Tag Archives: Admiralty Wharves

Dyachkov’s Interview

Andrey Dyachkov (photo: RIA Novosti / Sergey Safronov)

As General Director of both Sevmash and TsKB MT Rubin, Andrey Dyachkov’s a pretty significant individual when it comes to submarines.  What follows are highlights from his RIA Novosti interview last Friday.

Some blurbs have been published, but one frankly hasn’t had time to see if they captured the importance of what Dyachkov said.  Hence this summary.  It has less elegance (or perhaps fluff) than you may be accustomed to reading on these pages.

Dyachkov said the following:

  • Sevmash and the Defense Ministry signed a contract for the modernized Yasen, or Yasen-M this year.  It will be five units; Severodvinsk plus five.  Severodvinsk will be delivered next year; there were problems with some components obtained from suppliers and the Kalibr missile system needs to complete state testing.  About six months are needed for all this.
  • This year’s huge contract problems were a result of a changed Defense Ministry approach toward price formation Sevmash wasn’t ready for.  But times have changed, and Sevmash recognizes money has to be used more effectively, and ways have to be found to cut production expenditures.
  • Rubin has a contract to design the modernized proyekt 955, Borey, the Borey-A.  The contract should be signed by early 2012.  The lay-down of the first improved Borey will happen next year, and Saint Nikolay is still the working name for the first unit.  No word from the Sevmash chief on the final number of boats until after the contract is signed.  They’ve started laying down Saint Nikolay, but the official ceremony’s still to come.
  • Seventy percent of sub costs are reportedly to pay suppliers.  The main thing is getting them to reduce the cost of their products.  The Defense Ministry might even consider foreign component suppliers for some SSBN components.
  • Sevmash will take on construction of two diesel-electric proyekt 636 from Admiralty Wharves.  This will lighten the workload of the latter, and use excess capacity at the former.
  • Severnoye PKB has a contract to figure out how to modernize Kirov-class CGN Admiral Nakhimov (proyekt 1164, Orlan).  First and foremost, it needs new missiles (Kalibr and Oniks) to replace its Granit.  They are talking only about Nakhimov at this point.
  • Sevmash won’t be repairing CV Admiral Kuznetsov in 2012.  The shipyard is prepared to build a future carrier.
  • Modified Typhoon-class SSBN Dmitriy Donskoy will be kept active at the White Sea Naval Base for sub-on-sub trials of new boats.  Northern Fleet subs won’t be diverted for this task.
  • KB Malakhit has developed repair and modernization plans for the Akula-class (Proyekt 971, Bars).  Money’s been allocated and Zvezdochka will do the work. 
  • Russia may offer up the Amur-1650 diesel sub in next year’s Indian tender.  It could have air-independent propulsion, but Russia doesn’t seem really high on the idea.
  • They want to test Proyekt 677 Lada and its sonar in deeper waters next year.

Perhaps the Borey and Yasen mods reflect the problems of restarting construction that had been dormant (or at least very slow) for a long time and of using newly-made components rather than older ones.

The GOZ Last Week (Part I)

Let’s start with the news.  In short, Defense Minister Serdyukov told the press all GOZ-2011 contracts, except ones with OSK, were signed.  But most news outlets concluded he failed to meet Prime Minister Putin’s August 31 deadline for finishing the contracting process.

ITAR-TASS reported the Defense Ministry signed its fourth contract with OSK on August 29.  It was with Baltic Shipbuilding Factory “Yantar” for three Proyekt 11356M frigates.  Kommersant reported others are with Admiralty for three Proyekt 636 diesel-electric submarines and with Zvezda Shipyard in the Far East for nuclear submarine (probably OSCAR II-class) repairs and modernization.

But the largest and most important contracts with Sevmash for Proyekt 955 Borey-class SSBN and Proyekt 885 Yasen-class SSN production are still not signed.  The contract is supposed to cover two of the former and one of the latter that are already (or almost) complete.  Kommersant says the contracting delay means a fourth 955 and second 885 won’t be laid down until sometime in 2012.

ITAR-TASS concluded there are still differences over pricing although there is progress in the negotiations.  The wire service writes that Sevmash refuses to make concessions taking below a minimum profitability level, while the Defense Ministry calls price increases unjustifiable, and says it will only pay for concrete items regardless of the producer’s profitability.

On September 1, ITAR-TASS reported Serdyukov’s announcement that, on the whole, the Prime Minister’s order to conclude all GOZ contracts had been fulfilled.  It provided some choppy, weaseling quotes from Serdyukov:

“We are reprogramming for other requirements – precision weapons mainly, aviation, air defense . . . some suppliers because of some obstacles can’t provide their products.  . . . now we’re making changes – on the order of 30 billion [rubles].  . . . in essence, this is a formality  . . . .  Essentially, we’ve been through the entire agreed part.  The signing itself occurred yesterday-day before yesterday.  Only the United Shipbuilding Corporation contract remains.  Perhaps that’s all.”

