The 4th Military and Naval Show in Saint-Petersburg: Interview with the Director of OPK’s Shipbuilding Project Andrei Fomichev

July 7, 2009

IZVESTIA, Russia, July 7 /PRNewswire/ –

– Russia Develops Highly Competitive Military Goods Keeping With The XXI
Century Standards

The 4th Military and Naval Show became a showcase for the achievements of
Russian shipbuilders and designers and proved that 2007 and 2008 were
landmark years for the Russian Navy. The most important participant of the
show was the United Industrial Corporation (OPK), which embraces the largest
shipbuilding factories Severnaya Verf (Northern Shipyard), Baltiysky Zavod
and Iceberg design Bureau. But the real star of the show was the OPK-built
corvette Steregushchy, designated as Project 20380. In 2008 the corvette
joined the Russian Navy. Izvestia correspondent Artem Ostrovsky discussed the
importance of this event for the domestic navy and the prospects of military
shipbuilding with the Director of OPK’s Shipbuilding Project Andrei Fomichev.

Question: Andrei Borisovich, what makes Steregushchy unique?

Answer: First of all, Project 20380, of which Steregushchy is a part, is
not a rehash of old Soviet design. The project has been developed practically
from scratch by the Almaz Central Marine Design bureau in the post-Soviet
Russia. During the design stage 21 inventions were patented and 14
certificates issued for registration of computer programs. The corvette
employs stealth technology which makes it invisible to enemy detectors.
Highly automated operation and firing systems require fewer crew members to
operate them. And last but not least, Steregushchy is equipped with
up-to-date weapons, Russian made. The weapons, including a deck-pad
helicopter, allow the corvette to destroy surface, subsurface, air and
shore-based targets, fight as a combined team or on its own, including
fighting even heavier ships.

Question: Are you planning further construction?

Answer: Of course, Steregushchy is not the only ship of its kind. It is a
lead ship of a series of corvettes designated Project 20380. The OPK yard has
a government commission to expand the series with the Storozhevoy,
Soobrazitelny, Boiky and Stoiky corvettes. Three ships out of the four are
already in various stages of construction.

Admiral Vladimir S. Vysotsky, head of the Russian Navy, has said that
Steregushchy-type corvettes will form the basis of the Russian Navy until
2030. According to the management’s estimations the Navy will need several
dozens of new corvettes. In other words the transfer of Steregushchy to the
customer marked not just the start of production of surface vessels in the
new Russia, it marked large-scale production.

Question: Does the corvette compare favorably with its foreign peers?

Answer: Steregushchy is unique not only for the Russian Navy, as far as
its technical and combating qualities go. Project 20380 comprising newly
built ships is known abroad as project 20382 Tiger and caused excitement
among foreign customers. Foreign experts estimate that on the global weapons
market Project 20382 ships will have no competitors in their class in the
foreseeable future. Therefore the export potential of Tiger corvettes is very
high, estimated between twenty to thirty billion dollars.

Question: Does this mean that Russia will have a competitive edge on the
global weapons market?

Answer: Absolutely. Until recently, under cooperation programs in the
military and technical area, Russia has been supplying abroad mostly reworked
USSR-developed weapons. Russia’s foreign competitors reckoned that in the
following decade the modernization potential would run out. In that case,
they believed, Russia would start to lose cooperation partners and slowly
withdraw from the weapons market. The development of Steregushchy and its
export version means that the Russian Federation is beginning to possess
highly competitive military goods for foreign customers up to the standards
of the XXI century. They will not only preserve Russia’s current stance on
the weapons market but will most likely expand the country’s role in the
global military and technical cooperation.

Question: Is OPK developing other areas within the confines of military

Answer: OPK enterprises are the leaders of the military and industrial
complex, accounting for 75 % of the surface ships construction program. In
the last year apart from Steregushchy OPK gave the Russian Navy three new
ships. In 2008 the Federal Service for Defense Contracts (the Rosoboronzakaz)
approved the Severnaya Verf’s (part of OPK) status as the only Project 20380
corvette and Project 21270 motor boat supplier. Today this is the only
enterprise to have been included in the register of the exclusive suppliers
of Russian weapons and military equipment. Besides, OPK’s shipyards have been
accepted by the Federal Industry Agency and Rosoboronexport as a prospective
contractor under a number of orders and agreements with different countries
comprising 10 different areas of military and technical cooperation.

The yards of OPK are in the process of construction of the ocean frigate
“Admiral Flota Sovetskogo Soyuza Gorshkov” for the Navy, designated as
Project 22350, as well as a lead communications ship and a special purpose
motor boat. We are also developing military and technical cooperation.
Several vessels are being modernized for the Algeria Navy. At the recent
Military and Naval Show in Saint-Petersburg Vladimir Vysotskiy announced the
government’s intention to have another frigate built by the OPK shipyards.

Question: Such large-scale prospects will certainly require upgrading and
expanding the capacity of the yards…

Answer: According to experts’ estimates, Russia needs approximately
seventy surface vessels for offshore maritime zone. OPK’s yards already have
enough capacity to increase the scale of the state defense contracts program
threefold. Nevertheless OPK has started large-scale modernization and
expansion of capacity. OPK’s strategic aim is to create an advanced,
internationally competitive compact shipyard, capable of producing the entire
line of large-capacity vessels with a deadweight of up to 300,000 tons and
military vessels of virtually every class. As regards civil shipbuilding the
united yards specialize in the construction of high-technology, technically
advanced ships for exploration, extraction and transportation of raw
hydrocarbons from oil and gas fields developed on the continental shelves.
Moreover, OPK-built military ships can also be used to complete the shelf
projects: the Naval Doctrine of the Russian Federation makes the Navy
directly responsible for the protection of the inshore area, including the
vast Russian shelf territory.

Questions: It is evident the OPK enterprises don’t have a shortage of
orders. But according to recent information Severnaya Verf ended in the red
in 2008. How can you account for that?

Answer: The losses shown in the accounting statements of the factory are
technical and attributable to the restatement of foreign currency
liabilities, namely loans from Russian banks. This was due to the sharp Ruble
decline against the Dollar and the Euro. Severnaya Verf is obtaining foreign
currency loans to finance its export contracts and the repayment of the loans
will be effected out of the foreign currency revenue. However the expected
proceeds are not recognized in the accounting statements and not restated.
This is why the growth of the dollar and the Euro results in loss recognition.

Question: What are the prospects of financing the state defense orders
given the current economic situation?

Answer: The Deputy Prime Minister Sergei Borisovich Ivanov, directly
addressed this issue at the recent show. According to his words the Russian
corvette and frigate construction program is under way and will be funded
fully and without delay.

About OPK

United Industrial Corporation (OPK) is a diversified holding company with
total value of assets of more than US$13 billion. OPK develops and manages an
investment portfolio in major sectors of the Russian economy, including the
financial sector, real estate development, shipbuilding, mining and media.
For more information please visit the OPK website http://eng.opk.ru/


Source: newswire

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