2 Introduction

Many people in various countries are concerned with a question, what is a real status and prospects of the Russian space program? Is it going to collapse soon or will it survive? If it survives, which way the new Russian space policy may go and how that would influence a global scene of space activities?

One immediate practical aspect of such questions is whether it is worth relying on cooperation with Russia in on-going or future projects (if its space infrastructure is about to collapse)? On the other hand, is it wise to support it in any form (if there is a chance for return to confrontation)?

Difficulties in answering these and other similar questions are complicated by problems in obtaining sound information about what exactly is going on in Russia and, perhaps the most difficult, in correctly interpreting the available data, which are typically scattered and subjective.

This paper represents an effort to watch the Russian space program from a close distance, while remaining independent from its establishment and thus able to critically analyze official statements and reasonings behind them.

The paper considers status of the space activity in Russia, including:

• financing of the national space programs;
• operational status of national space systems;
• situation in the space industry.

To outline implications of the above to global space cooperation and competition, the paper discusses:

• perceived role of international activities for survival of the Russian national programs and;
• internal political environment for international space projects, particularly prospects for drastic changes of a state space policy after upcoming elections.

2 Status of space activity in Russia

General situation in the Russian space program is determined by two fundamental factors: the end of the Cold War and on-going economic transformations. The former factor results in several features, which are common to all participants of the Cold War. However, the latter causes substantial specifics of the current Russian situation.

Budgeting

In the former Soviet Union missile and space programs enjoyed very high priority and were appropriately supplied with money and materiel resources. A demilitarization of the economy with the end of the Cold War lowered priority of missile and space programs, while economic crisis, associated with break-up of the state planning system, decreased a total amount of resources, available to the government.

Figure 1, summarizing officially released data on the Soviet/Russian space budget between 1989 and 1995, clearly shows drastic decline of funding immediately before and after the break-up of the Soviet Union in 1991. According to Russian Space Agency (RSA), funding for space program in real terms fell more than 5-fold, from equivalent of 3.9 to 0.69 billions dollars and relatively to GNP it declined from 0.73 to 0.29 per cent.

Figure 1. Space budget of USSR/RF[1].

Precise interpretation of these figures is complicated by two factors. First, prior to 1991 an exchange rate of ruble/dollar was not fully representative because of the closed nature of the Soviet economy. Second, figures before 1991 relate to the whole USSR, while figures after 1992 relate to the Russian Federation, which has significantly smaller overall budget, but, on the other hand, possesses less number of space industrial and research organizations.*

Nevertheless, the available data leave no doubt, that the financial situation of the Russian space program is extremely tough.** The U.S. NASA with its expected budget cuts of some 12% in 5 years looks like an etalon of steadiness and wealth from a Russian perspective.

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* As will be discussed below, official statements, including budget calculations, should be taken with a grain of salt. The outcome of those heavily depend on when, by whom and with which purpose they are done.

** RSA and Space Forces claimed, that they need nearly triple as much money as they have been allocated in FY'95 budget (5860 millions rubles vs 2551 millions).

 

Status of space operations

One of the most obvious consequences of budget cuts is a decline of procurement, which is observed in decreased launch rate. Figure 2 shows, that in 1993-1994 Russian launch rate fell to one half of the level of mid-80s.

Figure 2. Space launches in 1983-1995.

The launch rate, however, is not an unambiguous indicator, since it may diminish because of increased operational longevity of spacecraft, as it was the case with the U.S. space systems in 60s. More representative is the status of operational space systems.

Table 1 lists all Russian space systems currently in use and shows their replenishment during 1994 and 1995.

The table demonstrates, that practically all space systems, inherited by Russia from the Soviet Union, are still maintained and the launch rate declined primarily because of less frequent replacements in operational constellations.

Rarer replacements cause aging of constellations, with a growing number of spacecraft operating beyond their warranty period. If earlier spacecraft tended to be replaced as soon as warranty expired, these days customers are forced to use them as long as they actually perform.

Impact on R&D

While decline in procurement is easier to observe, budget cuts have yet more profound impact on advanced research and developments. Table shows, that the R&D segment of the Russian space program suffers even more than routine operations. If such a trend will persist for few years, it will result in a loss of innovative capability and will block development of new, advanced systems in a future.

Comparison of national space program performances in 1989 and 1995.

Source: Hearings at the Committee on Geopolitics of the State Duma of Russian Federation, 23 Feb 1995.

