Russia Halves Civilian Fleet Renewal Plans as War Costs Pressure Budget

Russia is significantly reducing a multibillion-dollar initiative aimed at modernizing its outdated civilian ship fleet, as rising wartime expenses and decreasing revenues compel the Kremlin to tighten expenditure across key industrial sectors.

According to a presentation obtained by the RBC news website, funding for the government-supported shipbuilding program will be slashed by over 40%, leading to a reduction of nearly 70 planned new vessels.

Initially launched in 2023, the initiative sought to produce more than 260 cargo, fishing, dredging, and cruise ships by 2027.

Under the newly adjusted plan, only 191 vessels will be delivered through the subsidized leasing program managed by the State Transport Leasing Company, signifying a substantial decline from the original target.

The total financing for the program is set to decrease from 231 billion rubles (approximately $2.88 billion) to 134.8 billion rubles (around $1.68 billion). It is anticipated that cargo and fishing vessels, alongside dredgers, will likely be among the first categories to face cuts.

These reductions are taking place against the backdrop of climbing construction expenses and severe fiscal challenges stemming from the ongoing war in Ukraine. At present, one-third of federal expenditures is allocated to defense, while revenues generated from oil and gas—critical to Russia’s budget—have plummeted significantly.

Oleg Sutyurin, a partner at SBS Consulting, indicated that the fleet modernization effort, initiated in 2023 to tackle the increasing obsolescence of the country’s civilian vessels, is being scaled back due to strict budget limitations.

“The primary challenge is the rapid increase in construction costs,” he explained.

A significant portion of the financing for this modernization endeavor was anticipated to come from Russia’s National Wealth Fund, a sovereign reserve that has seen two-thirds of its liquid assets diminish over the last three years.

Once valued at $120 billion, the Fund currently holds only $52.6 billion in unallocated reserves after consistent withdrawals to address budget deficits and support significant infrastructure projects.

By the conclusion of the first half of 2025, Russia’s federal budget deficit ballooned to 3.8 trillion rubles ($47.3 billion), already exceeding the government’s initial annual target by more than three times. June saw a particularly sharp decline in revenue, with income from oil and gas decreasing by about one-third.

While the Industry Ministry claims that the revised fleet program is still feasible, maritime experts caution that ongoing delays may result in serious safety issues.

Currently, the average age of a Russian civilian vessel stands at 40 years. Experts project that the country must introduce 200 to 220 new ships each year merely to ensure operational safety and reliability.

Sutyurin emphasized that to avoid an increase in accidents linked to aging equipment, Russia needs to add no fewer than 200 to 220 new ships annually.

The financial pressure has already triggered other industrial reductions. In May, Moscow cut over 100 billion rubles ($1.25 billion) from vital aviation support programs, reversing earlier plans to replace Western aircraft in the national fleet.

Anatoly Artamonov, chair of the Budget and Financial Markets Committee in the Federation Council, cautioned last week that acquiring an additional 2 trillion rubles ($21.3 billion) annually for defense and security would only be achievable through significant reductions in what he termed “inefficient spending.”

Analysts point out that this “inefficient spending” increasingly encompasses civilian infrastructure and industrial renewal—sectors that were once viewed as essential to Russia’s long-term stability.

Mikhail Burmistrov, head of the consulting firm INFOLine-Analytics, indicated that securing budgetary support for the Kremlin’s shipbuilding goals remains challenging given the substantial deficit.