Kommersant added Serdyukov’s comment that:

“We, unfortunately, can’t accept the figures which industry gives us.  For the most part, they are simply unjustified.”

Kommersant’s sources maintain, in addition to OSK, contracting with OAK and MIT remains incomplete, and no one’s willing to guess when this still-difficult process will end.

On September 2, Kommersant’s source said part of MIT’s contracts are done, but it would be premature to say the process is complete.

ITAR-TASS added that Sevmash’s contract is now supposed to be signed in mid-September.  The factory reportedly will agree to current prices for its submarines in exchange for some kind of “coefficient” to offset their rising costs starting in 2013.  The wire service also claimed there are now 6 of 13 OSK contracts signed.  And it put the cost of a Borey-class SSBN at a somewhat hard-to-believe 23 billion rubles.  OAK and MIT sources also told ITAR-TASS their contracts aren’t complete.

Vedomosti cited Konstantin Makiyenko on long-term submarine production costing 500 billion rubles.  If that’s eight Borey- and eight Yasen-class boats, it’s a $17 billion contract, basically $1 billion per submarine.  Thirty billion rubles a boat is a lot closer to 23 billion than the 47 or 112 billion that Serdyukov complained about in July.

Despite indications to the contrary, one has to wonder if Serdyukov isn’t very slowly winning his battle with the OPK.  But ultimately, it’s hard to say before we see what gets delivered, when, and how good it is.

Latest on GOZ Woes (Part II)

To review this week . . . Prime Minister Putin’s current deadline for completing GOZ contracts is August 31, but it’s unlikely to be met, even by loyal Deputy PM and OSK Board Chairman Igor Sechin.  Deputy Finance Minister Siluanov said Defense Ministry contracts are being made on credits and government-backed financing rather than cash.  Putin said the price tag for GOZ-2011 is 750 billion rubles, but 30 percent of projected procurement still isn’t covered by contracts as the final third of the year begins.

How did the government, Defense Ministry, and OPK arrive at an August 31 deadline that’s unlikely to be met?

The latest round of this year’s GOZ woes started in early July when MIT General Designer Yuriy Solomonov told Kommersant that GOZ-2011 was already broken, and Russia’s strategic missile inventory is not being renewed as necessary.  He said there’s no contract for the RS-24 / Yars ICBM, and the late arrival of money makes it impossible to salvage 2011.

President Dmitriy Medvedev responded by calling Defense Minister Anatoliy Serdyukov on the carpet.  According to RIA Novosti, he told him:

“Sort out the situation.  If there’s information that the state defense order is broken, it’s true, organizational conclusions are needed in connection with those who are responsible for this, regardless of position or rank.”

“If the situation is otherwise, we need to look into those who are sowing panic.  You know how according to law in wartime they dealt with panickers — they shot them.  I’m allowing you to dismiss them, do you hear me?”

RIA Novosti reported Serdyukov’s opinion on the “wild growth” in the price of military products, especially from MIT and Sevmash.  He said MIT is asking 3.9 billion and 5.6 billion rubles respectively for Topol-M and Yars ICBMs.  Serdyukov put GOZ-2011 at 581 billion rubles [different from Putin's figure!], and added that only 108 billion, or 18.5 percent, was not yet under contract.  He said everything would be done in 10 days.

At virtually the same time, Deputy PM and VPK Chairman, Sergey Ivanov told ITAR-TASS 230 billion rubles were not yet contracted out.  OSK piled on Serdyukov, claiming contracts for 40 percent of the Navy’s share of the GOZ weren’t finalized.

In late July, it looked like Northern Wharf (which reportedly produces 75 percent of Russia’s surface ships, and is not part of OSK) might be made into an example for other “GOZ breakers.”  While prosecutors talked vaguely about the misuse of GOZ money, the shipbuilder’s representatives apparently mounted a vigorous defense, asserting that the enterprise has been right on time, even though it’s underfinanced by the Defense Ministry.

Main Military Prosecutor Sergey Fridinskiy said prosecutors uncovered 1,500 GOZ-related legal violations during the preceding 18 months.  He indicated there were 30 criminal convictions, and state losses amounted to millions of rubles in these cases.  The most egregious example  was the theft of over 260 million rubles given to OSK’s Zvezdochka shipyard to repair Kirov-class CGN Petr Velikiy.  Fridinskiy indicated the enterprise director and his close associates apparently had 40 million of the money in their own names.  Recall Fridinskiy earlier said 20 percent of defense procurement funding is stolen.

