Industry and International Relations

US and Russian cooperation in the Space Station entails not only government to government cooperation but also industry to industry agreements. The bottom line is that while government agreements will formalize cooperation, the actual building of the station will be accomplished primarily by private industry.

—NASA administrator Dan Goldin95

The case of Ukraine is instructive. Trade restrictions might function as one of many American bureaucratic mechanisms channeling the flows of US resources or they might lessen the negative impact of foreign competition on American firms. However, the advantages of American protectionism diminished with the increase in joint ventures between Russia and the United States. At the same time, US aerospace firms began to vertically integrate: launch providers merged with satellite builders. Initially, as of 1992 one policy analyst noted the division of the aerospace industry into two powerful blocs: General Dynamics, Martin Marietta, McDonnell Douglas, and Rockwell international demanded strong protectionist policies against Chinese and Russian boosters. Hughes, Loral, and General Electric Aerospace, however, lobbied for access to the less-expensive foreign launchers.96

The years 1993 through 1995 brought the merger/acquisition of sev­eral key firms: Martin-Marietta acquired General Electric Aerospace, then General Dynamics. In 1995 Lockheed (which in turn had been collaborating with Energia and Khrunichev) merged with the Martin consortium forming International Launch Services. Thus, the Lockheed-Martin group pressed for the total elimination of Proton launch quotas while Boeing (and its new subsid­iaries McDonnell Douglas and Rockwell) entered into business arrangements with Ukraine’s Sea Launch, marketing the Zenit.97

Globalization is by no means a new phenomenon for the aerospace indus­try, which for decades has seen joint ventures in aviation research, development, and production.98 However the trade liberalization of the 1990s brought US and former Soviet complexes together for the first time. Hughes, Lockheed, Martin Marietta, and General Electric had been key figures in Cold War era reconnaissance, military communications, and early warnings satellites.99 With Europe’s market share rising steadily and defense spending dropping precipi­tously, the industrial lobby, proponents of defense preparedness, and congressmen became increasingly concerned. As of 1969, US firms held an astounding 91 per­cent of the world market share. In 1993 this figure had dropped to 67 percent.100 What follows gives nuance to the significance of US-Russian partnerships.

In 1993, the United States permitted Russian firms for the first time to launch American telecommunications satellites into geosynchronous orbit, providing they sold their launch services at a cost comparable to Western prices. In 1998, Ukraine and Russia entered into Technical Safeguard Agreements designed to protect American satellite and missile technology and allow US industry to launch satellites from foreign locations. Between 1997 and 2006, Proton launchers captured a market share equal to the Atlas (11-12 percent and 10-12 percent, respectively), but it must be recalled that the Proton was by way of joint ventures, now also an American product.

It is indisputable that Russia’s rise on the world market is due, at least in part, to Russian-American joint ventures that brought about a convergence of Western management, marketing, and perhaps most important, customers. These factors were evident in the logic and execution of the Gore-Chernomyrdin Commission for Economic and Technical Cooperation. However the American aerospace industry stood to gain as well—not so much by opening new markets, as finding new business partners. These included the commercial space launch ventures of Lockheed-Khrunichev-Energia (ILS) and the Energia-Boeing-Yuzhnoe venture, Sea Launch.101 Additionally, Pratt-Whitney, Rockwell, and Aerojet initiated busi­ness deals with the former Soviet Space complex, while the Russian manufactur­ers of the Cosmos, Cyclone, and Rokot launch vehicles each found international partners to launch their vehicles. Analysts speculated that Europe’s market share would drop from roughly 50 percent in 1996 to 25 percent in 2006.102

Thus, the United States helped shape the formation of a privatized aero­space industry in the former Soviet Union. The US government opened itself and American firms to Russian space industries, but—as mentioned earlier—in exchange, the United States demanded the formation of a civil space agency as well as agreements concerning compliance in the demilitarization of former weapons facilities. It is at best doubtful that their optimistic wishes for weapons control were successful. Nonetheless, the United States attempted to woo the remnants of the Soviet Union into military and economic compliance by offering a combination of trade and fiscal incentives. With it came more than $760 mil­lion (as detailed in table 8.2) to buttress their faltering aerospace infrastructure

In the long run, these government dollars were but a drop in the bucket—or more aptly a foot in the door—compared with the profit intake of private indus­try.103 As of 1998, Western customers were paying more than $880 million a year for space services. This accounted for roughly 70-80 percent of the Russian space program’s operating costs.104 In 1997 alone, Energia Corporation claimed over $350 million in commercial earnings, roughly half the total foreign sales for the entire space industry. While cooperative space work did not release the largest sum of money to the Russian space program, it did provide a politically palatable environment for reforming state infrastructures to favor trade on the global market.