RUSSIA AND FINLAND: SAFE FAIRWAY

On April 11 the Arctech Helsinki Shipyard floated Russian icebreaker Alexei Chirikov which is to service oil platforms at Arkutun-Dagi field on Sakhalin. The floating of the innovative logistic vessel built by joint Russian- Finnish-Korean shipyard, a joint venture of USC and STX Finland, confirmed that Russian-Finnish shipbuilding partnership is sailing along a safe fairway.

Unforgotten past

Finland built ships yet for the USSR – in the 1960s the shipyards of Suomi produced 1200 vessels for the big neighbor and many of them are still navigating. For example, six nuclear ice-breakers built by the Finns are still operating. The Taimyr and the Vaigach were built by Finnish shipyards, as well as diesel icebreakers Yermak, Krasin, and others. Therefore, a new ship ordered by Russia in Finland is rather a tradition than news.

“Thirty years ago the Soviet Union accounted for a quarter of Finnish exports and ships comprised a major part of it,” said Ilpo Kokkila who heads the Central union of business life in Finland.

Today shipbuilding partnership is profitable both for Russia and Finland as joint experience and know-how help guarantee high quality of production for own needs and bid for joint fulfillment of international orders. Most experts are convinced that Russian and Finnish shipbuilders can properly cope with the task.

The Finnish Maritime Industry Association estimates the country controls one percent of the global shipbuilding market which is a good result for a small country with a population of five million people. The Finnish share in the global production of cruise ships and ferries is close to 20% and in design and production of ice-breakers and ice-rated vessels – nearly 60%. Today the maritime cluster in Finland employs a total of 21 thousand people who work in over 60 companies. The annual turnover of the industry is close to 60 billion euro. Russia is considered a major strategic partner and shipbuilding for the Arctic as the most promising guideline.

“The potential of Russian-Finnish interaction in the Arctic region is immense and is not currently used in full,” said Russian trade representative in Finland Valery Shlyamin. The national Arctic strategies adopted by both countries open prospects for expanded transportation possibilities in the region and development of its natural wealth which mostly comprises energy carriers. Forecasts estimate close to a quarter of global undiscovered hydrocarbon reserves are accumulated there. The development of the Russian Arctic shelf by 2030 will demand new technical means and servicing infrastructure for production and transportation of close to 110 million tons of oil and 160 billion cubic meters of gas. Experts estimate close to 150 vessels – 30 platforms and terminals, close to 50 specialized transportation ships and 70 servicing vessels – will be necessary by 2030. The big demand cannot be satisfied only by Russian shipbuilding capacity. Besides, Arctic development demands modernization of the ice-breaker fleet while oil and gas industry needs gas tankers for liquefied natural and hydrocarbon gas, container carriers and oil tankers, as well as universal multipurpose vessels. “On such a background Russia and Finland have all possibilities to efficiently develop mutually advantageous cooperation both in shipbuilding and in the creation of a joint maritime cluster,” the Russian trade representative said.

The future of the cluster was discussed by the Russian-Finnish Intergovernmental Commission for trade and economic cooperation and the Russian-Finnish Partnership in Modernization of National Economies business forum on its sidelines.

The forum of businessmen, experts and politicians named shipbuilding and biotechnologies as the most promising avenues of bilateral innovative cooperation. New developments are expected soon, f i r s t and foremost, staged emergence of the mentioned Russian- Finnish maritime cluster of recognized international scope. Its prospects were discussed by participants in the round-table Challenges in Maritime Industry in Russian-Finnish relations – Arctic Cooperation held on the sidelines of the business forum in Turku attended by nearly 90 representatives of the industry, including up to 30 Russians delegated by ship and machine-building companies and R&D organizations.

Modernization and the search for new forms and points of growth come to the foreground instyle Russian-Finnish business partner ship.

Round-table participants agreed the task of the Russian-Finnish maritime cluster in the geographic boundaries from St. Petersburg to Helsinki and Vyborg was to “create trans-border technological chains and networks of suppliers and efficiently use international labor division.” It is also important to mount the Russian participation in joint projects implemented for Russia and supplies of Russian materials and pre-fabricates, equipment and devices for the Finnish maritime industry .

Naturally, activities within the maritime cluster are not simply industrial cooperation as they also envisage cooperation of R&D and design bureaus in designing maritime hardware and new conceptual shipbuilding guidelines, etc.

