Why Russia depends on foreign fleets: ambitions and reality

Foreign shipowners are involved in the transportation of Russian export cargoes. Before the start of the special military operation, their share in certain market segments reached 80–85%. Between 2019 and 2025, Russia increased its cargo exports by more than 40 million tonnes, from 654 million tonnes to 696.7 million tonnes. The Russian fleet and the shadow fleet that has emerged, with an opaque ownership structure, partially reduce dependence on foreign shipowners. However, first, these vessels address the issue only in part: according to expert estimates, the shadow fleet has eased the acute problem only in the transportation of sanctioned oil, covering around 85% of this need. Second, the shadow fleet is not fully sovereign, which creates additional complications.

This fleet was built abroad and is significantly depreciated. To keep it operational, it has to be repaired outside Russia, using components that are not produced domestically. The shadow fleet is also facing active countermeasures from countries that have imposed sanctions on Russia. As a result, the absence of a sovereign fleet limits Russia’s sovereignty in transporting its export products.

Russia has set Arctic development and the expansion of the Northern Sea Route as one of its strategic objectives. Ambitious targets have been set for the production and transportation of millions of tonnes of raw materials in the Arctic basin. According to previously announced plans, LNG and oil alone are expected to exceed 160 million tonnes by 2030, which will require a corresponding number of vessels to transport them.

There is only a limited number of Arc6 and Arc7 transport vessels in the world capable of operating in this basin. Therefore, without building its own fleet, Russia’s plans to extract natural resources in the Arctic will be constrained, and the development of the Northern Sea Route will be economically premature. Today, only the Zvezda Shipbuilding Complex is building the required vessels, but its output volumes are insufficient to meet the stated objectives.

Russian shipbuilding capable of producing the vessels required both for transporting export cargoes and for developing the Northern Sea Route is the foundation of the country’s transport sovereignty. Having become a supplier of raw materials in the global division of labor, Russia did not actively develop maritime transportation and is not among the top ten countries by fleet value. That top ten consists mainly of countries that have imposed sanctions on Russia. Unlike Asian manufacturers — Japan, South Korea, and China — Russia did not develop civilian shipbuilding on a comparable scale. These countries built vessels faster and at lower cost than other countries, including Russia. They invested tens of billions of dollars in the construction and modernization of shipyards and actively funded the development of modern transport vessels. For each of these countries, shipbuilding is a key sector of the economy, and their governments have actively supported its development, including by helping the industry navigate periods of crisis.

In Russia, the capacity to build medium- and large-tonnage transport vessels is limited. The key constraints are the lack of domestic production for a broad range of components required for these types of vessels, as well as limited manufacturing capacity. Most Russian shipyards capable of building vessels with a deadweight of more than 15,000 tonnes — including the B.E. Butoma Shipyard, Sevmash, Baltiysky Zavod, and Admiralty Shipyards — are occupied either with state defense orders or with the construction of nuclear icebreakers. The Zvezda Shipbuilding Complex is currently the only Russian shipyard specializing in the construction of civilian medium- and large-tonnage fleets.

Today, the development of the Russian state depends on domestic shipbuilding. Shipbuilding is an economic instrument of national development, not merely a sector that contributes to gross national product and provides employment for more than 150,000 Russian citizens. This is why the role of the state is critically important in building a system of cyclical operation for the shipbuilding industry.

Cyclical operation of the industry means balanced vessel production aimed at ensuring sovereignty in the export of Russian products, passenger transportation, and the maintenance of Russia’s waterways, while reducing and maintaining the average vessel age at 22 years, with annual utilization of shipbuilding plants and shipyards at no less than 70% over the long term. Under such a cyclical model, it is necessary to balance the construction of new shipyards with an increase in vessel output, while also regulating the retirement of obsolete vessels once they reach a certain service life. Vessels over 40 years old cannot be withdrawn all at once, as this would reduce Russia’s transport capacity; their retirement must be gradual. At the same time, shipyards cannot be built only to stand underutilized a few years after reaching their design capacity. Yet they also cannot be left unbuilt, given the current need to increase production volumes, particularly in segments where manufacturing capacity is insufficient. Therefore, the creation of a cyclically operating industry that generates a steady order book for new vessels is critically important for shipbuilding.

A full-scale launch of cyclical industry operations will take at least 10 years. This means moving away from the assumption that commercial entities can independently determine the operating conditions. For the industry to function effectively, the state will effectively need to return to a Gosplan-style approach in order to establish balances for vessel construction, taking into account vessel retirement once a certain age threshold is reached, as well as balances for component production and for the development and construction of new shipyards.

At the current stage of industry development, the state is providing step-by-step support to shipbuilders by encouraging shipyard modernization and the adoption of new vessel construction practices, including the use of modern technologies. Plans have already been announced to build a new shipyard in the Far East. However, the chosen approach is highly challenging: the Far East lacks shipbuilding specialists, and there will be competition for resources between the Zvezda Shipbuilding Complex and the new shipyard. At the same time, the project to create a distributed shipyard in St. Petersburg, where the country’s main shipbuilding capacities are concentrated, has not been implemented. The state is supporting the development of new types of components, but maker lists with Russian equipment for the planned vessels have still not been formed.

The state is already creating conditions for domestic demand for Russian-built vessels to grow, become serial in nature, and ensure economically efficient operations for shipbuilders. This was defined as one of the key objectives of the adopted Shipbuilding Development Strategy through 2036. The state plans to increase funding for concessional leasing and to compensate part of the costs incurred by companies building civilian water transport vessels. The key question is the volume of allocated funding and the activation of shipyards.

Today, it can be stated that the state has turned its attention to Russian shipbuilding. The flywheel of industry change is gradually gaining momentum. Visible results will take years, but Russian civilian shipbuilding has been given a chance to develop. For the state, this entails an additional cost burden. A wait-and-see position or slow decision-making will constrain Russia’s development. The current political environment creates significant risks for export-oriented industries and transport sovereignty, while also limiting the development of shipbuilders. It is therefore important that the adopted course for the development of the shipbuilding industry be long-term, and that issues be addressed comprehensively across the entire value chain — from support for vessel and component design to regulation of cargo shippers, shipowners, and transport companies.

An example of a comprehensive project currently being implemented in Russia is the construction of the Moscow–St. Petersburg high-speed railway. The project has clearly defined sources of financing, state support covering the entire chain from components to infrastructure construction, and takes into account passenger flows between the cities as well as the interconnection between the new infrastructure under construction and the existing transport network. All stages of project implementation are coordinated with one another. This is precisely the type of industry management approach that can deliver results in the form of a strong and competitive shipbuilding sector: development goals for shipbuilding are clearly defined, all participants are aligned — cargo shippers, transport companies, shipbuilders, component manufacturers, leasing and insurance companies, and others — and production volumes are balanced. A similar approach should be applied to all shipbuilding development projects.