Medvedev raps Russia shipmaker over late India deal

By Denis Dyomkin

SEVERODVINSK, Russia (Reuters) - President Dmitry Medvedev on Thursday lashed out at Russian shipbuilder Sevmash for delays on a landmark contract with India, traditionally a close trading partner.

Arms exports, which exceeded $8 billion last year, are a key source of revenue for Russia. India and China account for the bulk of Russia's defence industry sales.

In a $1.6 billion deal signed in 2004, Russia was to modernise the Admiral Gorshkov at Sevmash, in the northern port of Severodvinsk, and deliver the aircraft carrier by 2008.

After delays from the Russian side, the delivery was pushed back to 2012 and its price nearly doubled to $2.8 billion. The contract has become a painful issue in India-Russia relations.

"This is a matter of prestige," Medvedev told a meeting with government officials, the military and shipbuilders on Thursday in Severodvinsk on the White Sea. "This (project) must be completed within the agreed timeframe and within the agreed parameters. A fully-fledged aircraft carrier will be created."

The modernisation of Admiral Gorshkov had been expected to lead to other lucrative contracts including tanks, aircraft and warships.

The ship, already renamed INS Vikramaditya, was first launched in 1982 and was decommissioned in 1996. Smaller than U.S. carriers and powered by steam engines rather than nuclear reactors, it originally carried helicopters and vertical take-off and landing aircraft.