Ships are used in naval battles and can destroy other ships and considerable amounts of infrastructure. They can also destroy improvements (in contrast to airstrikes that cannot) with higher chances than in the case of Ground Battles; if the victory type is an Immense Triumph, the attacker has a 15% chance of destroying an improvement. Ships cannot loot money.
To build ships you need to build Drydocks in your cities (which must be powered). Ships require both Munitions and Gasoline to operate.
The Naval Battle formula is similar to this used for the Airstrikes, meaning that, even when you have less ships than your opponent, it is actually possible to get a victory. Even if this victory is not an Immense Triumph, getting just a victory is many times enough (for example to break a blockade)
The amount of damage done by a naval battle is dependent upon a number of factors.
The base formula for infrastructure damage is:
Infrastructure Destroyed = MAX( MIN(Attacking Ships - (Defending Ships * 0.5) * 2.625 * RAND(0.85,1.05) * (Victory Type / 3), City's Infrastructure * 0.5 + 25), 0)
War Type and War Policy factors are multiplied to the base damage calculation. Victory Type is 0 for Utter Failure, 1 for Pyrrhic Victory, 2 for Moderate Success, and 3 for Immense Triumph.
Army value = Ships * 4
For each of 3 rolls there's a random roll between 40% - 100% of the army value for each side. Casualties are the opponent's roll * 0.01375 for each side.
Ships can Blockade opponents by achieving an Immense Triumph Naval Battle. Blockaded opponents cannot exchange money or resources with other nations or alliances. This means that they cannot trade at all and cannot deposit or retrieve money from their alliance bank. They can however transfer money from their alliance bank to any other nation or alliance, provided they are a high enough rank within the alliance. Also, it is possible to redeem credits during a blockade.