Note, that the year of 1994 featured as many as 5 maiden launches of new spacecraft (see Table 1). Those spacecraft, however, were under development for a long time and were delayed for several years by budget shortfall. For space systems, which originally expected to be completed by now, timing of completion shifts to the year 2000 and beyond.

Industrial Base

Unequaled decline of the state financing, associated with the end of the Cold War and with transformation from planned to market economy, put Russian space industry in an unprecedentedly difficult situation. The volume of production in rocket and space industry in 1994 fell to 30% of the 1989 level.

The problem is not only an abrupt decline in state orders, but also late and/or incomplete payments of even these short money by the Government.

Because of peculiarities of the Russian transitional economy the Government is unable to raise a full amount of planned revenues. As a result, it can not pay enterprises in time/in full for their work under state orders. Naturally, the heavier an industrial sector depends on state orders, the more it suffers from Government's inability to pay for its obligations, with the space industry standing high in this list.

The impact of not-payments to companies is the more severe, the deeper they are down in a production cooperation chain.

A prime contractor, say, Progress Plant has to cope with short or delayed payments from RSA or Space Forces for its Soyuz launchers. When it eventually gets some money, it is not in a hurry to pay its subcontractor, say, Voronezh Mechanical Plant for the 3d stage engines. Similarly, VMZ does not pay NII of Physical Measurements, for supplied engine sensors, i.e. sub-subcontractors appear in a yet worse position.

Three dozens enterprises, subordinated to RSA, had a cumulative debt of about 500 billions rubles (as of this February), while the Governments owed them 470 billions [2]. Figures for individual enterprises varied from 5 billion rubles to the highest of 170 billions at Lavochkin NPO [3].

Level of salaries is extremely low. The most unpleasant feature is that these salaries, which traditionally were higher than in non-defense industries are now some 25% lower, than the average in Russia (see Figure 3).

Figure 3. Average monthly salaries

Average salary in space industry in1994 was 192 thousands rubles [4], what was equivalent to about 80 dollars. In February of 1995 average salary was 296 thousand rubles, but its dollar equivalent decreased to 70. Even these salaries are often delayed for several months because of not-payments from customers

Note, that an acting Russian legislation subjects an enterprise to a progressive additional taxation, if it pays its workers, employed on state orders, more than 6 "minimal salaries". Since the official "minimal salary" is currently equivalent to about $14 (a cost of monthly ticket in Moscow subway), this limitation prompts enterprises to find other ways to pay people and escape from formal accounting.

Consistent with the above is a profound loss of personnel in space industry (as well as in all state-dependent defense-related industries). By the end of 1994 employment in space sector decreased to 64-66% of the 1989 level (to about 600 thousand people).

There is also a significant hidden unemployment, with lots of people using their formal job affiliation just as an anchor and spending most of their time pursuing more profitable businesses.

An R&D sector suffers more severe reductions, i.e. design, testing and research divisions lose more personnel, than manufacturing units. Figure 4 displays, that the cumulative loss of "qualified employee" has reached 50%.

Figure4. Decrease ofemployment in the Russian space industry.

Young people are also more active in quitting job in space sector and more reluctant to join it. Hence, there is a problem of aging of personnel* and growing threat to succession of technological culture and know-how.

Note, however, that everything said above about differences in situations of individual companies, depending on their place in production chain and their individual role, remains true with respect to personnel losses. Prime contractors experience lower losses, typically about 25%. Energia Corp. reported a loss of about 7500 of its peak employment of some 35000 people, i.e. about 20%. Khrunichev State Space Center did not claim any significant losses and even known to re-hire experienced personnel from other companies to augment perspective developments.

There is also a difference depending on location of companies. For companies, located in large cities (Moscow, Saint-Petersburg), observable loss is higher. For those, located in dedicated "closed towns" (like NPO PM in Krasnoyarsk-26), hidden unemployment is more significant. In these confined enclaves employees of defense-related companies simply do not have other place to go for a job.

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* For example, at Design Bureau of General Machine-building (KBOM), average age of personnel reached 49 years.

 

2 Implications for international space cooperation and competition

Insufficient financing of space sector by the Government prompts the Russian industry to search for a non-governmental support. Such a support could be looked for either within the country or outside. Both trends are observed.

Many space companies attempts to stick to those sectors of Russian economy, which are cash-rich (the latters being, by large, oil and gas industry). Such proposals primarily include equipment for oil and gas industries, but at the top of this trend one can see the Yamal project (led by Energia Corp.) to deploy communications satellites to serve gas-producing facilities, and a proposal of a new Riksha launcher to use methane as a fuel (Energomash NPO, Makeyev KB et al.).

