Russian State-run and Private Space Industry: Problems and Cooperation

The recent InSpace Forum held in Moscow demonstrated progress in cooperation and dialogue between Russia’s state-run space companies and its fledgling New Space sector, reports Anastasiya Svarovskaya.

The InSpace Forum 2018 held in Moscow on 21 March 2018 considered ways for the business sector and the state to cooperate in the space industry. This year’s forum was the third such event, and it consisted of two sections – the commercial space industry section and unmanned aerial vehicles (UAV) section.

The participants shared some cases of failed and successful projects, pointed at certain barriers in state and private cooperation, discussed the issues in Russia’s legal framework, and they even found the time to dream about the future.

The majority of the audience at the forum was space industry professionals, such as employees of state-run organizations and founders of private space companies. However, the rest of the audience was mostly those interested to know more about the current state of affairs in the Russian space industry as well as in the UAV sector. Speakers change from year to year, but the main players on both the commercial and the state-run sides remain the same. They are the state-run Roscosmos Corporation, S7, the Skolkovo Foundation, Dauria Aerospace, CosmoCourse, and others.

Visitors to the business forum were in for a nice surprise: a new discussion panel on space law and space risk insurance was created in the commercial space section. As for the UAV section, it was premiered at this year’s forum. In addition to that, visitors could see the exhibition, which mostly featured UAV manufacturers and various institutions. The startup pitch session was also there for everyone to enjoy.

In the commercial space industry section, the participants discussed the challenges and opportunities of commercial space businesses, in particular, those of private-state cooperation. The discussion was different from what it was in the formative year of the forum, three years ago. In 2016 the discussion mostly focused on finding ways for the private sector to acquire partnerships with state-run companies. Back then one had a strong impression that the state-run companies were reluctant to let private businesses approach them and simply had no idea how to interact with them as they had never had that kind of experience before. On the other hand, private businesses also had little idea of how to interact with state companies and what to expect from such partnerships. Since then S7 Space Transportation Systems LLC has emerged as a major player, while most of the commercial participants of the first forum have managed to stay on the market over this three-year period, which means they have now a certain amount of experience interacting with state-run space industry companies.

As of 2018, commercial players have developed a clearer understanding of their aims and needs as well as of the existing obstacles. The participants acknowledged that the current legal framework created no major hurdles for their activity, although the interaction with the state-run companies was further complicated by an absence of a clear-cut set of rules as well as of management on both sides that would be able to play by those rules. Therefore, a need to create a coordinating body was voiced, which would supervise the interaction process on both sides. Dmitry Payson, a representative of the Roscosmos State Corporation, expressed the hope that the Venture Foundation of Roscosmos currently being created would perform this very function.

Dmitry Pakhomov, a representative of NPO Energomash, spoke on behalf of the state-run industry. He emphasized his company’s readiness to interact with commercial businesses and participate in joint co-investment projects. First and foremost, his company is ready to contribute its vast experience designing and testing rocket engines.

Aliya Prokofyeva, founder of the commercial space company Galaktika.space, pointed at a lack of access to relevant technology as a major concern. Prokofyeva said, “First, the U.S. model of interaction between state-run and commercial companies is very close to my heart. Special legislation has been recently enacted in the USA that opens up a wide range of possibilities for space companies in terms of implementing low-Earth orbit and deep space projects. Second, it is very hard to gain access to relevant technology in Russia as it is either too expensive or just not possible at all, which is a problem. NASA is focused on long-term goals and acts as a regulatory body, while ‘smaller’ projects are handed over to the private sector. I’d love to see this happening in this country too.”

The following two sessions were dedicated to something no private business can do without, namely, the development of the legal framework in order to support private space entrepreneurship as well as space risk insurance. Two important acts have been enacted by the government recently, which will influence the commercial space industry. They are the letter of intent between the Russian Venture Company, the Roscosmos State Corporation, and the VEB Innovation fund in order to establish the Roscosmos Venture Foundation, as well as the Earth Remote Sensing Act. This legislation can potentially have an impact on the development of private spaceflight in Russia. One should hope that the success of commercial space companies will stimulate the interest of space law professionals.

During the fourth, and last, session representatives of the companies shared their experience of entering the market, advised on the best ways of attracting investment and assessed their companies’ input in developing the infrastructure of Russia’s commercial spaceflight industry. As there are few private space companies in Russia, it is crucial to learn from everyone’s experience in order not to repeat the mistakes of others so early on. Pavel Pushkin, founder of CosmoCourse, opined that before creating a space startup and attracting investment one should first try to answer the following three questions: 1) Is there a market for your company’s products out there? 2) Who will be selling the company’s products and within what timeframe? 3) Who is going to translate the company’s ideas into reality and how will it be done? Pushkin said, “As soon as you’re able to answer those questions, you will have no problem finding an investor. But they do require precise answers as there is precious little entrepreneurship in the space industry.”

The panel speakers did not only focus on the issues (such as obstacles for state and commercial partnership or a lack of funding and access to relevant technology), but they also found time to dream as well. Their dreaming could be summed up as follows: “The Russian space industry does have future potential. We would love to see the commercial space sector develop and we’d like to be able to run ahead of other nations as we used to in the past, not just try to catch up. And it would be great if the space industry depended less on government contracts but could attract more independent customers. It would also be fantastic if private companies could not only invest in their dreams but were motivated to venture into new investment areas.”

Anastasiya Svarovskaya is a journalist and Masters student in ITMO (Information Technology, Optical Design and Engineering) at the University in St. Petersburg, Russia, with her major in Science Communication. She actively participates in space outreach, acts as a PR specialist, and takes part in the organisation of space related events.