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The Russian Space Industry at 56: a Canadian Opportunity Mark Walker

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The Russian space industry at 56: a Canadian Opportunity Mark Walker Norman Paterson School of International Affairs, Carleton University, Ottawa, Canada 1 Abstract After stagnation in the 1990s, which saw little or no development, the space industry is once again an executive priority in Russia. This paper proposes an outline of the Russian space industry, its international engagement, and areas where a space-trading nation such as Canada can engage it. The research design is based on secondary research focusing on literature published within the last five years. First, it will examine government policies that affect the Russian space industry, as well as its areas of focus and specialization. Second, the paper will map out the international activities and engagement of the Russian space industry for a better understanding of its global integration. Lastly, future direction and developments within the industry will be considered, and what this means for Canadian businesses and policy makers. This paper will derive research from Russian and Canadian government websites, news articles, press releases and articles from peer reviewed journals. The sources used are varied in order to form the clearest perspective possible. Two scholarly journals, Astropolitics and Space Policy, are referenced in particular for their published works on Russia’s modern space industry. This paper will contribute to a broader understanding of the Russian space industry, and the opportunities it can provide a space nation like Canada. 2 In 1957, Russia launched Sputnik and took the first step into space. 56 years later, it has a well- developed and diverse space industry. In the pursuit of better technologies, business and relations, Canada, and the global space industry, must be aware of the changes that are taking place in Russia. The Russian space industry is being restructured, opened for investment, and is the subject of high-profile engagement, both domestically and internationally. The executive level government agency, the Russian Federal Space Agency, also known as Roscosmos, administers and directs the Russian space industry. Roscosmos has been charged with funding and implementing the Russian Federal Space Program’s 2006-2015 “ten-year plan”.1 This ten- year plan includes large capital investments and a vertical reorganization of the domestic space industry. Additionally it seeks to maintain Russia’s international position as the world’s preeminent launch vehicle provider, and provide a better-developed domestic satellite industry.2 Over the last decade, the Russian space industry has become globally involved and integrated. Now, Russian firms regularly enter into partnerships with European and Asian firms. Of specific note are the government and private firm relations that Russia has with the European Union, India, and China, where technology sharing and cooperation regularly occur. There are opportunities for Canadian firms to get involved in the Russian space industry. This paper therefore proposes to outline and examine current changes in the Russian space industry, its international engagement, and any opportunities that are available to the Canadian space industry. 1Eligar Sadeh. Report: Towards a national space strategy. Astropolitics, 8: 73-112, 2010, 102 2 Sergey Ponomarev. The Space Capability of Russia is a Strategic Instrument. Security Index, No.2 (95), Vol. 17, 2011 3 The Russian Federal Space Agency, also known as Roscosmos, administers and directs the Russian space industry. The head of Roscosmos is Vladimir Popovkin. Roscosmos is an executive level agency run by the President of the Russian Federation. The policies and activities of the Russian space industry, as they fit into Russia’s strategic planning, are coordinated and directed by the Government Military-Industrial Commission.3 Its Chair is Dmitry Rogozin, who is also Deputy Prime Minister of the Russian Federation. This Commission is composed of 15 permanent members and 45 non-permanent members. The Head of the Russian Federal Space Agency, Vladimir Popovkin is a permanent member of the Commission. In its mandate, Roscosmos is responsible for administering executive level policy and legal regulation, providing state services, international space cooperation and joint projects and programs in space, space research, missile and space technology for military purpose, strategic missile systems, and general coordination of Russia’s Baikonur space centre operations.4 There is some question as to Roscosmos’ strategic orientation. Different sources are unclear as to whether or not it engages in military research and development.5 In 2006, the Government of Russia began restructuring and funding