Nevertheless, non-traditional internal markets are not big enough to employing all capabilities of the space sector, which became idle with decline of state orders. On the other hand, the domestic private sector is not mature enough to invest into long-term high-tech projects. Therefore cooperation between the Russian space industry and private sector proceeds mostly in such forms, as leasing out a floor space of the former to the latter.

In this situation foreign contracts appear as an important mean for staying afloat.

Attempts to sell some products or services at the global space market to substitute for a short governmental payments are straightforward in their rationale.

International non-commercial projects may also prove vital for at least some segments of the Russian space complex. In particular, participation in a high profile international project (like Mars'96 or the International Space Station), gives to appropriate Russian institutes and companies an additional foothold and leverage to press the Government for support, quoting an importance of the project for making Russia's image at the international arena.

However, from a viewpoint of foreign partners there are concerns, associated with the current Russian situation. The essence of these concerns is two-fold:

• how viable is the Russian space program and
• what is going to happen to it and to Russian state policy in general after upcoming elections?

Dualism of Russian official statements

Severely confusing to outside observers is a dualism of statements by Russian officials about the status and prospects of the national space program.

There are numerous statements by various Russian officials, saying that at the current level of state support the national space infrastructure will survive for no more than 2-3 years and unless urgent corrective actions are immediately taken, its degradation will become irreversible [5].

On the other hand, at other occasions same officials say, that "the situation is hard, but we are doing our best and are sure, we will survive these difficult times" [6].

To get a key to this uncomfortable ambiguity of statements, one has to take into consideration, where and for whom the statements are made.

Dire predictions are addressed to the Government or the Parliament with an intent to get more money or to resolve other urgent issues. The "all-right" posture is intended for foreign partners, to whom Russian officials want to look good in order to preserve their willingness to cooperate with Russia.

The desire to look poor and ill for an own government is not something unique. However, in modern Russia this approach is particularly stimulated by a circumstance, that the Government operate "in a regime of a fire crew" and needs a disaster call to make a decisive action.

Unfortunately, applying this approach, Russian officials may underestimate effectiveness of modern information highways. It is quite possible, that their dire predictions reach ears of Westerners faster and easier, than hearts of domestic financial authorities.

Nevertheless, which of the two contrary statements is right?

Viability of the Russian space potential

First of all, speaking about the viability of the Russian space potential it would be incorrect to speak in general.

As said above, the situation in the space complex of Russia is uneven. It varies both "horizontally" -- between various companies of a similar business, between various regions, and "vertically" -- between different levels of production cooperation.

For example, the Buran program for all practical purposes is dead. The Mir program keeps afloat thanks to an established backlog of international missions. The Proton launch venture is not simply alive, but is so well as to afford modernizations and new developments.

Significant part of these "horizontal" variations can be attributed to a "fight for life" with "survival of the fittest". This is something, which must have occurred with transformation of general principles of state policy and reconsideration of priorities in space.

A "vertical" aspect is more worrisome. Break-up of lower tiers of production cooperation could ruin a project, despite its lead contractor might appear doing fine until the very last moment.

This problem was already appreciated by RSA in 1994, when it can not get Soyuz launchers from Progress Plant, first because there was no money to pay Progress itself and then because Frunze Production Assn. was not paid for engines for those launchers.

One way RSA deals with this problem is a targeted "program oriented" financing, coming directly from RSA to contractors at different levels (as opposed to funneling money through the full chain of subcontractors). These measures by the state authorities are amended by actions of companies themselves. Lead contractors gradually restructure their cooperation, with more components manufactured internally and some poorly doing subcontractors being replaced by newly emerging ventures or by foreign suppliers.

Another aspect of viability considerations stems from the abovementioned disparity between R&D and serial production. Prevailing cuts of R&D financing (as well as of associated personnel) means, that ability for future indigenous advanced development is being lost, while capability to "clone" articles, based on once developed technology and hardware, remains.

Note, that it is this available technological backlog, which is essential for on-going international cooperative projects and for initial penetration to international markets.

For advanced projects the prevailing decay of innovative capabilities is a threat. However, the purpose of the current phase of international activity for Russian participants is to ensure their own survival. The success of this phase would enable them to save or recover their capabilities for advanced developments (which will be necessary for them to stay in international business further).

