Directorate of Intelligence
The Russian Space Launch Vehicle Industry: Looking Jo Foreign Sales for Survival
Sharply falling government purchases have prompted Russian space launch vehicle (SLV) producers to step up their activities to market their products and services abroad. The newly-created Russian Space Agency and Glavkosnros-foimerly charged with marketing SLVs abroad-will provide Utile help in this effort, forcing individual producers to go it alone. Large stockpiles and low prices would appear to give Russian SLVompetitive edge in the space launch market They face, however, serious obstacles including declining budgets and govemrnent orders, technical incompatibilities. Western technology transfer restrictions and other trade barriers, hi market-entry negotiations with the United States in October and November, the first item on the Russian agenda will be reductions in technology transfer restrictions. In exchange, Russian officials probably would agree lo follow US pricing policy but would resist an agreement that confines Russia toew launches per year. |
their resource-starved space industry.
In recent negotiations with the United States, Russia took the first steps to gain access to the commercial space launch services market. Negotiations will continue in October and November and, by the end of the year, the Russians hope to have an agreement that will allow them to bid on and win Western launch contracts. The Russians are seeking entry into the space launch market to earn hard currency and to provide new customers for
The Space-Industrial Complex in Decline
funding may be cut further next year.
Until the, the Soviet space industry enjoyed high levels of funding and priority access to skilled manpower and scarce materials. Since the demise of the USSR, however, the space industry ofaboutercent of the facilities areother CIS states have faced severe budget cuts; we estimate that government spending on hardware for space programs has declined in real terms by aboutercent since the beginningccording to Yuriy Koptev--director of the newly-created Russian Space Agency (RSA) (see inset, 'Creation of the Russian Space Agcncy)--
Creation of the Russian Space Agency
President Yel'tsui created the Russian Space Agency (RSA) inargely to coordinate and represent the various entities involved in the civil space program, including the Russian space-industrial complex, RSA's envisioned principal tasks are establishing civil space policy, controlling the space research and test institutes, coordinating programs that cross institutional and national boundaries, and acting as general contractor to the struggling space industries. However, its space missions must also satisfy the science-oriented Interagency Expert Commission, established under the same decree an advisory body. In the cases of dual military/civilian space systems-such as many existing communications satellite networks-tile RSA is required to coordinate efforts with the Ministry of Defense. The RSA does not directly control individual design and production facilities, but is supposed toontract system similar to the current US government's contracting procedures. According to Koptev, the agency will employeople and will reorganize the space sector to ensure the rational use of resources. Although it is the lead agency for inter-governmental projects, the RSA does not have muchole in sales efforts by individual oigani?ations, though each sale must be licensed by ihe RSAbbbjBbbbbj
5 to market Soviet and Russian space launchbeen unable to counter falling domestic demand with foreign sales. Glavkosmos' poor reputation, earned through years of marketing failure and recently imposed US punitive
sanctions, appear to have further eroded the organization's ability toccording to Koptcv, in late July President Yel'tsui "stripped" Glavkosmos of any authority to negotiate international contracts, except with India. Koptcv has made it clear that Russian SLV firms will have to step up their own efforts to win commercial sales,1
Producers On Their Own
Russian space firms are trying to distance themselves from the troubled Glavkosmos sales organization and market their products and services themselves (seeestern technology transfer restrictions, however, have largely prevented them from selling launch services on traditional boosters or attracting interest in plans to modify ballistic missiles for Launching commercial payloads (sec inset, "Russian Space Launcho date, Russia has launched only two commercial satellite payle foreignIndian-built remote sensing satellites8
Russian Space Launch Vehicles
The Russians are marketing the services of two basic types of launch vehicles. The first consists of traditional SLVs, developed for the former Soviet Union's space program. These SLVs are launched from three sites: Tyuratam, Plcsctsk, and Kapustin Yar. Most of theseas the Protonbeen used extensively toariety of Soviet civilian and military satellites and other payloads. (CNF)
Russian firms are also developing andecond type of SLV, derived from ballistic missiles. Some of these systems will be mobile, which theoretically allow the Russians to launch payloads from any location on the globe. Others will be launched from silos or other fixed launch complexes. None of theseas the "Start" derived fromechnology-have yet launched civilian payloads. Whilemissile-derived SLVs have the advantage of mobility, they are too small to launch the heavier payloads that dominate the commercial launch market
' Glavkosmos has been involved in the sale of Russian cryogenic engine technology to India, restricted by the Missile Technology Control Regimeespite US opposition and punitivewhich ban Glavkosmos from purchasing US technology or selling products and services to the US for the next two years-Glavkosmos chose not to cancel the deal. |
2 Ukraine's Dnepropetrovsk facility and the associated Yuzhnoye design bureau-which is involved in producing the Zenitooster as well as tlte air-launched system dubbed "Spacend an SLV based on dieCBM-also are heavily involved in marketing weir products and services. The Russian launchry likely will find itself competing with Ukraine in bidding for commercial launch contracts. I
