December 14, 2007:
There is a nasty situation is
developing between India and Russia, and apparently it's all because of some
lost blueprints. It goes like this. Russia and India have a $1.5 billion deal,
which sold an unfinished Russian aircraft carrier, the Admiral Gorshkov, to
India, and included a Russian shipyard performing $700 million worth of
repairs, modifications and upgrades. Another $800 is to be spent on aircraft,
weapons and equipment. Russia now wants a lot more money, while India insists
on getting what the original contract called for. While the carrier is in
Russia, India, which has already paid the Russians half a billion dollars,
insist that they now own the ship. Russia has been scrambling to explain their
sudden demands for more money, and has
now admitted that the cause of the problem is, well, no one can find the
blueprints for the Admiral Gorshkov, which entered service in 1987. The ship
was built in Ukraine, which became an independent nation in 1991. After
independence, the blueprints for the Admiral Gorshkov went missing, but no one
noticed.
The Admiral Gorshkov was inactivated in 1996 (too
expensive to operate on a post Cold War budget). The Indian deal was made in
2004, and the carrier was to be ready by 2008. But a year ago reports began
coming out of Russia that the shipyard doing the work, Sevmash, had seriously
miscalculated the cost of the project. The revised costs were now more like
$1.1 billion for the $700 million refurb. The situation has since gotten worse,
with Sevmash now saying that it will cost over $2 billion to refurbish the
carrier. The Indians are not happy, and expects the Russian government (which
owns many of the entities involved in the project) to make good on the original
deal. The problem is this. The shipyard estimated the costs of doing the
refurbs, not having the blueprints
handy. When shipyard engineers took a close look at the Admiral
Gorshkov, they realized that their estimates were much in error.
Given that India currently has $10 billion worth of
Russian military items on order, and has been Russia's biggest, and most
profitable customer for military equipment for decades, the Gorshkov is looking
to be an error of gigantic proportions. The boss of Sevmash, when the Gorshkov
deal was negotiated, has been fired and is under criminal investigation, on
suspicion of financial mismanagement (separate from mistakes made in estimating
contract costs for the Admiral Gorshkov work). To make matters worse, the
additional work required on the Gorshkov has caused Sevmash to turn down
lucrative commercial projects (like offshore oil platforms.)
The Indian government has told the Indian Navy that
no more money will be forthcoming, and that Russia must comply with the
original contract. The Russians, however, complain that the Indians demanded,
after the contract was signed, substantial changes that were not in the
contract. These changes greatly increased the cost of the work. The Indians
accuse the Russians of not planning the refurb carefully. Now we have an
admission that there are no blueprints, and it will cost millions to recreate
the plans. Without blueprints, you can't really do a lot of work on a major warship.