Russian Industry and Energy Minister Viktor Khristenko said their shipyards cannot build ships on turn-key basis. Although the Russian shipbuilding sector continues to boast high technical, personnel and export potentials, the current conditions are inadequate for its effective performance. With appropriate incentives Russian shipbuilders could build ships on turn-key basis instead of building ship hulls that are to be subsequently fitted out at foreign shipyards. This would allow Russia not only expand its domestic transport shipbuilding market but also, given the growing world demand in this area, successfully compete in the international markets.
The current situation results from the fact that, as compared with the international funding standards for shipbuilding projects, Russian shipyards have to operate in very unfavourable economic conditions. Across the globe, borrowed funds typically account for up to 80 percent of a vessel's with the credit's interest rate and maturity averaging 8 percent and 10 years respectively. In addition, shipyards are often subsidised and offered various benefits and payment relief. In Russia, borrowed funds account for only 30-40 percent of a vessel's cost, with the credit's interest rate and maturity averaging 15 percent or more and 2-3 years respectively. In other words, the current lending conditions and tax rates lead to a substantial 25-30 percent increase in price of ships build at Russian shipyards for domestic customers. It is important to note that Russian companies place annually $0.8 - 1 billion worth of shipbuilding orders abroad.