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. Last Updated: 07/27/2016

Arms Trader Eyes St. Pete Shipyards

Itar-TassThe Steregushchy being launched from the Severnaya Verf shipyard Tuesday.
The owner of the country's two largest military shipyards has said the government wants to acquire both firms, and local media said on Wednesday that state arms trader Rosoboronexport was in talks to buy them.

The Severnaya Verf and Baltiysky Zavod shipyards in St. Petersburg are estimated to hold shipbuilding contracts worth about $2 billion.

The yards are owned by the United Industrial Corporation, or UIC, which was established in 2004 to consolidate noncore assets of International Industrial Bank.

"The state has displayed interest in our Severnaya Verf and Baltiysky Zavod, as well as in the Iceberg design bureau creating icebreakers," UIC director general Alexander Gnusarev told reporters late Tuesday.

President Vladimir Putin called in his state-of-the-nation address last week for the establishment of a national shipbuilding corporation.

"As we understand, the state plans to establish a concern building surface ships. The idea is being actively discussed by the [Federal Industry Agency]," Gnusarev said.

"We hold the very promising shipyards, while the state has the best design bureaus."

Gnusarev did not say which state entities might buy the shipyards. He added the government had not yet made an official offer to buy them or merge them with state-controlled design bureaus.

He said the assets of the two shipyards would have to be evaluated before detailed talks started, and said he expected the industry agency to outline its vision for the future shipbuilding concern within a month.

Kommersant quoted unidentified sources on Wednesday as saying Rosoboronexport had contacted International Industrial Bank to discuss the potential purchase of the yards.

A Rosoboronexport spokeswoman said the company would not comment on the report.

Kommersant quoted bank officials as saying the arms trader was keen to buy the shipyards, which are capable of building all types of military surface ships.

Rosoboronexport last year exported weapons and ammunition worth over $5 billion. Russian media have speculated the company is a Kremlin vehicle aimed at establishing government control over certain sectors that the state sees as strategic.

Last December, Rosoboronexport gained control of Russia's largest carmaker, AvtoVAZ.

The arms trader is now in talks with the world's largest producer of titanium products, VSMPO-Avisma, on buying a stake.

Rosoboronexport wants to change its legal status to allow it to operate with less oversight from the government, Vedomosti said, citing an unidentified government official.

Rosoboronexport wants to be classified a state corporation, a special status used only twice since it was created in 1999, the newspaper said. State corporations don't have to pay a share of their profit to the government and can use all their income on development, Vedomosti said.

Rosoboronexport, which had sales last year of $5.2 billion, is currently a federal state unitary enterprise, which means it needs government approval for any transaction worth more than 5 million rubles ($186,000) and must pay the state a portion of its income.

Rosoboronexport chief Sergei Chemezov told Vedomosti last year that the unitary enterprise status had "outlived its usefulness."

(Reuters, Bloomberg)