Russian Shipbuilding Faces Crisis as USC Sells Off Yards
The United Shipbuilding Corporation (USC) is set to sell several of its shipyards that currently lack orders, according to Chairman Andrey Kostin. This decision comes amid a pressing need for a comprehensive restructuring of the shipbuilding industry in Russia. The Khabarovsk Shipbuilding Plant, a major facility in the Russian Far East, is among those on the chopping block, having already reduced its workforce by 70% due to dwindling production.
Challenges in Russian Shipbuilding
The decline of the Russian shipbuilding sector is largely attributed to the soaring costs of production. Building ships in Russia is significantly more expensive than in countries like China. For instance, three of Russia’s largest grain exporters are opting to order over 60 bulk carriers from Chinese shipyards, where the cost per vessel is approximately 3.5 billion rubles. In contrast, the same ship would cost around 12.5 billion rubles if built in Russia. This stark price difference is driving companies to seek more affordable options abroad, further exacerbating the challenges faced by domestic shipyards.
USC, established in 2007 to consolidate the fragmented shipbuilding industry, has struggled with financial issues over the years. In 2023, the corporation was placed under the management of VTB Bank due to ongoing financial difficulties. VTB, Russia’s second-largest bank, is also grappling with its own crisis, marked by a significant rise in loan defaults, particularly in military financing. Reports indicate that VTB’s net profit plummeted by 49% in the first half of 2025, a decline that is rare for major banks.
Impending Banking Crisis and Economic Impact
The situation within VTB reflects broader economic challenges in Russia, where a full-scale banking crisis is anticipated. Many corporate and retail borrowers are struggling to meet their debt obligations, with notable difficulties emerging in sectors such as construction, industry, and even the military. The true extent of the banking crisis may be worse than official reports suggest, as opaque loan restructurings complicate risk assessments. As the year progresses, the repercussions of these financial strains are likely to ripple through the economy, impacting various sectors and heightening the urgency for reform within the shipbuilding industry.
