Commercial shipbuilding in Russia is gradually returning to the Soviet times, reflected by its ever growing reliance on defence orders and little work from the merchant sector.. In 2012 defence orders accounted for two-thirds of revenue of domestic shipyards, equivalent to 90 billion rubles. ($3 billion), which is three times more than in 2011. At the same time revenue from commercial shipbuilding fell by 16%, compared to 2011.
The last decade has seen very slow growth for Russian commercial shipbuilding despite a strong legislative base, recently underpinned by the existing state programme which can be translated as ‘Of the development of Shipbuilding’. This programme, due to last until 2030, was developed by the Ministry of Industry and Trade and the Krylovskiy State Scientific Center. The total value of the programme is some 605.3 billion rubles ($20 billion), of which 337.9 billion will be allocated from the state budget, the rest from the private sector.
The commercial part of the state program consists of five sections, including ‘Development of civil maritime and river engineering’, a 90.3 billion ruble initiative to form a scientific and technical base for universal platforms for building commercial vessels.
According to Minister of Industry and Trade Denis Manturov, the programme will help expand the national fishing fleet, encourage the building of ships for the Northern Sea Route, the development of the national sea shelf, and inland shipbuilding.
The last 15 years have been lean ones for Russian merchant shipbuilding , the majority of the few orders received being for single state-assisted contracts including emergency response vessels, environmental and port services, plus a few projects for major oil and gas companies. The number of such contracts has not been sufficient to save the yards, the majority of which have teetered on the brink of bankruptcy. The focus has always been on warships, a situation which has not changed since the Soviet days – in fact the collapse of the Soviet Union has brought about a decline in naval shipbuilding, which has not been matched by a move to the commercial sector.
According to Dmitry Mironenko, vice-president of United Shipbuilding Corporation, Russia’s largest shipbulilder group, commented: “Despite the efforts taken, by the government for the development of commercial shipbuilding in recent years , the main problem of the industry still remains the technological gap with its Asian, and especially EU rivals, which has grown with the increase of tonnage of ships under construction. The current level of depreciation of fixed assets in the industry is still around 70% with the average age of the industry’s production equipment is 20 years. The situation is aggravated by the lack of high-tech shipboard equipment and the technologies for its production. This means that the majority of shipboard equipment for domestic shipyards is currently imported from abroad. Finally, rapid development of the industry is prevented by low productivity of the domestic shipbuilding."
Government initiatives to provide  state support for Russian shipping and shipbuilding, by cutting production costs at domestic shipyards and reducing payback period for locally-built ships, have proved ineffective; and neither have amendments to taxation, labour codes, shipping and water transport regulations. Most of the amendments were aimed at supporting ship operators, e.g. tax relief on Russian built and registered vessels lasting until 2027.
At the same time, the Russian government is aware of the need to close the  technological gap between the Russian yards and Western and Asian competitors, hoping to establish joint ventures with China and South Korea, leading to technology transfer and improved quality of Russian ships. Such agreements to establish joint production for ships and marine equipment were recently signed between United Shipbuilding Corporation and DSME and STX in Korea, Yantai Raffles of Singapore, DCNS of France, the Finnish Wärtsilä group and Saipem in Italy, which are expeted to result in the establishment of at least three shipbuilding clusters in Russia during the next few years.
One anticipated development will be Zvezda, at Bolshoi Kamen, in the Primorye Territory (Russia’s Far East), for large ships up to 300,000dwt. At Primorsky Krai, Yantai Raffles is involved in developing the Vostok-Raffles» shipyard in Five Hunters Bay, focusing on offshore rigs. The New Admiralty shipyard, on Kotlin Island, St Petersburg, is being developed  by United Shipbuilding Corporation, to build ships up to 200,000dwt. Russian President Vladimir Putin is closely involved in all these initiatives.
The investment in shipbuilding is being matched by plans to abolish import taxes and duties on marine equipment imported for Russian-built ships, with a view to encouraging a Russian high-tech marine machinery and equipment industry. This will be backed by the establishment of national design engineering bureaus.
According to Alexander Sergeyev, head of the Russian Maritime Register equipment department, until recently Russia mainly concentrated on small ship engines up to 100kW and secondary equipment. He expects this to change as the industry modernizes and shifts to more high-tech equipment.