be a major protective measure of the Russian government in the field of shipbuilding.

According to him, the EU has closed the seller’s market for Russia, while Russia is ready to close the buyers’ market for EU companies, which, according to him is more important, as at present up to 40% of the world’s new shipbuilding capacities stay idle.

At the same time sources in USC, (which asked not to mention their names amid the fears of dismissal, similar to recent dismissal of Russia’s deputy minister of economic development for critics of state measures) are not so optimistic.

According to them, introduction of customs duties on the supplies of on-board equipment from abroad may have a negative impact on USC and will threaten the implementation of many investment projects by the company and in particular the renewal of its fleet.

They added that imposition of mirror-image sanctions against Russia could have a negative impact, primarily on Russian civil shipbuilding.

According to sources at USC, if the situation in military shipbuilding remains quite good, as Russia’s import dependence in this segment is small, then the situation in civil shipbuilding remains more complex, as the share of foreign components in the industry, particularly offshore marine facilities and equipment, exceeds 70%.

In addition to the imposition of a ban on the imports of foreign on-board equipment to Russia, there is a possibility that local government may impose a ban on local shipping companies building merchant ships for EU customers, despite the fact that, so far, the number of orders has been small.

Sources in USC added that the Russian shipbuilding industry will find it extremely difficult to operate without technological cooperation from foreign companies, “especially due to already imposed Western sanctions for the supply of equipment for offshore operations, that could jeopardise implementation of some large-scale offshore projects by Russian companies.”

This is reflected by statistics, as the present share of imported components, primarily from the EU, in offshore construction can reach 70%-80%, and these are key components such as drilling and pumping equipment, and control systems.