On 09 December 1999 the Russian Government passed the provision on Russian Shipbuilding Agency. Under that provision, Russian Shipbuilding Agency (Rossudostroyenie) is a federal body of executive power branch implementing control, permissive, regulating and other responsibilities in the field of the shipbuilding industry, including researches, development, manufacture, updating and utilisation of products of military and civic shipbuilding. The Agency's main task is formation and fulfilment, together with Russian Ministry of Science and Technology and Defence Ministry, of research and industrial policy directed to the manufacture of competitive products and the introduction of advanced technologies in the field of the shipbuilding. Some of the enterprises earlier subordinated to the former Ministry of Shipbuilding, the agencies on conventional arms of the former Defence Industry Ministry, agencies on control systems, enterprises of the former Ministries of Electronics, Radio Industry and Industry of Communication Facilities are under the authority of the Agency of Shipbuilding now.
The shipbuilding industry was traditionally one of the leading defense industries in Russia. Since the beginning of the defense conversion process, state military orders have been reduced from 60 percent of total production to 5-10 percent, and Russian shipbuilders have had to seek new markets and expand existing product lines. Faced by tough western and eastern competition, Russia must also introduce new technology and costruction practices to maintain its competitiveness.
Russia possesses 40 shipyards, however only seventeen among them has the capacity to build vessels greater than 122 meters in length and only five among them has the capacity to build large ocean ships. St.Petersburg is the most important center of shipbuilding in Russia since three of the country's main shipyards are located there, as well as many supporting industries (machine building, compressor manufacturing industry, ship design bureaus etc.).
Russian shipyards are not able to compete with the shipyards of South Korea, China, Germany and other European countries, where during recent years modern robotic shipbuilding technologies were implemented. Russia is behind these countries in terms of level of production management, technology, construction period and prime costs. Due to this, Russia might lose its competitiveness unless the shipyards are modernized. Modernization of each shipyard will require not less then $500-600 million. According to experts, robotics and new technologies will not make the shipyards highly profitable if installed in old yards. Thus, in the mid-1990s the Council of the Ministry of Economy of Russia decided to create a modern shipbuilding complex. The investment project was included in the State program for the conversion and restructuring of the defense industry of the Russian Federation. This program, which is a Russian analogue to the US "Moritex" program, is called "Russian Shipyards" and has received presidential status. The program envisages the joining of the three existing St.Petersburg shipyards (Baltiysky Zavod, Severnaya Verf and Admiralty Verf), and creating a joint ship-assembly complex in the form of a joint-stock industrial corporation. The project of unifying the yard would cost approximately $650 million. Of this amount, 30% would go for the transfer of a number of machine building workshops to other enterprises in St.Petersburg and to the redevelopment of 150 Ha of freed property in the center of the city. It is still rather unclear who is planning to finance this project.
Shipbuilding in Russia is very different from other sectors of industry: very long terms of project completion (sometimes more than 30 months); very high project costs ($30-50 mln.); and a need for high capital investments. According to some estimates, Russia needs annual fleet renewal of 150-200 ships, requiring an investment of $2.5-3.5 billion. However, Russian shipowners do not have money to finance the construction of new vessels.