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Samsung Terminates $3.5B in Orders from Russia’s Zvezda and Plans Lawsuit

shipbuilding
Samsung was contracted to build blocks for Russia's Arctic tanker fleet (SHI file photo)

Published Jun 19, 2025 7:34 PM by The Maritime Executive

 

The fight between Samsung Heavy Industries and Russia’s Zvezda shipbuilding is continuing with the South Koreans now saying they have terminated the contracts and plan to seek compensation. The dispute has been developing as Western sanctions mounted against Russia including Zvezda and ends what had once been hailed as the largest contract in the history of Samsung Heavy Industries.

In stock exchange filings on June 18, Samsung Heavy Industries reports it notified Zvezda that it was terminating two contracts, one for blocks for 10 icebreaking LNG rankers and a second for blocks to assemble seven icebreaking shuttle tankers. The first of the contracts was awarded in November 2020 valued currently at $2 billion and a second in October 2021 valued at $1.5 billion. As part of the notices, SHI says it plans to retain $800 million in advance payments.

The problem is that Zvezda backed out of the contracts a year ago citing what it said were the failures of Samsung Heavy Industries. It demanded repayment, with interest, on the advance payments. SHI launched an ongoing Singapore International arbitration process but has now decided to take additional steps.

The problems began in February 202 as the United States and South Korea began imposing increased strict sanctions on Russia and its companies. One of the first limited the ability to pay for work but in April 2022 Samsung reported it had been able to complete the delivery of a new Aframax shuttle tanker to Russia’s state-run shipping company Sovcomflot. Samsung had total contracts calling for the blocks for 22 vessels with a combined value of approximately $5.7 billion. 

Five vessels under the 2019 contract were delivered, but the 2020 and 2021 agreements were hampered by the increasing sanctions. Samsung was designing the vessels when the first sanctions were imposed after the invasion of Ukraine. Competitor Daewoo Shipbuilding canceled three contracts with the Russians in 2022 citing failure to make installment payments while initially, Samsung Heavy Industries sought to continue its projects. 

Samsung Heavy Industries reported in 2022 that it invoked Force Majeure, suspending the design work for 10 LNG carriers and seven shuttle tankers. It said the companies were discussing future implementation plans for the contract. However, when Zvezda was designated by the U.S. in February 2024, Samsung said it was blocked from working with Zvezda. Both companies are claiming a breach of the contracts.

The vessels were part of Russia’s ambitious plans to expand its oil and gas sector in the Arctic. With the sanctions, Russia has said it would shift the production work domestically with a plan to invest more than $6 billion to build more than 1,600 commercial ships over the next decade. The yards however have struggled to even complete the assembly process using the blocks from South Korea for these highly technical vessels.