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. Last Updated: 07/27/2016

IST Dumps Stake in Top St. Pete Shipyard

IST Group, which controls St. Petersburg-based battleship maker Baltiisky Zavod, has sold off its 18.85 percent stake in rival shipyard Severnaya Verf less than seven months after buying it, the company said Monday.

The shares were bought for an undisclosed sum by Rinaco, an investment company set up in the spring by unidentified shareholders of MDM-Group.

IST cited differences with Severnaya Verf's majority shareholder, arms holding New Programs and Concepts. "Having concentrated all power in its hands ... [it] is leading a policy that does not reflect the interests of minority shareholders, in particular the state and IST Group," the company said.

IST vice president Nikolai Dobrinov also expressed concern at the precarious finances of the shipyard, which is the subject of several lawsuits and government demands for money that could bankrupt it, he said. Last year, it reported a net loss of 1.5 billion rubles ($47 million) on revenues of 3.3 billion rubles.

Dobrinov also said that Severnaya Verf has revealed its "technical inability" by failing to deliver four Valdai Project cargo ships to the North-West Shipping Co., which was awarded 240 million rubles damages last month.

IST bought the stake in the spring when both Severnaya and Baltiisky were involved in political infighting over a $1.4 billion contract to deliver two Project 956 Sovremenny-class destroyers to China. At the time, IST said the stake was bought to ensure better control of financial flows at Severnaya Verf.

Severnaya Verf, which had already made 17 such destroyers for the domestic navy and two for China, lost the contract to Baltiisky Zavod in a tender called at the behest of former Deputy Prime Minister Ilya Klebanov, only to later regain the contract and wind up with Baltiisky Zavod as a supplier.

The conflicted erupted early this year when the head of the Unity party's State Duma faction, Vladimir Pekhtin, alleged Severnaya Verf owed the budget $300 million for two partially built warships it inherited from the state, which it completed and sold to China for $610 million in the late 1990s. The Audit Chamber investigated at his request and found no compensation had been made to the state budget.

In April, the St. Petersburg prosecutor's office turned to the local arbitration court on behalf of the Finance Ministry, demanding Severnaya Verf pay 182 million rubles to the budget, an amount that was later revised and hiked to $603 million.

Severnaya Verf appealed and the St. Petersburg and Leningrad region arbitration court was to look into the matter Monday, but any decision has been adjourned until Oct. 28.

Adding to the woe, Baltiisky Zavod's board announced Monday it was ending its cooperation with Severnaya Verf.

The new shareholders, however, are hopeful. "Severnaya Verf is in principle a good enterprise," said Rinaco spokesman Andrei Mescheryakov. He added that Rinaco hopes to turn the situation around.

"We are ready to work in cooperation with all shareholders in the interest of the plant's development," said an official at New Programs and Concepts, adding that assembly work on the destroyers continues.