Sanctions work: Russian shipbuilding collapses due to lack of parts

Russian shipbuilding giant United Shipbuilding Corp. (USC) is running out of key engine parts, which will delay or even halt the production of tankers and ocean-going vessels it needs to transport oil and cargo, the Wall Street Journal reports.

Russian company executives say that the Russian shipbuilding sector is facing the biggest challenge since the collapse of the Soviet Union, with thousands of workers at shipyards and supporting industries expected to be laid off over the next year.

While state-owned USC has been under sanctions since 2014, its challenges of getting equipment and foreign specialists to install parts "took on a systemic character" after February 2022, a company spokesman said.

INFOline, an investment adviser in Russia, said that local shipyards last year delivered 20 percent fewer vessels than in 2021.

USC is building 59 cargo ships. It delivered 17 vessels in 2020 and 16 in 2021 but only four last year because rudder propellers made in Germany are no longer supplied, according to WSJ sources.

According to USC executives, it will take several years to replace imports with Russian-made parts, and "prospects for import substitutions are dim."

USC and Zvezda Shipbuilding Complex, another state-owned enterprise, are Russia’s two biggest yards in terms of orders. A steady customer for both Russian yards is state-owned tanker operator Sovcomflot, which is also sanctioned and was forced to sell over a third of its fleet and move its operations in Dubai.

The European Union and the United States have imposed a ban on Russian ships at their ports along with sanctions on tankers moving Russian oil. These actions have led Russian oil exporters to rely on an ageing fleet of tankers that now move the majority of the country’s seaborne oil exports.