Russia?s big two to co-operate

Russia?s two largest shipbuilders are joining forces after years of rivalry in an effort to rationalize shipyard facilities in a shrinking market. St. Petersburg-based Baltiisky Zavod, builders of warships for more than a century, will withdraw from defence contracts and concentrate on building commercial ships while rival Severnaya Verf will focus on military vessels.

The agreement comes as the industry, weighed down by over-capacity from the former Soviet times, is trying to restructure to fend off foreign competition. The deal between Baltiisky and Severnaya is valid for five years.

Last year Baltiisky completed a $1 billion contract for the delivery of three frigates to the Indian navy and is fully booked with civilian contracts until 2008. Baltiisky?s expertise and capacity will come in handy if Severnaya wins a tender for three more frigates for India. The two yards will also co-operate in a bid to win a contract to develop and produce a new frigate for the Russian Navy later this month.