CoOptation, Political Objectives, and the Business Environment:

1
Co-Optation, Political Objectives, and the
Business Environment

• The Case of U.S.--Russian Space Technology
  Ventures
• by
• Eric J. Novotny
• Presented to The 4th Annual Conference
• On Management Strategy and the Business
  Environment
• 26 March 2004

2
Or..The Missiles that Came in from the Cold
3
International Partnerships in Space

• International Cooperation takes place nominally
  between governments
• Commercial partnerships emerged and prospered at
  the end of the Cold War
• Political constraints and rules applied during
  the Cold War were no longer appropriate
• New political arrangements had to be made before
  commercial partners would accept risk

4
Commercial Space Industry

• Industry Structure
• Manufacturers
• Satellites 2.5 B
• Launch Providers 2.0 B
• Ground systems 12.0 B
• Satellite Operators
• Telecommunications 15.0 B
• Broadcasting-DTH 18.0 B
• Specialized services 1.0 B
• Insurance 4.5 B capacity

5
Satellites Growing Heavier over Time
6
Mid-1990s Stronger Market Conditions
7
Pre-Existing Treaty Context

• Nonproliferation Treaty
• NPT does not apply to delivery systems
• Ballistic missile (IRBM / ICBM) technology and
  launch vehicle technology overlap

8
Missile Technology Control Regime

• Informal arrangement of voluntary bilateral
  agreements with the US sharing a common interest
  in nonproliferation of missiles
• Established in 1987 to cover nuclear delivery
  systems--relatively new regime--Does not cover
  all relevant states
• Revised definitions in 1993 to cover delivery of
  all types of weapons of mass destruction--nuclear,
  chemical, biological

9
Overlapping Political Objectives

• U.S.
• Convert Russian infrastructure
• Stabilize Russian economy
• Avoid stress to U.S. launch suppliers
• Enforce nonproliferation regime

• Russia
• Stabilize deteriorating industrial base
• Acquire U.S. business expertise
• Remove risk of U.S. opposition

10
Policy Solutions

• Establish joint ventures under U.S. law
• Establish annual bilateral conference
• Institute quota system
• Number of launches
• Price differentials

11
Major Joint Ventures

• Technology Ventures
• Sea Launch
• RD AMROSS
• Marketing Ventures
• International Launch Services
• United Start
• Starsem
• Eurokot

12
Sea Launch

• Established in 1995
• Partners
• Boeing
• Kvaerner
• RSC Energia
• SDO Yuzhnoye
• Purchases Zenit vehicles from Yuzhnoye
• Adds Energia upper stage and Boeing fairing
• Launches on sea-borne platform

13
RD AMROSS

• U.S. had no equivalent technology
• RD-180 engine was proven and reliable
• Pratt Whitney willing and able to buy engines
  and integrate them into American launcher (Atlas
  V)

14
International Launch Services

• Lockheed - Khrunichev Energia joint venture
  established in 1993
• ILS established in 1995 to handle combined launch
  businesses
• First commercial contract 1994 launched in 1996
• Russians provide all hardware and facilities
  needed modification for commercial customers
• ILS provides marketing, contracting, mission
  management

15
International Launch Services
U.S. Government
Russian Government
Khrunichev Energia
Lockheed Martin
ILS
Launch Service Customer
16
Conclusion Mission Successful