Joint ventures which will emerge in the framework of the Russian-Finnish cluster will specialize in production of engines, electro-technical and onboard equipment, as well as systems for civilian ships and maritime hardware for the use in Baltic and Arctic Seas. New environment-friendly technologies have to be developed, such as the use of dual-fuel propulsion plants. Innovative cooperation will target the design of new materials for operation in Arctic conditions. Russia and Finland will jointly build shelfoperating vessels, oil and gas drilling and production platforms, multifunctional specialized icebreakers for fishing and research in extreme conditions, etc.

The idea to modernize the existing shipbuilding infrastructure and create new one will be entrusted to the Russian-Finnish technopark to be created on the Kotlin Island near St. Petersburg on the basis of the Kronstadt maritime works. Both countries declared it a priority.

The Bering and Chirikov are back to the Pacific

All principles of future partnership have been already implemented in the joint project of icebreaker construction for Sakhalin fields.

The Arctech Helsinki Shipyard created in December 2010 is considered by experts as a base for the emerging Arctic Center of shipbuilding companies which targets customers who need to modernize their Arctic fleet. That determined the basic guidelines of Russian- Finnish cooperation: construction of high-tech vessels – icebreakers, logistic ships, and other specialized ice-rated vessels.

Such is the new series of Russian-Finish icebreakers. Its identity is beak design with asymmetric hull and several propulsion plants which provide efficient forward and backward run and side motion. The diesel-electric icebreaker has a capacity of 13MW and can crush ice of up to 1,7 meter thick and navigate for 20 days at temperatures up to minus 35 degrees Centigrade. The two-year project costs 75 million euro. The icebreakers help supply production platforms and protect them from ice. “It is likely a unique vessel among existing ones and the best in its class,” said Sovcomflot CEO Sergei Frank.

The lead ship of the series named after legendary seafarer Vitus Bering is already operating in the Pacific Ocean. It will be backed by the Alexei Chirikov, the second icebreaker in the series named after great Russian seafarer and explorer of the northern part of the Pacific and companion of Bering in Kamchatka expeditions. Like three centuries ago the seafarers are again sailing the same seas and serving Russia.

The Arctech Helsinki Shipyard hopes the two icebreakers built in cooperation with Vyborg Shipyard will be followed by the third and fourth. However customer Sovcomflot said modern shipbuilding means competition and Russia can build the vessels at its own shipyards. Tender winner has to offer the best. “Competition today depends not only on money, but also on know-how ,” said Sergei Frank.

Joint ventures will specialize in production of engines, electrotechnical and onboard equipment for civilian ships and maritime hardware for the use in Baltic and Arctic Seas.

The significance attributed to shipbuilding in both countries is confirmed by the presence of heads of state at name-giving ceremonies in St. Petersburg and Helsinki. The Vitus Bering got its name in the presence of Russian President Vladimir Putin, while the Alexei Chirikov – in the presence of Finnish President Sauli Niinistö.

“It means a lot for our company,” said Arctech Helsinki Shipyard Director General Esko Mustamäki. “Good contracts demand good work and current ones open a new era of Arctic shipbuilding. I am convinced that in five years Sovcomflot will become the biggest operator in Arctic waters while Arctech will supply vessels for its Arctic fleet,” said the shipyard CEO full of optimism.

Keep afloat

Finnish economic experts say the Arctech Helsinki Shipyard founded by Russian USC and STX Finland (a unit of STX Europe within Korean STX Business Group) is the most successful business component of the Finnish coowners. STX Finland runs two other shipyards in the country: Turku Shipyard in Turku and Rauma Shipyard in Rauma. The enterprises of STX Finland employ a total of 2500 people. In January 2013 Finland admitted that its shipbuilding industry was in a deep crisis which intensified after STX Finland shipyard in Turku lost a major contract for the construction of a deluxe cruise liner for American Royal Caribbean Cruises. The multibillion-dollar contract went to STX Europe in France which was a blow to Finnish shipbuilding as the order could have provided 23 thousand jobs, according to experts. The Finnish government refused to issue guarantees to the shipyard worth 50 million euro and said it had no right to risk the money of taxpayers and support a loss-making company. The shipyard had to work itself to win the order.

Lack of contracts begins to tell on the Russian-Finnish shipyard in Helsinki which in February began negotiations about temporary personnel cuts. As a result 15 people had to go on an unpaid forced leave.