According to Rossiyskaya gazeta, Defense Minister Serdyukov claimed he was on the verge of signing contracts with MIT for Topol-M and Yars production.  Once again, he said all contracting would be finished in two weeks.

In mid-August, OSK enterprises Sevmash, Admiralty Wharves, and Zvezdochka said they would soon be forced to cease work unless the Defense Ministry signed contracts with them.  Putin, Sechin, and Serdyukov met and launched a special interdepartmental commission to set prices for the Navy’s remaining 40 billion rubles in GOZ contracts.  And, according to Kommersant, everyone was once again reassured that all contracts would be completed in two weeks.

And it’s not just all ICBMs, ships, and submarines . . . Kommersant wrote that the Defense Ministry eschewed contracts for 24 or more MiG-29K and more than 60 Yak-130 trainers at MAKS-2011.

So what does the mid-year GOZ picture look like? 

The president and prime minister have fumed and set a series of deadlines, not met thus far.  And the defense minister and deputy prime ministers have assured them they would meet each deadline in turn. 

More interesting, and somewhat unnoticed, is the fact that the prime minister and defense minister (among others) seem to be consistently working from different sets of numbers on the size of the GOZ, and how much has been placed under contract.  The GOZ hasn’t captured this kind of leadership attention at any time in the past 20 years.

Producers are being honest when they say late state contracts mean they can’t do anything (or at least what the Defense Ministry wants them to) in what remains of the year.

Picking up the pieces of GOZ-2011, and trying to put GOZ-2012 on a better footing will occupy the rest of this year.

Lost in everything is what will the Russian military get eventually by way of new hardware, and when will they get it?  And how good will it be?

GPV, Exports, and OPK Capacity

New Sub at Admiralty (photo: RIA Novosti)

This morning RIA Novosti reported on a familiar topic — the conflict between planned acquisition embodied in the State Program of Armaments, 2011-2020, and the Russian OPK’s capacity and capability to deliver it.  In this case, new diesel-electric submarines from St. Petersburg’s Admiralty Wharves.  Also familiar is one reason for the bind — a lingering priority on production for sale abroad.

A highly-placed OPK source tells the news agency that the GPV’s plan for conventional submarine deliveries might not be fulfilled due to Admiralty’s heavy load of orders.  The Russian Navy is reportedly supposed to get 20 new diesel-electric boats by 2020, and Russia also has ten foreign deliveries scheduled.  The OPK source notes that Admiralty has become a sole source for conventional subs, and he calls for shifting some sub production to Nizhniy Novgorod and Komsomolsk:

“In view of the large volume of new submarine construction for the Navy, and also for export, it’s essential to diversify production, utilizing, for example, the capacity of ‘Krasnoye Sormovo’ Shipbuilding Plant in Nizhniy Novgorod and the Amur Shipbuilding Plant in Komsomolsk-na-Amure.  Otherwise the state program in the diesel submarine construction area could be disrupted.”

RIA Novosti notes “Krasnoye Sormovo” built plenty of Soviet submarines, 280 in all, including 25 nuclear-powered ones.  Its last boat was a diesel-electric for China in 2005.  The plant also outfits Russian Navy and export subs with torpedo- and mast-related equipment.

The article also speculates that construction of French-designed Mistral helicopter carriers could be problematic if Admiralty is selected.  The shipyard is reportedly planning on new construction space on Kronshtadt for this reason.  The OPK source says Mistral would be Admiralty’s main concern, and occupy its main capacity and personnel.  So, he continues, it’s logical to send some orders (i.e. submarines) to other factories that have the capabilities.

Igor Korotchenko tells RIA Novosti “Krasnoye Sormovo” could provide extra buildingways if Admiralty can’t meet all its export contracts.  He says Admiralty is now building five subs under the GOZ, six for Vietnam, and:

“In the event new contracts are signed for sub construction with Venezuela and Indonesia there will be an obvious problem with inadequate buildingway space, and then a backup could be required.”

RIA Novosti notes rather dryly along the way that no Russian GPV has been fulfilled completely because of the country’s insufficient modern industrial capacity.

One wonders what, if any, work and investment would be required to bring “Krasnoye Sormovo” and Amur back into the sub-building business.

Nikolskiy on GOZ-2010 Failures

On Tuesday, Vedomosti’s Aleksey Nikolskiy wrote about breakdowns in last year’s State Defense Order (GOZ).  He notes that concern about failures started with Roskosmos, but it isn’t limited to that part of the defense sector.

