Page 111 - RusRPTMar19

● Ships
Russia’s Ministry of Transport asks from the budget RUB98bn for the construction of non-nuclear icebreakers and special vessels. The Ministry of Transport has prepared amendments to the state program “Development of the transport system”, which the government adopted in December 2018. To ensure year-round operation of the ports of the Far Eastern and North-Western basins ice thickness up to 2 m RUB7.3bn each. For the same purposes, the ministry is asking for the construction of two auxiliary icebreakers with a capacity of 12–14 MW (RUB6.5bn each) and a port icebreaker with a capacity of 6–8 MW for RUB5.5bn. The disbursement period is 2019–2024.
The Ministry of Transport has launched a campaign to increase the share of exports shipped on Russian vessels from 2% to 50%. It plans to do so by mandating that exporters who receive state support—either SOEs or companies receiving investment financing from the budget—conclude long- term contracts with domestic shipping companies who fly the Russian flag. MinTrans says its goal is to increase the competitiveness of the Russian fleet and ensure economic security by reducing dependence on foreign shipowners. Don’t expect this lofty goal to pan out anytime soon. Even the head of a lead Russian shipper has called the 50% quota “figurative.” Russia simply does not have enough ships in its fleet. In five years, with a concerted effort, 20-25% may be possible. Conversely, state-owned Sovkomflot could transfer its vessels currently flying Liberian and Cypriot flags, over 130 ships, to the Russian fleet. But that’s not really the point, now is it?
Tanker orders for Novatek's Arctic LNG project for the Zvezda shipyard may be subsidized from 2020 through 2036 so as to match prices offered by South Korean competitors, per reports from Minpromtorg. The subsidies speak to how inefficient production in Russia is for its most important strategic sectors, as well as how Rosneft - largest shareholder in the Zvezda shipyard - is forcing Novatek to pay it for tankers. The timeline on the table for subsidization is also quite long, and a precedent that other industries will undoubtedly look to when lobbying for greater spending thanks to the new $49/barrel of oil breakeven point for the budget. Expect the policy to be little more than a payoff for Rosneft, and to do very little for import substitution writ large.
● Subsidies are meant to match the price differential between production at Zvezda and production in South Korea, traditionally a dominant supplier of ships for Russian firms. However, no figures for subsidies have been offered yet by the relevant ministries.
● Experts estimate that costs at Zvezda are up to 50% greater, and calculate that subsidies will cost at least 10bn rubles ($153mn) a year.
● Zvezda is currently contracted to build 37 tankers, 26 of which have been ordered by Rosneft alone.
● Rosneft leads the consortium that owns and operates the Zvezda complex
9.1.13 Other sector news
Russian generics supplant foreign drugs. In 2018, the volume of imported pharmaceuticals by monetary value increased by just 1.1% year-over-year.
111 RUSSIA Country Report March 2019 www.intellinews.com