If there were no technology transfer restrictions or other trade barriers, Russian SLV producers would have several advantages that could giveompetitive edge. First, Russian producers can tout their long track record and reputation for reliability, especially for traditional SLVs.ariety of sources indicate that many traditional
SLV producers have excess boosters stockpiled due lo overproduction. At the same time, ballistic missile producers have large stockpiles of missiles deactivated under arms control treaties. These excess SLVs and missiles, produced in the years befc inflation, could be an important source of low-cost hardware for sales abroad. |
Thus far, price quotes for existing Russian launch services have been below, and in most cases well below, prices offered in the West Protonaunch service prices, for example, have usually been roughly half of comparable prices offered by Western boosters, such as the French Ariane. Koptcv indicated in September that Russia's inexperience in setting hard-currency prices is exacerbated by the current exchangea typical Russian launch wouldillion if translated directly from rubles, well below comparable Western market prices. Price quotes by missile producers for converted lCBMs and SLBMs also have been relatively low. Russian SLV providers, however, are becoming more sensitive to charges of dumping and are more cautious about touting below-Western prices for their launch2rochure for the "Start" SLV stated that their prices would be low, but not low enough to be considered dumping. |
The leading Russian contenders for commercial sales, at least in the near term, probably will be producers of traditional SLVs. Of these, the Khrunichev organization will betrong position by virtue of its relatively developed market the Proton's ability to place payloads into geosynchronous orbit and its reputation for reliability and expenence--its Proton SLV has been in operation7 and3 percent success rate. The Proton is well-known among Western consumers, and the Khrunichev plant itself is relatively well-versed in Western business practices.
Samara Aerospacend Omsk Airframelso produce reliable, well-tested traditionalPlant l's Vostokooster launched the two Indian-built satellites--but overall the two plants' launch vehicles have not been as heavily publicized as Khrunichev's Proton, and the plants lack marketing experience. Scientific Production Association (NPO) Energiya'sooster, though well-publicized,iable market due to its very large size and correspondingly high cost Originally designed to launch the Buran space shuttle orbiter, thean launchilograms into low earthmore than necessary to launch the heaviest of communications satellites. Thes reliability has not yet been established since it has only flown twice. NPO Encrgiya also is0 million perprice too high to attract many customers. Moreover, the strap-on boosters used on there produced In Ukraine, which could disrupt supplies of the boosters if political relations deteriorate.
Of the family of missile-derived SLVs, the "Start" likely has the greatest potential to come to fruition due to the producer's heavy marketing of the project and Russian government support Acting Prime Minister Oaydar himself has stated his support for the "Start" project including it in Russia's state space program The Rokots another strong contender due to its relatively large payload capacity and the fact that it has already been tested once in its modified form. In early September, Koptev claimed to have two silos available at the Tyuratam launch center for Rokot commercial launches.
The ability of Russian firms to succeed in the commercial launch market will requireumber of obstacles. Technical incompatibilities between Russian launch vehicles and foreign payloads could pose major problems when processing and launching the payload and could raise the overall cost to near thatestern SLV. In some cases, the Russians could require Western payload producers to supply sensitive information about the payload that could raise technology transfer problems. In addition, the ground support equipment may be too primitive for the payloads of many potential Western customers. Russian payloads arc preparedarebi^^cjnvironmenL, rather than in environmentally controlled conditions as in the West. I
A lack of insurance underwriters in Russia also has hindered SLV producers' efforts. The Russians reportedly have lost at least one launch contract due to insurance concerns on the part of the customer. Inussian launch firmid to launch two Iranian communications satellites, even though they provided the lowest bidillion. The Iranians would have preferred to use the Protonut awarded the contractestern firm because they could not otherwise obtain insurance for their payload. In theumber of organizations underwrite launch contracts, primarily to insure the payload. Insurance premiums vary fromoercent of the payload's value. The Russians, however, have no experience in providing launch insurance to foreigners. In most cases, Russian launch vehicle providers haveree second launch if the first fails, but have not provided msurance^toj^ve^hepayload, generally the most expensive componentaunch. I
Another potential sticking point for some Russian launch vehicle producers is Kazakhstan's control of the Tyuratam launch facility, where the majority of Russia's commercial launches take place. Onay, Presidents Yel'tsin and Nazarbaycv signed an agreement on the joint use of Tyuratam for both civilian and military operations. In return for access to the facility, the Russians reportedly willortion of their profits from commercial launches with Kazakhstan. Kazakhstan, however, will have significant control over theas the right to change launchit currently lacks any significant physical presence at the facility to enforce such changes. The Russian press reported that President Yel'tsin had considered expanding the Plesetsk launchinaccommodate all Russian launch vehicles, but decided the cost would be prohibitive. Should political relations between Russia and Kazakhstan worsen, or were Kazakhstan to charge exorbitant fees for use of its facilities, producers of launch vehicles dependent on Tyuratam would beisadvantage. The Soyuzolniyand Cosmosan be launched from Plesetsk, but these SI-Vs are not as comnwrcially attractive as the ProtonLV, which cuirenUycanonly be launched from Tyuratam due to its payload and orbital requirements. |
