MOSCOW — The future of one of Russia's most renowned space firms is in jeopardy, with the weight of Western sanctions, economic crisis and industrial decay coming to bear.
In many ways, the Russians brought this on themselves. For nearly 20 years, NPO Energomash has produced its venerable liquid fuel RD-180 rocket engine exclusively for export to US space launch provider United Launch Alliance (ULA) to power its Atlas V rocket.
That was until last May, when Russian Deputy Prime Minister Dmitry Rogozin, angered by Western sanctions against Russia for the annexation of Crimea two months earlier, declared Russia would ban exports of the engines for use in military launches.
Rogozin is the government's space industry czar, and his threats made many on Capitol Hill, already weary of Russian conduct, uneasy. Russian officials in September changed their tune, when Oleg Bochkarev, deputy chairman of the Military-Industrial Commission, Oleg Bochkarev, denied plans to ban exports.
"It wouldn't be profitable for us to do so. We produce and deliver the RD-180s, and they buy them," he said, then accusing the US of trying to break the relationship.
But the damage was done. By the end of the year, Congress had banned future purchases of the engines for military launch, promised money to the Defense Department to fund a domestic alternative, and ULA had announced the development of both a new engine and a new launch vehicle.
With the US rallying to end its dependence on such a critical piece of Russian space technology, Russia's Energomash is in deep trouble, said Yury Karash, a space policy expert with the Russian Academy of Cosmonautics.
"It will most likely be near catastrophic for Energomash and quite painful for the Russian space industry," Karash said.
Energomash did not respond to a request for comment on the RD-180 ban, but its annual financial statements reveal a company deeply dependent on a single buyer — the ULA.United Launch Alliance.
The RD-180 is Energomash's hottest product, and its other engines are currently not in wide use by any Russian-made rockets. Of the 11 engines produced in 2013, eight of them were RD-180s produced for ULA.
In 2013, the company turned almost 185 million rubles (US $3.4 million) in profits on a revenue of a little more than sitting a little over 7.1 billion rubles. ($128 million). In 2014, as Russia's economy stalled under the weight of Western sanctions and sharp declines in global oil prices, Energomash reported revenues of 4.37 billion rubles ($79 million), and a loss of 1.16 billion rubles. ($21 million).
Underscoring its difficult the tepid financial situation that Energomash found itself in even before the current crisis, the company in August of 2013 took out a $65 million credit from now-sanctioned Gazprombank to finance RD-180 production through the end of 2014.
Sales of the Energomash RD-171 and RD-181 (also known as the RD-193 or RD-191M) engines are minuscule, and threatened by political events at home as well as abroad.
The RD-171, for example, was Energomash's second-best selling product in 2013 with two engines sold. These engines are used to power the Zenit booster, which is built in Ukraine by defense enterprise Yuzhmash.
Russia's Energia Rocket and Space Corp.oration provides Yuzhmash with 70 percent of the components for the Zenit, which is purchased mainly for Energia's Sea Launch project — currently on ice amid the crisis in Ukraine.
Energia and Sea Launch are moving on with the advent of the new Angara family of rockets. In February, an official with Roscosmos, the Russian Federal Space Agency, official said that Russia would cease purchases of Zenit, and media reports have indicated Angara may replace the Ukrainian-built rocket for Sea Launch.
Though this might look good for Energomash, which co-produces the Angara's RD-191 engine with the new rocket's builder, the Khrunichev State Research and Production Space Center, the contract will not be able to financially replace the RD-180 deal, said Pavel Luzin, a space industry expert at the Institute of World Economics and International Affairs at Perm State University.
"Energomash and Khrunichev should be able to produce 26 RD-191 engines in 2016, [but] I'm not sure it will be able to assemble 26 [this] year," Luzin said. "In 2013, Energomash assembled just one RD-191 engine."
Only two Angara rockets have flown so far: a single-core Angara booster in July, and a five-core heavy variant in December. Furthermore, Even if full production is reached, Energomash only assembles the engines, as the components are built by Khrunichev, Luzin noted.
Hope on the Horizon?
Both Energomash and ULA are holding out hope for congressional that there may receiveongressional relief, allowing the companies to extend the procurement of the RD-180.
The 2015 US National Defense Authorization Act included section 1608, which members of the Hill said was intended to allow ULA to use 14 engines it had already contracted was already on contract for before the Russian invasion. However, Pentagon lawyers have concluded that the language, as written, allows ULA to use only five of those 14.
Members of Congress are looking at changing the law to clarify that they intended all 14 engines to be procured, something the Air Force would welcome. And there is a public campaign to ensure that ULA's monopoly is not replaced by one from competitor SpaceX, which offers the tantalizing, if unlikely, possibility that a new tranche of engines could be procured.
Still, But even if that happens, is to come, ULA has dedicated itself to moving off the RD-180 when it begins using e of its next-generation launch vehicle in the early part of the next decade. If Energomash is to survive, it will need to look in a new direction — and . Luckily for the company, there are signs of hope.
In January, Vladimir Solntsev, president of Energia, which owns a 14 percent stake in Energomash (the rest is of which is state-owned), announced in a statement that the company had signed a US $1 billion deal with Orbital Sciences for up to 60 RD-181 engines to propel the Antares rocket. Under the deal, Energomash will build the engines, and testing and installation will be managed by the Kuznetsov Design Bureau, the same firm that sold Orbital the ancient Soviet NK-33 engines for the Antares rocket previously.
Luzin said that while the deal might save Energomash, it will not guarantee that it turns a profit.
This year, only two2 RD-181 engines are needed by Orbital, and although the fine details of the contract details are not fully known, it stipulates the purchase of 20 engines, with options for deliveries of two additional batches of 20.
But this new production line might be enough for Russia's massive space industry consolidation project launched by President Vladimir Putin earlier this year to hide Energomash's losses in a behemoth industrywide holding structure.
Under the plan, the United Rocket and Space Corp.oration will consolidate most of the space industry under its umbrella, Energomash included, and take the name of Roscosmos, — the federal space agency, which will be liquidated.
Another option for Energomash to save itself in the wake of the RD-180 ban is to revert to bureaucratic lobbying within the Russian space industry. "The company could try to argue for the government to sacrifice the interests of other Russian space companies," such as its rival Kuznetsov, Luzin said.
Aaron Mehta in Washington contributed to this report.
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