US sanctions once again shake Russian shipbuilding company

The sanctions imposed by the US on Russia, especially the blacklisting of the Zvezda Shipbuilding Complex earlier this year, are considered the reason why the Russian shipbuilding giant canceled the contract with its South Korean partner.

On June 11, Zvezda suddenly notified Samsung Heavy Industries (SHI) of the cancellation of two contracts worth about $4.3 billion between the two sides to build 10 icebreaking liquefied natural gas (LNG) carriers and 7 icebreaking shuttle tankers, the Korea Times reported.

Zvezda's unilateral decision to withdraw from the deal comes after nearly two years of increased sanctions by Washington and Seoul, as well as a US move earlier this week that included further targeting of Arctic energy exploration activities.

SHI has a long history of cooperation with Zvezda and from 2019 to 2021 signed a series of high-profile shipbuilding agreements under which the Korean side designed and supplied blocks for liquid cargo ships to be completed at Zvezda's yard.

Five vessels under the 2019 contract have been delivered, but the 2020 and 2021 deals have been hampered by mounting sanctions pressure. Samsung’s subsidiary was designing the vessels when sanctions were first imposed following Russia’s military campaign in Ukraine. As a result, SHI has suspended production of blocks and equipment for Zvezda for 10 LNG carriers and seven tankers under construction, citing “force majeure.”

Launching ceremony of an icebreaking oil and LNG tanker at the Zvezda shipyard, August 2023. Photo: High North News

Earlier this year, the US blacklisted Zvezda and blocked it from doing business with the Russian company. After months of negotiations between SHI and Zvezda over whether to continue the contract, the Russian company unilaterally announced the cancellation of the contract and demanded that the South Korean shipbuilder return the $800 million advance payment it had received and pay interest on outstanding debts.

“The Russian client unilaterally claimed that the contract was not fulfilled during the negotiation process,” the South Korean company said on June 13. “As the notice of termination is illegal, we plan to file a complaint with the Singapore Arbitration Court for resolution. We also plan to continue negotiations with the client.”

Securities analysts expect Zvezda's request to have a limited impact on SHI's business in the short term.

“This will not affect the company’s other product development,” said Shinyoung Securities analyst Eom Kyung-ah of South Korea. “Usually, arbitration takes a long time to reach a conclusion, so in the short term, there will be no change to SHI’s business.”

There was no immediate response from Russia about the South Korean company's plans to sue .

Minh Duc (According to Korea Times, Maritime Executive)

Source: https://www.nguoiduatin.vn/don-trung-phat-cua-my-mot-lan-nua-lam-chao-dao-cong-ty-dong-tau-nga-a668471.html