Russian SLV producers must also survive current economic difficulties if they are to compete in the longer term. Declining budgets and production orders have pushed many Russian space enterprises to the brink of bankruptcy. Many firms are being squeezed, and are paying their workers with bank loans. Some organizations, such as NPO Encrgiya, occasionally have been unable to pay their employees at all. While gauging the prospects of any individual firm is fraught with uncertainties, we expect dramatic contraction and fundamental restructuring in the industryhole. As cost-
ankruptcy laws begin lo take effect, some may fail in thenext few
Finally, SLV producersumber of external obstacles that will seriously hinder their ability to compete. At this month's negotiations, it appeared that Western technology transfer restrictions imposed by the Coordinating Committee on Multilateral Export Controlshave blocked the Russians from bidding on Western launch contracts in the past-are the Russians' primary concern. The Russian delegation appeared Irritated that transfer res trie uons were not on the agenda. aaaaaaaaal
Producers of SLVs derived from ballistic missiles must also con lend with the START and INF Treaties, which strictly regulate the use of ballistic missiles These treaties, in addition to the Missile Technology Control Regimen international body which regulates the flow of ballistic missile technology to Third World countries, also will restrict Russia's opportunities lo launch SLVs based on mobile ballistic missile- -systems from outside its borders. These arms control treaties also are of major concern to the Russians because they would restrict tbe use of transportable launch systems, such as the "Start" |
In addition, Russian SLV producers will find the market extremely tight Producers of traditional SLVs will be comperingelatively small number of commercial launch contracts- -estimated ater year. Moreover, most launch contracts are concluded two to five years in advance of the launchlong timetruggling industry to wait In the present market there also is very little demand for the small -payload launches that missile-derived SLVs can provide. Finally, the Russian market position could be eroded if Western governments, in the course of negotiations, force the Russians to set prices
able to those offered in the West to keep Western producers from being undercut
Russian space officials also continue to be befuddled by Western trade and economic policies. At recent negotiations, delegation members appeared confused over the mechanisms involved in die forming and operation of international trade consortiums-such as the General Agreement on Tariffs and TradeTT)-to regulate trade. Russian officials are perplexed that their effort to compete in the market on the basis of low prices has left them open to charges of dumping. This lack of understanding of bask Western economic thinking could severely hamper Western efforts to reach agreements on "rules of ihe road" with Russia.
Impact on Future Negotiations
The issue of primary importance to Russian officials in future negotiations will continue to be reduction of Western technology transfer restrictions. The Russians likely will continue to view these restrictions as the primary obstacle to market entry and probably will be reluctant to move ahead on other aspects of the agreement until this issue is resolved. Negotiators are likely to be more accommodating, however, on the issue of launch prices. Koptev has stated that he would agree to "restrictions and conditions" on
the use of Russian Uunchvehicles and probably would be willing ton agrcemeni that fixes launch prices. I
Despite their desire to reduce or eliminate technology transfer restrictions, Russian negotiators will be reluctant to sign an agreement similar to the one between the United States and China. Such an agreement would eliminate technology transfer restrictions but, at the same time, limit Russiapecific number of launches perp lev and other delegates probablyirrrit on launches unfairly constrains Russian market access. I
A China-like agreement would also face strong opposition in Russia Traditionalists in the Russian government would consider any agreement which places Russiaerceived disadvantage as yet another example of Yel'tsin bowing excessively to US influence. SLV producers would further argue that the government should focus on removing trade barriers and other restrictions rather than on limiting launches. Producers might also fear that competition among Russian launch scrvic^jroviders would intensify if the number of launch contracts per year were restricted. I
Appendix: Major SLV Producers and Their Products
Salyut Design Bureau/Khrunichev FiU Missile Productionhe Khrunichev plant and its affiliated design bureau-KB Salyut-are attempting to win launch contracts for the ProtonLV to offset falling domestic orders. The Khrunichev plant, for example, reportedlytockpileumber of Protono last two to three years. Khrunichev also produced theCBM, currently undergoing testsonverted commercial SLV dubbedhe latest test of the convertedccurred inhrunichev also produces manned-space equipment and spacecraft. Khrunichcv's director. Anatoliy Kiselev, is reaching out direcdy to the customer. In some cases, Khrunichev uses KB Salyut as anKB Salyut, for example, is the organizationid for the upcoming INMARSAT launch contract using the Proton SLV. KB Salyut also is the lead organization supplying cryogenic upper-stages for the Indian launch vehicle program. Several other westernSouth Korea, Brazil, and Argentina-also have expressed an interest in the Proton. Khrunichev officials stated in April that they hope to earn0 million in profits from launch services over the next five years. Recent reporting, however, indicates that Khrunichev may bcexperiencinga severe financial crisis and is considering building civilian aircraft. I
Aerospacealso referred to as the Progresshe Aerospace Production Planthich is located in Samara (formerlyssembles the Vostokoyuznd MolniyaLVs as well as some Energiyaomponents. The plant has little experience in marketing its SLVs but has enjoyed some success in marketing other products, such as materials processing payloads. Little is known about the plant's financial health, although military procurement cuts likely are forcing the plant to seek other sources of funding to survive.
