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Ministry, defense firm fail submarine supply contract deadline

August 31, 2011, 16:24 UTC+3

"The talks with Sevmash continue, but the parties are unlikely to meet the deadline for signing the contract," the source said

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MOSCOW, August 31 (Itar-Tass) — The Russian Defense Ministry and the Sevmash shipyard will be unable to sign a contract to supply strategic nuclear power submarines on time. The deadline for signing, set by the prime minister, is August 31, a source close to the negotiations told Itar-Tass on Wednesday.

The government military-industrial commission confirmed the information.

"The talks with Sevmash continue, but the parties are unlikely to meet the deadline for signing the contract," the source said.

Last week, Prime Minister Vladimir Putin ordered his deputy Igor Sechin to have all contracts with the Unified Shipbuilding Corporation signed by August 31.

The source told Tass that the shipyard had sent tons of documents to the Defense Ministry on signing the contract for strategic nuclear submarines. The Defense Ministry rejects them on the ground that "the price does not meet its interests."

The official suggested that a compromise might be possible on a form, not on prices: "for example, we’ll sign a contract on framework prices of the state armaments program, and in case of the price problem, we'll conclude additional agreements."

Reports said the Defense Ministry and companies of the Unified Shipbuilding Corporation on Friday would sign five contracts to build warships for the Russian Navy, within the 2011 state defense order.

"There's an accord to sign contracts on Friday, including with the Admiralteiskiye Verfi shipyard to produce diesel submarine and with the Zvyozdochka company to produce two military transport vessels.

On August 29, the Defense Ministry and the Yantar shipyard signed a contract to build frigates of Project 11356. In all, 13 contracts have to be signed.

Missile frigate of Project 11356 is intended for combat in ocean and sea expanse, search and destruction of submarines, anti-ship and air defense of warships and vessels on the sea, delivering strikes at vessels, supporting land troops operations and landing marines.

However, the largest contracts with Sevmash to build nuclear missile submarine of the Yuri Dolgoruky class and multi-task nuclear submarines of Project "Yasen" within 2011 state defense procurements have not been signed yet.

"Difficult negotiations over these contracts have been conducted both in bilateral format and within the framework of the inter-departmental commission in the past few days, but no results have been achieved yet," the source said on Tuesday.

The considerable differences in customer and producer's prices remain the main problem. For example, Sevmash's position is that its limit of concessions is at the minimal payback level and that further prices cuts are simply not possible.

Otherwise, it will be unable to purchase new technologies or hire skilled personnel. The Defense Ministry rejects the proposed prices as "excessive" and only wants to pay for products, regardless of whether or not their production pays back.




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