Russian economy scramble as Putin forks out £28m to support shipbuilding

The Russian government has been forced to allocate 2.96billion rubles (£28million) to support the country's shipbuilding industry in the face of a worsening economic picture. The pot of cash is to compensate for part of the costs of previously raised loans for the leasing and purchase of civilian vessels, Russian news agency Interfax reported. The order was signed by Russian Prime Minister Mikhail Mishustin, "in order to prevent the impact of the deteriorating economic situation on the development of the shipbuilding industry in connection with the increase in the key [interest] rate of the Bank of Russia."

The funds will be allocated to the Ministry of Industry and Trade within the framework of a federal project - "Production of Ships and Ship Equipment" - and used to compensate for part of the costs of Russian companies to pay interest on loans taken out between 2009 and 2025. The money will also be utlised to pay leasing payments under contracts finished in these years for the acquisition of civilian vessels.

In addition, the funds will be allocated to subsidise the costs of contracts for the purchase of ships from Russian leasing companies in instalments between 2022 and 2023.

The measure "will ensure the fulfilment in 2025 of obligations under at least 70 previously concluded loan, lease, and instalment purchase and sale agreements," officials say.

It comes after, in May, the Russian government unveiled a massive plan to build hundreds of new civilian vessels by 2050.

The scheme would also aim to upgrade its shipbuilding capability and increase the overall workforce in the maritime domain.

It was reported at the time by Offshore Energy that the Kremlin planned to spend more than 500billion rubles (£4.7billion) in federal funding in the next six years.

Earlier this month, it was announced that Russian shipbuilder Krasnoye Sormovo, which is part of the sanctioned state-owned firm United Shipbuilding Corp (USC), is set for a major modernisation scheme.

Total investment amounts to 7.5billion rubles (£71.1million), IAA PortNews reported, citing USC's general director Andrey Puchkov.

"We made the first investment decision in April. More than RUB 1bn has already been allocated for this year," he said, according to TradeWinds.

"These funds will be used in several areas: repair of the existing infrastructure, improvement of working conditions for the team and the purchase of new equipment."