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Russia’s Space Industry is about to Regain Its Former Glory. Or Is It?

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After a protracted period of decline and several recent launch failures, Russia is aiming to restore some of its former glory by boosting space industry spending more than RUB1.6 trillion over the period of 2013-2020, which includes building new launch pad and developing rockets able to reach moon and even Mars. However, current state of the industry might prove too big of a burden to achieve these monumental goals.

More funding for the industry

Heavily subsidised by government funds, the Russian space industry weathered the economic downturn of 2008-2009 and enjoyed enviable revenue growth over 2007-2012. However, increased funding proved insufficient to modernize the industry, as it continues to suffer from an ageing workforce, “brain-drain” and structural and managerial weaknesses.

To overcome these problems, Russia will give its Roskosmos space agency a staggering RUB1.6 trillion injection over 2013-2020 in an attempt to regain its global stance, including money for completion of a new launch facility – the Vostochny cosmodrome in Amur region in Russia. According to the official federal budget, Roskosmos would receive RUB167.63 billion annually, which would bring Russian space spending to the same level as that of the European Space Agency. Nevertheless, this would still make up just a third of the money that NASA spends.

The first mission from the new Vostochny launch site is expected in 2015. Russia has been developing the Vostochny cosmodrome, seeking to reduce dependency on the Baikonur cosmodrome in Kazakhstan, due to recent clashes with local authorities. It is also expected that the first manned missions could be launched by 2018, with “super-heavy” rockets capable of missions to the Moon by 2020.

Problems still to be solved

The Russian space programme has suffered multiple launch failures in recent years, including the Phobos-Grunt probe, aimed for one of Mars’s moons. This was one of at least four failed Russian spacecraft launches since 2010.

Furthermore, the low quality of electronic components used by the Russian space industry needs to be addressed, through industry restructuring and increased funding. Faulty and obsolete certification processes have also been blamed for the loss or crippling of major Russian satellites, including Monitor-E, KazSat-1 and Persona. Faults surfaced during the failed launch attempts due to too much reliance on estimations and calculations rather than comprehensive ground testing. There is also a need for an industry-wide, inter-agency system of information exchange, to enhance the reliability and technical state of rocket and space technology.

On top of that, management problems and uneven funding have led to loss of capacity to manufacture quality components in Russia, due to dissolution of the supplier network. In 2011, a Russian spacecraft consisted of some 70-80% imported components. The current state of the industry requires drastic restructuring to change this.

To this end, Roskosmos has launched a major reorganisation and consolidation effort. However, the original idea to create a single state-owned corporation (similar to United Shipbuilding Corporation) was dropped in favour of multiple integrated entities, with the government owning majority stakes.

Industry consolidation proves insufficient

Industry-wide consolidation took place during the 2000s, as larger and financially healthier companies acquired former subcontractors. In 2007, with the approval of a presidential decree, GKNPTs Khrunichev absorbed the Voronezh mechanical plant, the Isaev chemical machine-building design bureau, the Dlina Moscow enterprise for hardware assembly and “Polyot” Production Corporation. In 2008, Khrunichev also acquired a majority stake in the Proton-PM propulsion developer in Perm. In 2009, presidential decree gave Khrunichev complete ownership of the KB Khimmash design bureau in Voronezh.

One of the most controversial acquisitions was RKK Energia’s takeover of NPO Energomash, Russia’s leading developer of rocket engines. NPO Energomash reportedly resisted the move, claiming it could hamper the company’s competitiveness in bids with industry rivals, and also claimed potential loss of innovation ability. RKK Energia took over NPO Energomash in parallel with its effort to acquire a majority stake in the bankrupt Sea Launch, which it took for significantly lower than market price. By taking over NPO Energomash, RKK Energia could also control the price of engines for Zenit rockets used by Sea Launch.

Roskosmos has continued the integration of Russian space enterprises into larger holdings. In 2013, GKNPTs Khrunichev is to absorb Pilugin NPTs Avtomatiki and Moscow-based OKB Mars. At the same time, TsSKB Progress is set to integrate with NPO Avtomatika and NII Command Devices. Previously, TsSKB Progress absorbed its major contractors – NPP Opteks in Zelenograd and OKB Spektr in Ryazan.

Even large companies like NPO Lavochkin were made into acquisition targets by RKK Energia or ISS Reshetnev. Officially, the move was intended for industry consolidation and the ability to handle the lunar landing programme; a more likely reason is Lavochkin’s failures in the development of Phobos-Grunt and other projects.

Although increased funding and industry-wide consolidation measures are being implemented, it is doubtful whether the industry will achieve all of its goals. Problems and uncertainties remain and success will be subject to Russia’s ability to curb corruption and “brain-drain” in the industry. Robust funding is undeniably a major contributor to the industry’s prospective success, yet given
its current precarious state, proposed timeline does seem too optimistic, especially concerning its aims to be able to go to the moon by 2020 and to Mars by 2030.

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