This approach is seen in actions of Russian companies, which were successful in getting a foothold in foreign space markets. Khrunichev Space Center, having signed first contracts for commercial launches, invests money into upgrades of their Proton launcher, what would allow to better serve foreign customers. That development also fits needs of the national space program -- and gives new job to designers of Salyut Design Bureau, the R&D arm of the Center.

Similarly, sales of rocket engine technology by Energomash NPO to the U.S. will not only help to boost performances of next generation of American launch vehicles, but should also enable Energomash to upgrade engines for the Russian launcher fleet (e.g. new RD-120M, initially offered for the U.S. EELV, are later expected to power Soyuz-2/Rus, Russian evolutionary launcher, instead of the veteran RD-107/RD-108 family).

So, for the near-term projects the key problem is ensuring of uninterrupted chain of production cooperation. (This problem is equally important for on-going international programs and for Russian national space programs).

Long term project should be mounted on a base, which is currently sound and may realistically count on sustained development on the basis of its current start-up positions.

Economic aspects of viability of the Russian space companies are predetermined by the economic policy of the state. Most of the economic problems, outlined above (debts, not payments, etc.), are not inevitable price of economic transformations, but rather a result of indecisiveness of the Government and of slow advancement of real reforms.

Yet before the break-up of the Soviet Union the state authorities lost administrative control of "state-owned" companies, yet the state remained responsible for results of their economic activity.

Recent actions of the Russian government indicate its willingness to move in the right direction and make its economic and fiscal policy more consistent (decrease a burden of irresponsible enterprises, hanging on state subsidies, enforce dues and taxes collection).

Chances for drastic policy change

An impact of strengthened economic policy to space sector remains to be seen. Yet, with upcoming elections to the Russian parliament this 17 December and elections of the President, due in June 1996, questions arise about what is going to happen to this Government and whether the general political environment for Russian space activity will change after elections.

Analyzing attitudes and statements of major opposition forces and political blocks shows, that drastic changes are not highly probable. All major Parties, which may score relatively high at upcoming elections, either already consider space program as an attribute of a great power (Communists, Liberal-Democrats, some nationalist groups) or regard it as a major social factor because of a large number of people involved in the sector.

In fact, if the leadership of the ex-USSR was criticized by the opposition (including current Russian President) for wasting money to space program, today's opposition criticize the Russian government for undermining the national space capabilities. Thus, neither new Parliament nor new President will intentionally oppress the Russian space program.

There is, however, a criticism in some opposition corners of on-going international cooperative efforts, particularly of the Russian participation in the International Space Station Alpha, which is considered as a non-equal sell-out of unique national know-how. These stances may have some negative effect on the environment for the cooperation, particularly between Russia and the U.S. However, on-going projects are in fact so important for survival of the appropriate segments of the Russian space infrastructure, that the same industrial lobby, which now often appeal to opposition, will not allow this criticism to advance any further, than just verbal rhetoric.

Thus, even the most drastic overturn of the power after elections will hardly cause any direct harm to Russian national space programs and will not deter Russia from keeping its foreign obligations.*

There is, of course, a chance for a new outbreak of general instability in Russia, but now it seems less probable, than it ever was since 1991, and certainly less, than it was at the time of adopting decisions to pursue the International Space Station program jointly with Russia.

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* Listing priorities of Russian Space Agency (for domestic auditorium), First Deputy General Director Alaverdov ranked "keeping obligations to our foreign partners" as #2, immediately after "projects with a fast return or a big economic impact".

 

2 Conclusion

Current status of the Russian space program is determined by a general shift of priorities with the end of the Cold War and, additionally, by peculiarities of domestic political and economic situation.

1. The situation in Russian space complex is difficult and characterized by a crisis of state-dependent industry, shrinking of most operations down to a level of marginal sustainability, loss of up to 40 to 50% of personnel and degradation of space infrastructure.

2. The situation is uneven in both "horizontal" and "vertical" dimensions:

• different sectors and companies have widely differing performances;
• situation is typically getting worse deeper along the chain of subcontracting;
• loss of capability to develop new things is more profound than loss of capability to make already developed things

3. The situation is ambiguous. It is indeed dangerous, but not hopeless.

4. In the current situation international cooperation, both in form of joint non-commercial ventures and, particularly, integration into global space market, is considered vital for sustenance of the national space capabilities.

5. Political support to the national space program appears assured notwithstanding any feasible outcome of upcoming elections, although in the most extreme scenarios an international political atmosphere for joint non-commercial projects may cool out.