Esko Mustamäki said the shipyard “did not receive sufficient orders to ensure full load on the personnel.” In such a situation partnership with Russian shipbuilders offers both a way to survival and a path to growth.

The opinion widely spread after Korean and the Finnish media announced in the spring of 2013 that STX can sell its subsidiaries abroad, including in Finland, to raise money for the parent company and preserve priority production guidelines. The news was completely unexpected for Finnish shipbuilders. Experts say it is hardly possible to find a buyer of the shipy ards in Finland.

“There is an unstable situation at the shipyards which can result in a change of owner,” said Finnish Prime Minister Jyrki Katainen adding the sale of the enterprises to a private owner can offer “a chance for Finnish economy”.

Finnish experts and media cautiously but persistently suggest that a buyer can be found on the other side of the border – in Russia. “In the coming decade the role of Arctic shipbuilding will considerably grow and Russia is a major actor on the market. Consequently, it needs hundreds of new vessels and additional capacities for their construction,” said Professor Jorma Tajna, a leading Finnish maritime expert. Like many people in Finland he concluded that “Russia may be interested in buying the Finnish shipyard.” Time will show whether Finnish experts are right.

Fall is not alwa ys fail ure

Trends in bilateral economic relations can be traced by the very name of the annual information analytical bulletin of the Russian trade mission in Helsinki – Finland – a Russian Partner. In 2012 the bulletin came out under the motto Finland – Russian Economic Partner while in 2013 the country was called Russian partner in modernization of national economy .

Modernization and the search for new forms and points of growth come to the foreground in Russian-Finnish business partnership. Old methods of trade and economic ties which until recently ensured stable positive result are losing their previous force. New time sets new tasks while trade statistics urge to accelerate their solution to the maximum.

Professor Jorma Tajna: “Russia may be interested in buying the Finnish shipyard.”

“Our economic relationship faces a major challenge as trade turnover fell 10 percent,” said Valery Shlyamin. “The problem is not only the world market situation and decreased activity in the euro zone. Traditional trade forms in which commodities – oil and petroleum products, gas, timber, etc – comprise 88 percent are outdated.” The trade representative believes Russia and Finland have to find new spheres of cooperation, first and foremost, technological. “It is wrong to stake on increased commodity exports in kind. Trade turnover figures may change but it is important that technological cooperation changes.” Regional cooperation is also important, he believes. “Our relations are multi-faceted and flexible enough and it is necessary for public-private and municipal partnerships to profit from them,” Shlyamin said.

In 2012 trade turnover between Russia and Finland comprised 17 billion dollars, twelve of which were Russian exports to Finland and five – Finnish exports to Russia. Despite the mentioned 10-percent fall Russia remains a major trade partner of Finland and accounts for 14% in its trade turnover. The share of Finland in Russian turnover is 2.1 percent.

The Russian co-chair of the Intergovernmental Commission and Deputy Prime Minister Dmitry Kozak suggested at a meeting in Turku that “Russia and Finland can succeed in restoring the trade turnover in a year or two.” “Russia and Finland work to create a favorable investment climate and the agreement signed today will promote simplified border procedures. The growing number of border crossings which currently comprise 12 million a year will give an impulse to trade turnover growth,” he said and recalled that “not everything depends on us, the world economy is unstable so far and it would be wrong to give exact forecasts.”

The Finnish co-chair of the Intergovernmental Commission and Minister for European Affairs and Foreign Trade Alexander Stubb believes such processes, as Russian membership in the WTO and further integration in the economic system of Europe will play a positive role in restoring trade indicators. “They enhance the trends existing between Russia and Finland,” he said.

At present there are close to 600 Finnish companies operating in Russia.

Polls held by the Russian-Finnish Chamber of Industry and Commerce show that every third Finnish businessman operating in Russia plans new investments into the Russian economy. Business activity is on the rise on the other side of the border: according to Finnish research company Asiakastiedot, every sixth company which opened in South Karelia and Kymenlaakso provinces in 2011-2012 was registered by Russian owners. The Russian business already owns nearly six percent of private companies operating in the region in the sp here of tr ansport.

However both countries mostly stake on innovations. Shipbuilding, as a sphere of innovations and their implementation, will preserve in the coming years its status of one of the most promising guidelines in Russian- Finnish cooperation. It means points of joint economic growth will increase which is so important in conditions of continuing global financial instability.

Yulia Andreeva, ITAR-TASS,

Helsinki – for Amber Bridge

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