Airframe. Located in Omsk, the production facility for the CosmosLVs may see an opportunity for sales of its booster's services, especially in the light satellite market SLVs based on ballistic missiles, however, could compete for commercial payloads withonsiderably smaller payload capacity than other existing Russian SLVsilograms. Like Aerospace Planthis plant has little experience in marketing SLVs, and has relied heavily on Glavkosmos in the past
NPO Energiya. This Moscow-based scientific production organization (NPO) designed and manufactures the Energiyas well as the Buran space shuttle orbiter and other space-related components. Energiya's director, Yuriy Semenov, has been pushing sales of the Energiyaeavy-lift SLV-designed to launch the Buran-which is in danger of being canceled with the mothballing of the Buran program. Energiya employs0 people and has consumedercent of the Soviet civilian space budget in the past Semenov is desperate to make some sales in order to keep the Mir space station-which it now claims to control-in orbit and avoid conversion to low-tech items. NPO Energiya, however, has met with littic success in marketing itsooster. Semenov has been trying to woo the US into using theo launch components for Space Station Freedom as well as space exploration programs, such as Mars. NPO Energiya is also developing (he Energiya-M, whose payload-lift capability to geosynchronous orbit would fall between that of the Protonnd the EnergiyaH
Kompleks/Votkinsk Missile Production Association. Votkinsk is ihe final assembly plant for theCBM and formerly assembled theRBM, now diininated under the INF Treaty. With the assistance of. commercial joint stock company, Kompleks and the Votkinsk plant are marketing an SLV dubbedased on thendechnology. Kompleks officials claim that "Start's" inaugural flight will take place this December at Plesetsk. Cutbacks in military orders have forced the plant to seek lOfnmeruaJ ventures, bi addition to the proposed "Start" SLV.
have expressed interest in building equipment such as satellites at the"Start" has generated considerable foreign interest. The Frenchas well as sevem! Asianve requested further information on theapabilities ofnd in some cases have visited Russian facilities. We believe that an operational commercial version of "Start" could be available some time in the next few years.
Miass Design BurcauJKrasnoyark Voroshilov Plant. These organizations are attempting toarket for converted SLBMs. The Krasnoyarsk facility produced thend8 liquid-propcllant SLBMs, and currently produces the SSith the assistance of the Ural-Kosmos joint stock company. Miass and Krasnoyarsk are proposing modifying all four missiles for commercial launch purposes. The Zybysotand the Volnaould be launched from submarines--theould be launchedtationary ground-launch complex. The first test-launch of the Zyb occurred on To date, several countries, includmgBBTajfffBmartd Brazil, have expressed an interest in launches using converted SI JIM space launch vehicles for light satellites and micro gravity experiments. The Volna and Vysota were offered to Brazil last year as partid torazil)an-built satellite, but the contract later was awardedSjgpaf-Bjf:rm recently requested information on the Zybiced7 forrom Russian waters2aunch from waters-as well as the
DubnaRaduga Design Bureau. Raduga has designed supersonic and air-launched cruise missiles, as well as naval cruise missiles. The design bureau reportedly is workingew commercial project calledhich willingle-stage liquid-propellant SLV, air-launchedlackjack heavy bomber. The Raduga organization hopes that the Burlak will compete with the US Pegasus air-launch system by virtue of its superior launch capacity. Raduga appears to be rnarketing the Burlak on itsreportedly still needs considerable investment funds to proceed. We estimate that Burlak is rmlikely be to developed before thef ever.
Russian Space Launch Vehicles
Russian Fixed Ground-Launch Space Vehicles
(in Million 3)
to Low Earth Orbit
wo torn Plesetsk
Plantolnrvo (SL-6) GlerAosmos
Russian Launch Vehicles (Technology)
(in Million $)
to low Earth Orbit
Ground Launch Complex
Reliability calculated ever last tennly launched7
c Reliability bosed on in-flightlikely .
fallobust program for maintenancelmmtud
Figures ore not volid when compared with those of fixed-
launchare useful only in assessing potential reliability.Original document.