increases for its civilian space industry. Roscosmos is administering the restructuring and funding increases. Funding for the Russian civilian space industry according to various sources, is somewhere between $1.3-2.4 billion USD a year.6 From 2006-2015, Roscosmos’ total budget is expected to 3 Government of the Russian Federation. “Government Military-Industrial Commission.” Official Website of the Government of the Russian Federation, http://government.ru/eng/gov/agencies/134/ (accessed Oct. 31, 2012) 4 Government of the Russian Federation. “Federal Space Agency.” Official Website of the Government of the Russian Federation, http://government.ru/eng/power/106/ (accessed Oct. 31, 2012) 5Bertrand de Montluc. The new international political and strategic context for space policies. Space Policy 25 (2009) 20-28, 24 Bertrand de Montluc. Russia’s resurgence: Prospects for space policy and international cooperation. Space Policy 26 (2010) 15-24, 15 6 de Montluc, 2010, 19 4 be between $9.3billion7 and $12 billion USD.8The Russian Federal Space Program’s ten-year plan, which began in 2006, involves vertical integration of smaller supply firms and mass manufacturing plants. This sort of vertical integration is being undertaken to internalize the market for intermediate products in the Russian space industry. This allows firms in the industry to reduce contracting costs, and subsequent monitoring and haggling costs.9The Russian Federal Space Program’s ten-year plan envisions approximately 11 integrated corporations involving around 70 independent enterprises.10 Russia’s restructuring program of its space industry focuses on its largest companies. Khrunichev State Research and Production Space Centre produces satellites and launch vehicles; Reshetnev ISS produces satellites; Korolev Rocket and Space Corporation “Energia” produces human spacecraft and the Block D upper stage launch system; the Lavochkin Design Bureau makes lunar and planetary probes, as well as small satellites; NPO Energomash makes rockets and rocket propellants.11 In the last five years, the Russian State Technologies Corporation has begun acquiring large and controlling stakes in many Russian space companies such as NPO Mashinostroyenia12 and United Engine Corporation,13 steadily acquiring a large share of the Russian space industry. 7 Ibid. 8 Alexei Arbatov, 2011. “Russian Perspectives on Spacepower,” in Toward a theory of Spacepower, edited by Lutes and Hays. Washington, DC: National Defense University Press, 442 9 Richard E. Caves, 2007. Multinational Enterprise and Economic Analysis, Third Edition. New York: Cambridge University Press, 16 10 Makarov and Payson. Russian space programmes and industry: Defining the new institutions for new conditions. Space Policy 25 (2009) 90-98, 94 11 James E. Oberg, 2011. “International Perspectives: Russia,” in Toward a theory of Spacepower, edited by Lutes and Hays. Washington, DC: National Defense University Press, 423 12Russian Aviation. “A “Superholding” for assimilation of hypersonic technologies will be created in Russia.” http://www.ruaviation.com/news/2012/9/20/1220/ (accessed Oct. 31, 2012) 13 Press Releases. “Russian Technologies State Corporation at the 10th International Aviation and Space Salon MAKS-2011.” Russian Technologies State Corporation, 2011 http://www.rostechnologii.ru/en/archive/0/detail.php?ID=10364 (accessed Oct. 31, 2012) 5 An example of the effects of this vertical restructuring effort is Khrunichev State Research and Production Space Centre. Khrunichev is one of the largest companies in the Russian space industry. It has recently acquired production of the GLONASS satellite technologies and is the Russian Federation’s largest launch vehicle provider. Khrunichev has been producing rockets since 1959. Its focus is on full-scale rocket production of the current Proton rockets and upcoming Angara family of rockets. It also produces satellite systems, the most noteworthy being the GLONASS satellite system. In five years, as part of the vertical restructuring initiative, Khrunichev has increased production 2.5 percent,14 due to the vertical integration of several parts of its supply chain. It has contracts with 45 companies in 22 different countries.15 While vertical integration of the Russian space industry is currently proceeding, there does not appear to be a consensus in the literature as to what the industry’s structure should finally become. There is equal uncertainty regarding the industrial policy of the government of the Russian Federation. Ultimately, it is unclear whether the Russian space industry will be entirely vertically integrated, entirely horizontally integrated, or some mixture of both.16 Russia’s space industry is in the midst of restructuring and re-alignment. It has had many impressive past accomplishments. However, in the 1990s it
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