Russian Naval Views

Shipbuilding

The nature of the Russian armament industry has changed substantially over the past several years, and the naval shipbuilding business has changed with it. Orders have been reduced across the board, and elements of the former Soviet shipbuilding infrastructure have been split between several of the former republics. The net result has been a substantial slowdown in the pace of shipbuilding for the navy and the shift of some shipyards to non-naval work. In an effort to reori­ent the navy procurement system over the past year, the military hierarchy has de­veloped long-term naval shipbuilding plans, and the Ministry of Defense has identified the central pillars of the ship­building infrastructure that will be pre­served and supported. This reorientation fits into the larger plans of Andrey Kokoshin, the First Deputy Minister of Defense, who advocates using the most technically advanced military design and production enterprises as key elements of a more general Russian economic recov­ery. Some of the problems of the navy shipbuilding industry—many common to the military industrial complex in gen­eral—are to be addressed in this effort.

Central to the problems of the ship­building sector has been the rapid cut­back of state orders and the demand that the enterprises rely on self-financing for working capital. As state orders declined, the enterprises were forced to look for customers elsewhere and, as few had any experience in marketing or in acquiring outside funding, they found themselves trying to operate at a very small per­centage of their previous funding levels. High inflation has exacerbated the fund­' ing shortfall. Always required by the state to produce some quantity of “con­sumer goods,” many enterprises expanded production of these goods—but the state had taken care of sales and distribution in the past, and the enterprises, faced with doing it themselves, generally were un­able to adjust.

Examples of the disruptive effect of these problems abound. In the Northern Yard in Leningrad, General Director Yuriy Bokov observes, "The volume of Ministry of Defense orders was cut in half for us just in the past two years.” Among

the items now being produced in this fa­cility are “. . . dry cargo vessels, heat exchangers, electrodes, furniture, etc.” This is a typical example of the scale of the impact and of the seemingly unrelated nature of some of the consumer goods produced at these facilities. Bokov indi­cates that the move to produce more of these goods “saved” the enterprise, but the “production capacities working for de­fense are only 20% activated.” In similar fashion, Russian aerospace firms were asked to produce food-processing equip­ment as their contribution to “defense con­version.” Although such consumer pro­duction may provide employment, the nature of the skills required and the char­acter of the work is sufficiently different to cause some loss of skilled workers.

Another issue for the shipyards and other industrial enterprises was the im­pact of the cutbacks on their former sup­pliers. For the shipyards, this actually was somewhat less of a problem than in the aerospace industry, as many Russian ship­yards did a lot more of their own sub­assembly work in-house. Nevertheless, in some areas the supplier base was quite important. In electronics, for example, the impact on suppliers clearly is worrisome: “We are producing our potential, albeit not in the previous volume . . . but will our related armament people, instrument makers, and others preserve theirs? We are forced to give up their services due to the sharp reduction in finances com­ing from the Ministry of Defense.”¹

As in the United States, once the mar­ket is cut off, suppliers shift to other production in an effort to sell to a new market, or they go out of business if un­able to adjust. Recreating the supplier net­work is costly and time-consuming.

The large-scale downsizing of the Russian Navy also has meant fewer new- construction ships being built, almost across the board. The fewer state orders have, however, been spread among a smaller shipbuilding base, as some of the former Soviet yards are now in countries outside the Russian Federation. The Rus­sians indicate that they have lost about 30% of their military production infra­structure, and the reductions continue.

All of last year the navy received 28

new ships and submarines ... to re­

place 116 written-off naval vessels. Many of these had not reached the normal end of their service life. [More were] . . . written off . . . due to the absence of a ship repair facility and the impossibility of extending the ser­vice life of relatively new ships.^[1]

An interesting example of this phe­nomenon appears in an article in Trud in June 1993. It cites the enormous ship that has spent a good deal of time at the out­fitting quay of the Baltic Yard (Baltiyskiy Plant). The ship, the “Ural Command Measuring Complex,” is a “floating mil­itary computer center”—a one-of-a-kind ship in the Russian Navy. However, even though . . it is still very young, a bit more than two years old,” it already is laid up. There are no trained replacement crewmen for the ship, and there also is “no facility for its skilled servicing.”^[2]

First Deputy Minister of Defense Andrey Kokoshin advocates concentrating defense orders to save only the most technologically advanced and strongest enterprises—like this attack helicopter.

Similar examples can be seen across the entire fleet. In the Pacific, the carriers are laid up, with the Minsk retired after a relatively short service life. Elsewhere, the large nu­clear cruisers are facing the same condi­tions: “Why are our heavy nuclear cruis­ers laid up? Well, because they are not being repaired on time. There are not enough berths.”^[3] The Russians cite an insufficient basing infrastructure as the key deficiency. Even in port, ships had to steam all of the time, which led to pre­mature wear and tear. Repair therefore is needed more frequently, but the facili­ties for repair also are inadequate. Once out of its building way, “it will be ser­viced at military repair plants at which there is neither equipment, specialists of the proper class, or resources to do that.” It is interesting to look at the life cy­cles in the nuclear icebreaker fleet. These ships were built in the same facilities as the nuclear-powered cruisers, but the icebreakers’ life-cycle maintenance re­quirements have been addressed. In the icebreaker fleet there is little or no rota­tion of crew. Specialists have remained with the ships since they first became op­erational. In addition, repair facilities have been provided at the home port of Mur­mansk. Although not ideal, the facilities are “permanent and reliable.” The nuclear cruisers, which were built much more re­cently than some of the icebreakers, “are already ‘dead.’” The problem has been with crew rotation schedules and the lack of suitable repair and support infrastruc­ture and resources. The replacement crews do not have sufficient training or support to maintain the ships.