Nikolskiy recounts Deputy Prime Minister Sergey Ivanov’s session with the Roskosmos collegium.  The space industry only produced five of 11 satellites specified in GOZ-2010, and 6 civilian launches were postponed.  The three GLONASS satellites lost to a “childish mistake” [in filling the rocket's tanks] cost 2.5 billion rubles.  But we’ll return to Russia’s space woes another day. 

A Defense Ministry source tells Nikolskiy GOZ failures are constant. 

Bulava SLBM delays kept Yuriy Dolgorukiy from entering service [remember the new SSBN itself had to return to Sevmash for work while it awaits the next Bulava test].  Introduction of the new Severodvinsk SSN has been put off until much later because of construction defects.  A United Shipbuilding Corporation (OSK) source tells Nikolskiy the Defense Ministry has stopped financing completion of a proyekt 677 diesel-electric sub, and work on two others laid down at Admiralty Wharves is in question.

Nikolskiy says the Air Forces’ assimilation of Yak-130 trainers is delayed by last March’s crash.  And there’s a serious delay in the testing of the Su-35 fighter, according to a Defense Ministry officer [Sukhoy was reportedly testing two Su-35s last August].  One enterprise manager claims reforms in the Defense Ministry purchasing system are holding back contracting for aircraft deliveries this year. 

CAST’s Konstantin Makiyenko says government and Defense Ministry criticism of industry for its GOZ failures could be followed by personnel changes.  In Roskosmos’ case, the situation is almost “overripe.”  But Makiyenko defends other Russian arms producers by noting that delivery delays are common even for U.S. and European manufacturers.

Tender for Helicopter Carriers May Just Be Formality

Mistral Schematic

Kommersant reports today that United Shipbuilding Corporation (OSK) has gotten the Defense Ministry’s permission to hold an open tender for procurement of helicopter carriers.  The paper concludes the Defense Ministry is refraining from a sole-source purchase of the French Mistral, and will consider similar proposals from OSK’s shipyards.  But the military [at least some military officials] haven’t hidden the fact that they prefer Mistral [but Defense Minister Serdyukov has always maintained they’ve been talking to other suppliers], so the tender could just be a formality. 

OSK President Roman Trotsenko says a special commission from the Ministry of Industry and Trade will conduct the tender, but details are sketchy.  A Defense Ministry source told Kommersant that, without a tender, a deal to buy a helicopter carrier [presumably Mistral] would be considered illegal.  So there won’t be a sole-source buy despite a year of government-to-government talks.

The paper reminds readers of OSK’s recent unsuccessful antimonopoly complaint in regard to the government’s consideration of Mistral.  Although the complaint was not reviewed, it must have had some impact on the decision to compete the helicopter carrier purchase.  Kommersant sources say OSK Board Chairman Igor Sechin also had something to do with it.

Trotsenko says far east shipbuilding plant ‘Zvezda,’ Petersburg’s ‘Admiralty Wharves,’ and Kaliningrad’s ‘Yantar’ will bid for the ships.  ‘Zvezda’ already has a joint venture in place with South Korea’s Daewoo – builder of the Dokdo helicopter carrier.  The OSK President says ‘Admiralty’ and ‘Yantar’ might work with ‘Northern’ shipyard or a foreign builder. 

Kommersant has a letter sent from Sechin to Prime Minister Putin this spring saying not only is Dokdo an alternative to Mistral, but Dutch and Spanish helicopter carriers are as well.

Trotsenko says OSK yards can build a helicopter carrier in 30 months for $500-700 million against a Mistral pricetag of €420-680 million.

Kommersant concludes the tender won’t end the conflict between OSK and the Defense Ministry.  Mistral will remain the latter’s priority.  The paper’s sources don’t know if the military wants to buy Mistral itself or place an order for a new unit in a French shipyard (STX).  OSK hasn’t been able to arrange a cooperative agreement with STX.

Mezhprombank-controlled ‘Northern’ and ‘Baltic’ shipyards will participate in the tender according to a representative of the bank. Kommersant’s sources think Mezhprombank, its owner Sergey Pugachev, and shipyards are the favorites among Russian contenders.  Pugachev was an early supporter of buying French, then building other units in his shipyards.  And, according to Kommersant, the Defense Ministry supports Pugachev.

Alongside Pugachev and Mezhprombank, OSK feels its chances to win the tender aren’t great.  Moscow Defense Brief analyst Mikhail Barabanov also says Mezhprombank yards are the favorites to build Mistral in Russia.  Such a deal’s been reached at a political level between Paris and Moscow, so the tender might just be a formality.  CAST’s Konstantin Makiyenko agrees.  But he thinks Mistral orders will go to ‘Baltic,’ since ‘Northern’ is loaded with frigate and corvette orders.  Meanwhile, OSK would like to buy both yards from Mezhprombank, but the sides haven’t reached agreement on a price.