FLY ME TO THE MOON, AND MARS; SHAKE-OUT IN RUSSIAN

C O N F I D E N T I A L SECTION 01 OF 03 MOSCOW 003684 SIPDIS SIPDIS DEPARTMENT FOR OES/SAT (HODGKINS, WALKER),EUR/RUS (GREENSTEIN) STATE PASS TO NASA (BARRY) E.O. 12958: DECL: 07/27/2017 TAGS: TSPA ESA KSCA TSPL RS SUBJECT: FLY ME TO THE MOON, AND MARS; SHAKE-OUT IN RUSSIAN SPACE SECTOR REF: A. MOSCOW 2927 ¶B. MOSCOW 1637 ¶C. 06 MOSCOW 12582 Classified By: EST Deputy Counselor Kristina Kvein. Reason 1.4 (b),(d) ¶1. (SBU) SUMMARY: On June 22 the president of Energia, one of the major Russian space corporations, was suspended by the Board of Directors at the instigation of the Federal Space Agency Roskosmos in a reported dispute over the direction of space exploration. He had urged more market-oriented policies aimed at increasing revenues, and he promoted exploration of the Moon and future flights to Mars in contrast to the current Federal Space Program 2006-2015, which emphasizes continued operation of the International Space Station. This dispute arose as Roskosmos reorganizes the Russian space industry to consolidate more than 100 enterprises into 6 to 10 holding companies by 2010. The process of consolidation challenges the space industry to become a major competitor on the global market for products and services. END SUMMARY Reconfiguring the Space Industry -------------- ¶2. (U) Roskosmos,the Federal Space Agency, has been working since last July to implement the government-approved plan of reorganization for the Russian space industry to consolidate by 2010 over 100 manufacturers, research centers and design bureaus into a small number of joint stock holding companies whose stock is owned by the government and private investors. The initial holding companies will be created from a merger and reconstitution of the six existing major space enterprises and four new enterprises that will encompass nearly 60 percent of the space industry. The six current enterprises are the Rocket Space Corporation Energia, Khrunichev Research and Production Space Center, Mashinostroeniye Research and Production Association, the Russian Institute of Space Device Engineering (RIISD), Progress Design Bureau and Information Satellite Systems. ¶3. (SBU) Prime Minister Fradkov said the consolidation was designed to bring state unitary enterprises together with private investors to double Russia's share of the global space equipment market--estimated by Roskosmos head Anatoliy Perminov at $20 billion-- from its current 11 percent to over 21 percent by 2015. The first efforts consolidated Khrunichev from a state unitary enterprise to a 100 percent government-controlled joint stock company that will primarily produce heavy rocket launch vehicles. Later in the year, 10 enterprises were consolidated into Information Satellite Systems, with the Reshetnev Research and Production Association for Applied Mechanics (NPO PM) as the parent enterprise. By December Perminov announced that the other four enterprises-- Mashinostroeniye ("Machine-Building), Progress, Energia and RIISD --had been consolidated. ¶4. (U) At the outset of the consolidation, representatives of Roskosmos, the Russian Academy of Sciences and business and academic leaders met in Moscow August 27-31 at the spanking-new Presidential Center for Administration Studies for the Fifth International Aerospace Congress, which was dedicated to the 20th anniversary of the orbital launch of Space Station Mir. Scientists and promoters presented papers on exploration of the Moon and Mars in the near future and specialized topics of aerospace technology. The Aerospace Congress hailed the achievements of Soviet and Russian space exploration and pointed to a bright future, but concerns emerged at Roskosmos soon afterward as the GOR planned for the next decade in space. Explosive Fuel and Volatile Personalities -------------- ¶5. (SBU) The space program suffered several devastating losses in the past year. On July 27,2006,a Dnepr rocket crashed seconds after launch from the Baikonur cosmodrome, destroying 18 satellites and spilling toxic rocket fuel over Kazakh territory. (NOTE: Russia accepted liability and paid Kazakhstan about $1,000,000 in damages after Kazakhstan cut off launches from Baikonur, which is the only manned-vehicle launch site for Russia. END NOTE) In October President Putin issued a decree firing Alexander Medvedev, the director of Khrunichev. According to sources at Khrunichev, this was a result of the October 8 disintegration of the European Space Agency CryoSat satellite and other failures of Khrunichev MOSCOW 00003684 002 OF 003 products. On January 30 a Zenit rocket exploded on the Sea Launch commercial satellite platform in the Pacific Ocean, only the second failed launch by the Sea Launch consortium of Russia, the United States, Ukraine and Norway. An investigation panel determined in March that the fault appeared to be in the upper stages of the RD-171M rocket engine, which is manufactured by Energomash, the Russian rocket production company. ¶6. (SBU) On January 17, Roskosmos took the unusual step of singling out Nikolay Sevastyanov, President and chief designer of Energia, for harsh criticism for promoting "untried technical ideas, contrary to the national space policy." Sevastyanov has a reputation as a voluble booster of Russian space efforts, often going beyond the official Space Program 2006-2015 announced by Roskosmos, which favors further development of the International Space Station, even if Russia goes alone after the international program ends. At the Aerospace Congress Sevastyanov presented his proposal for flights to and exploration of the Moon and mining of helium-3 from the lunar surface as a potential fuel for earth-based nuclear reactors. Sevastyanov's ideas still held sway as Roskosmos meanwhile continued to push forward with the European Space Agency on plans to study the effects of 500 days isolation on a team of volunteers, replicating a human voyage to Mars. ¶7. (SBU) On Friday June 22 Roskosmos, which controls 38 percent of the shares of Energia, engineered a late night vote of the Board of Directors to suspend the powers of Sevastyanov. The newspaper Kommersant reported that the ostensible reason was disagreement with Perminov on the direction Energia wanted to take in developing space programs. Nevertheless, Sevastyanov defended his expansive programs in a June interview with Izvestiya and cited his record of nearly doubling the revenues of Energia during his two years at the helm.Sevastyanov's suspension