Economics also has had a major im­pact on the fleet. The problem is so acute that in July the Pacific Fleet in concert with the Maritime Kray Administration appealed to the Ministry of Defense for urgent financial aid. The Navy is in debt to the defense complex in the Pacific to the tune of 30 billion rubles, and “the ma­jority of enterprises serving the fleet are on the verge of a complete halt.”^{[4] 2 * 4 [5]} This is just a small part of the overall problem of financing. The Ministry of Defense owed military production enterprises a total of more than 400 billion rubles in July. Reportedly, it is unable to pay be­cause the Ministry of Finance, citing the budget yet to be approved by parliament, has not transferred the funds to the Min­istry of Defense’s account.

The lack of financing also has affected the trained manpower pool that works in Russian shipyards. As the shipbuild­ing sector has declined, many of its trained workers have begun to look for greener pastures. “Over the year [1992], 44,000 people have left the shipbuilding sector—more than any other sector of the defense industry.”^[6] The loss of skilled workers makes a bad situation worse.

In response to the problems, the Min­istry of Defense—in particular, Andrey Kokoshin, the First Deputy Minister of Defense—has laid out a new “military- technical policy.” Although aimed at re­vitalizing the overall military industrial complex, Kokoshin’s ideas clearly will apply to the shipbuilding sector. Rather than attempting to save every enterprise, Kokoshin intends to focus on key enter­prises—those with state-of-the-art tech­nological capabilities and some prospect of meeting world standards in production. The Ministry of Defense will concentrate defense orders with these enterprises, “doing everything possible to preserve the strongest collectives and high-tech production.”^[7] For example, all future nu­clear submarine production in Russia will be concentrated at the Severodvinsk Ma­chine-Building Enterprise, the large ship­building facility at Severodvinsk.

Kokoshin also intends that certain sec­tors of the defense budget be increased, “especially for [research, development, test, and evaluation] and for creating a [scientific and technical] reserve. Placing emphasis—and funding—on the scien­tific underpinnings of the defense sector will provide employment for these im­portant technical personnel, while help­ing to prevent their emigration or exodus to the private sector. For the navy, Kokoshin also believes that it is neces­sary to fit out the partially completed ships that are now on building ways. One of his highest priorities is the Kirov-class cruiser currently at the fitting-out quay in the Baltic Yard.

Kokoshin’s plans also address alter­natives to government funding. Among the potential funding sources he advo­cates are joint ventures with Western or Japanese firms in areas that may help Russian industrial recovery. Overseas sales of arms and raw materials such as oil also are seen as suitable ways to gain funding for needed military programs. The Russian arms bazaar is open for busi­ness, advertising almost any Russian weapon system and willing to sell to any­one with the cash to buy. This includes many frontline weapon systems, such as Su-27s being sold to China, MiG-29s for Malaysia, and submarines for Iran.

The implications of the Kokoshin ap­proach for the navy and military are rea­sonably clear. The decline in the military budget will be halted, at least in terms of research and development expenditures. Ships that have been partially completed will be pushed to completion as a high priority. The Russians clearly would like to include the second Kuznetsov-class air­craft carrier in this effort, but it remains to be seen if they will succeed. The re­cent agreement with Ukraine for the Rus­sians to “buy” the Black Sea Fleet and its bases by canceling Ukrainian debts may make this feasible.

Both the Ministry of Defense and the Russian Navy also have completed plans for the next five to ten years. These arms programs will foster more systematic management of the fewer defense pro­grams and will help support the Ministry of Defense’s arguments for funds within the Russian government. Reportedly, in these plans the product mix for the forces has been cut by a factor of three. For the navy, this means a much reduced number of ship classes in all categories under construction, reducing the associ­ated costs for tooling and the like, and reducing the logistics costs for support­ing the resultant fleet. This will mean a potential evolution in the Russian Navy to a couple of submarine types, a single general-purpose destroyer, a single frigate class and, reportedly, no new cruisers after the current construction is fitted out.

To some extent in the turmoil of the past seven years, the defense enterprises have been left to their own devices to survive. Kokoshin believes, however, that “You cannot bet on natural survival.”^[8] Al­though his plan will reduce the size of the defense industrial base, it will allow the strongest, most technically advanced elements to survive. In addition, joint ventures with the West will foster as­similation of new technologies that can be used in both the civilian and defense economies.

Finally, Russia’s emphasis on export­ing any products of the defense sector seems destined to have significant nega­tive fallout. The obvious impetus to weapons proliferation is one downside, and many in the West are unlikely to view such efforts with equanimity. The willingness of potential Western partners to participate in joint ventures with Russ­ian defense-related enterprises in the face of continued Russian sales of advanced weapons may decline—certainly West­ern governments may object.

Plans are not reality, of course, and the Russian Navy has a way to go before it overcomes the problems inherent in the economic and political changes of the past seven years—much less those it faces in the next seven. It also is not yet clear what priority the political leader­ship in Russia will assign to the Ministry of Defense’s plans and desires. Never­theless, key elements of the navy ship­building infrastructure seem likely to be protected and supported as the Russian Ministry of Defense shifts to its new ap­proach to procurement.