The St. Petersburg Times  

Issue #764 (30), Tuesday, April 23, 2002

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Audit Report Puts Shipyard Deal in Danger

Staff Writer

Itar-Tass

The audit alleged the shipyard had not paid the budget for the ships it sold to China.

MOSCOW - The State Audit Chamber said Friday that the Severnaya Verf shipyard had failed to pay $6 million to the federal budget after completing two destroyers for China. The finding may cast doubt on a new $1.4-billion contract that the local ship builder was awarded to build another two ships for China.

The Audit Chamber, which is the agency of the State Duma that oversees the federal budget, performed the audit at the request of Vladimir Pekhtin, leader of the pro-Kremlin Unity faction in the Duma.

Pekhtin has said that Severnaya Verf owed the state budget at least $300 million for the two destroyers that it received from the Defense Ministry and which the shipyard delivered to China in 1999 and 2000.

Severnaya Verf sold the ships to China for $610 million but received them from the Defense Ministry when they were already 70 percent and 44 percent complete, Pekhtin said.

Severnaya Verf has said that the Defense and Finance ministries agreed to accept the sum of 186 million rubles ($6 million) as compensation for the work completed on the two vessels before they were delivered to the shipyard.

The Audit Chamber said Friday that the $6 million was never paid.

"The federal budget did not receive any compensation, even to the amount coordinated between Severnaya Verf and the Defense Ministry," the chamber said in a statement on the results of the audit, which was conducted in February and March.

The chamber also charged that the budget did not receive the $6 million "because of Defense Ministry inaction."

The audit is crucial in the current tug-of-war between the two local shipyards, Severnaya Verf and Baltiisky Zavod, for a new $1.4-billion contract to build two 956EM destroyers for the Chinese Navy. The government's Shipbuilding Agency declared Severnaya Verf as the contractor in early 2001.

But shortly after Rosoboronexport, the state's arms-exporting agency, signed the contract with China in January, then-Deputy Prime Minister Ilya Klebanov called a tender for the contract, and rival Baltiisky Zavod was declared the winner.

On Feb. 18 - the day that Rosoboronexport signed an agreement with Baltiisky Zavod and auditors began investigating Severnaya Verf - Klebanov was demoted from the post of deputy prime minister following a recommendation from Prime Minister Mikhail Kasyanov. The prime minister also called for a review of the recent tender.

In March, Shipbuilding Agency chief Vladimir Pospelov said the agency would stick to its decision from 2001 and support Severnaya Verf, and Rosoboronexport signed an agreement with that shipyard. Now both shipyards are awaiting a government resolution to determine the winner of the deal.

"It looks like a new round may start [in the battle for the contract], with the deal being given back to Baltiisky Zavod," said Konstantin Makiyenko, deputy head of the Center for Analysis of Strategies and Technologies.

Valery Pogrebenkov, spokesperson for New Programs and Concepts, the holding that controls Severnaya Verf, said the Audit Chamber has no serious claims against Severnaya Verf. He said the chamber holds the Defense and Finance ministries responsible.

"As soon as the means of compensation are worked out, Severnaya Verf is ready to pay," Pogre-benkov said Sunday by telephone.

He insisted that the sum should be no more than 186 million rubles.

Commenting on how the Audit Chamber reports could influence the decision to award the Chinese contract, Unity's Pekhtin said: "We think that contracts should be given to companies that work in the interests of the state."

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