was controversial. Seventeen top managers of Energia signed a letter to the Board of Directors protesting that the action "contradicts the law and violates the charter of the corporation." The official government newspaper Rossiysskaya Gazeta reported on June 26 that Putin had signed off on the Roskosmos decision. ¶8. (SBU) An extraordinary meeting of shareholders is scheduled for July 31 to vote on a new head of Energia, and Roskosmos is expected to have the votes to install its choice. On June 18 the GOR advised the Energia general assembly of stockholders to select Dr. Vitaliy Lopota. Lopota is the General Director-Designer of the Central Scientific and Research Institute of Robotic Engineering and Cybernetics in St. Petersburg. GLONASS Strives for Liftoff -------------- ¶9. (SBU) The other major thrust of the Russian Space Program is the Global Navigation Satellite System (GLONASS),which is the Russian response to the U.S. Global Positioning System (GPS). (Ref B) The first satellites of GLONASS were launched in 1982, but by the late 1990s the system was no longer functional, as many satellites had reached obsolescence and were not replaced. In 2001 Roskosmos began a renewed program to deploy satellites of the GLONASS type, and by 2006 had deployed between 12 and 15 satellites. In December, three satellites were placed in geostationary orbit, bringing the current total to 14 or 15 operating satellites. (NOTE: Several Russian newspapers reported in April that as many as seven of the satellites had operational problems, raising questions about the overall configuration of the system. END NOTE) The director of Reshetnev NPO PM, which manufactures the GLONASS satellites, told EST in June that with two launches of three newer model GLONASS-M satellites in September and December, respectively, 18 navigational satellites will be deployed by the end of 2007, sufficient for initial operation of the GLONASS system. (Ref A) In 2008 Roskosmos will launch six more satellites of the GLONASS M category, effectively providing global coverage. ¶10. (U) At the Nineteenth SvyazExpoCom held May 14-18 in Moscow, among the advanced telecommunications offerings, numerous manufacturers displayed GLONASS- and/or GPS-based receivers, including the Russian Institute of Radionavigation and Timing (RIRV) and exhibitors from various foreign countries . They quoted prices to us from $220 for a MOSCOW 00003684 003 OF 003 Taiwanese GPS receiver to 15,000 rubles (approximately $600) for the basic Hyundai model with a 2-inch display screen. The foreign models are offered in Russia on the Internet and through local distributors, but no foreign manufacturer has established a presence in the country. The RIRV models are available at electronic stores in major cities. Only the GPS receivers are currently functional in Russia, and representatives of the manufacturers told us that due to limitations in Russian mapping capabilities, they were operational only in the European sections of Russia and in a narrow strip of Siberia stretching to Chita. (NOTE: Then-Defense Minister Sergey Ivanov lifted restrictions on use of global navigation systems at the beginning of 2007, ending the longstanding prohibition on locating objects within a range of 30 meters. END NOTE) Several exhibitors told us they had not yet designed a GLONASS receiver because they were not certain when the system would be deployed. Changes at Roskosmos? -------------- ¶11. (SBU) The changes at the top of Energia and Khrunichev presage future changes in a unified space industry. The Russian space industry employs approximately 243,000 workers, according to Roskosmos head Perminov, but he has stated that their number will be reduced as reforms proceed. He reported in December that the federal budget allotted 24.4 billion rubles ($980 million) for the space program in 2007 out of an overall budget of 36 billion rubles ($1.3 billion) for Roskosmos. The Federal Space Program contemplated spending 305 billion rubles ($12 billion) in the period 2006 to 2015. At the present time, 70 percent of Russian space exports are reported to be in the segment of launching services, where they hold an estimated 40 percent of the $2.5 to $3 billion world market. However, the primary area of growth in space products by 2010 is expected to be commercial satellites, navigation equipment and services, satellite communications and remote Earth observations, with the total market growing from nearly $100 billion up to $300 billion. In contrast, the market for launching services is expected to grow slowly or to remain stagnant. The consolidated Russian space industry will be trying to break into a market that is growing most strongly in the areas where it is weakest. ¶12. (C) In May 2006, several newspapers ran a story that Perminov would be replaced as head of Roskosmos by a relatively unknown middle level official. Contacts at Roskosmos scoffed at the idea, and the head of the protocol office told EST "there have been rumors that Perminov would be fired since he walked in the door." Since that time, Perminov has seemingly lined up support from Sergey Ivanov, First Deputy Prime Minister, who is in charge of the space program. In March Ivanov told assembled officials of Roskosmos that the space industry would lead Russia into a future of technological achievements, but he has coupled such predictions with stringent requirements for successful performance. Several newspapers reported that Perminov consulted with Ivanov before suspending Sevastyanov. It is likely at this point that Perminov depends on Ivanov to retain his position at Roskosmos. ¶13. (C) COMMENT: Roskosmos has been a reliable partner in the International Space Station and other joint ventures, such as space medical and biological experiments. (Ref C) Under Kremlin orders to reform, the Russian space industry is facing severe challenges as it converts from a centrally controlled and government-supported collection of related enterprises to a market-driven group of public entities with sometimes competing interests and a limited claim on the federal budget. The new structure does not ensure transparency, nor does it respond readily to market forces. In addition to the inherent dangers of rocket launches, the industry must contend with the vagaries of the marketplace and the political climate, These changes come as Roskosmos is designing the Russian space program for 2016 to 2025. Thus far, the forces of orthodox thinking have won out over more radical risk-takers. RUSSELL