Winning: Grounded By Incorrigible Corruption


January 10, 2021: In late 2019, Russia revealed the results of its investigation into corruption that crippled efforts to complete construction of the new Vostochny space center (Cosmodrome). The aftershocks of that report are still being felt. The arrests and prosecutions for related corruption continue as does the replacement of senior officials for not being able to do the job. The most recent firing took place in November 2020 when Andrei Okhlopkov, the head of TsENKI (Center for Operation of Ground-Based Space Infrastructure Facilities), was removed for failure to make much progress in fixing the problems with the still (after a decade) unfinished Vostochny launch center. Okhlopkov had only held the job since mid-2018, when he replaced a man who had also failed to deal with the Vostochny mess. At the same time Okhlopkov was dismissed so was Evgeny Rogoza, who was in charge of Vostochny. Also dismissed, and arrested for corruption, was Roman Bobkov, who, since early 2019, headed the government-owned construction company building Vostochny. Bobkov was accused of fraud and bribing a Defense Ministry inspector to not report the fraud and misconduct still present at Vostochny.

President Putin recently interviewed the senior officials of the space program and those responsible for new construction and pointed out that it should be clear by now that anyone involved with space program operations, especially construction of the new Vostochny facility, should remember that over 70 space program officials have been convicted for corruption so far, and that will continue until they and their subordinates realize that continued corruption and mismanagement will be discovered and punished. What Putin found incredible was that even with the dozens of dismissals and corruption prosecutions that resulted from the 2019 investigation, many replacement officials kept making stealing and deceiving  and getting caught.

Construction of Vostochny has been underway for a decade and is still not finished. Costs have risen as a result and are now over five billion dollars. The corruption uncovered so far involved dozens of officials stealing nearly $200 million. About a third of that was recovered before it could disappear into offshore bank accounts or investments. New regulations have been enacted to make it more difficult for officials to set up offshore bank accounts or invest personal funds outside Russia. These investigations and prosecutions have been underway since 2014 and since then nearly 20,000 violations have been uncovered. Many of these were due to incompetence or sloppy managements. Too many of these violations were criminal in nature, involving theft or misuse of government funds.

The Russian space program is run by Roscosmos, a state-owned corporation that has a budget of nearly three billion dollars a year and provides employment for about 250,000 people, including the many contractors employed. Russian officials have noted that the United States gets by with about 30 percent as many people. More importantly Roscosmos has not been able to offer competitive pay to attract and retain qualified personnel. Since 1992, when the post-Cold War version of Roscosmos was created, personnel quality has kept declining and the average age of personnel has risen. The end of the Soviet Union meant the end of a state-run economy. Russia as a whole prospered once people could work for whoever could offer them the best pay and professional opportunities. Roscosmos was seen as an employer of last resort for scientific and engineering personnel and those who manage that kind of work.

Most of the damage at major projects like Vostochny was the result of incompetence but a lot of the poor work was deliberate. That was often the case when the use of substandard materials was involved. This occurred with a new launch pad and the defective concrete that had to be laboriously removed and replaced with concrete capable of handling large rocket launches. Another major source of corruption involved payroll, as in reporting more workers working more hours that was actually the case. Procurement was another profitable area for the corrupt as items that did not exist or were substandard were paid for rather than what was needed.

The government auditors admitted that a lot of the problem was the result of Russia still keeping details of such projects secret. Many of the scams would have been obvious if, as in the West, financial details of construction were public, and available for anyone to examine, records. “Classified” (secret) projects are always more prone to corruption or incompetence that goes undetected longer because few people are monitoring how the money is spent.

Vostochny is for commercial, not military, launches and keeping construction details secret does not encourage potential foreign customers. Vostochny will only be profitable if there are a lot of foreign customers. The government wanted to make Vostochny a project demonstrating how the Russian space program is making a comeback. Instead, Vostochny is turning out to be a reminder that not much has changed in Russia.

There have been some successes at Vostochny. In early 2016 the first satellite launch at Vostochny went off without a problem. A Soyuz rocket put three civilian satellites into orbit. The second launch took place in late 2017 and failed. The third launch, in early 2018 was a success. Another launch in late 2018 was a success as was one in early 2019. However, that is only five launches in five years. A second, larger, launchpad is under construction and by 2020 nearly half of Russian satellite launches were supposed to be carried out at Vostochny. That did not happen.

This new Cosmodrome is in the Russian Far East (Amur Province, just north of Manchuria), unlike the Soviet era site in what is now the independent state of Kazakhstan. Construction of the Amur site began in 2010 as Russia realized Kazakhstan was becoming a very difficult landlord. Construction of Vostochny initially moved quickly because the site used to be Svobodny 18, an ICBM base that was shut down in 1993 as part of the START disarmament treaty. Svobodny 18 was not completely abandoned in the 1990s or allowed to fall apart. Amur Province was ultimately selected because of weather; the area averaged only 50-60 overcast days a year, had a dry climate and calm winds. There was also an absence of earthquakes.

Construction went according to schedule as the first launches were planned to begin in 2016. This was made possible by the government acting quickly when the first signs of corruption surfaced. Three construction executives were arrested for corruption and many others threatened. Construction continues, mainly to build equipment and facilities for handling heavier cargoes, including supplies and components for space stations. In 2018 there were signs that the corruption arrests had not eliminated corruption and that a lot of it was still going on undetected. Until the release of the 2019 report, it was unclear how extensive the corruption was and how much damage it was doing to the construction effort.

While Vostochny will get Russian commercial launches, military launches will largely remain at Plesetsk, near the Arctic Circle. While Plesetsk's location is good for some types of launches, like high inclination, polar, and highly elliptical orbits, the place is frozen most of the year and more expensive to operate because of the climate.

In 2013 Russia agreed to remain in Baikonur after the Kazakh government agreed to reduce its demands for higher rent. Russia had threatened to cut launches at Balkinor from 75 percent of the Russian total to ten percent by 2020. Kazakhstan originally demanded a lot more money and threatened to shut down Balkinor if the Russians did not pay it. At the time Russia paid Kazakhstan $115 million a year for the use of Balkinor, in addition to the $50 million a year spent to maintain the facility. Many Kazakhs saw Balkinor as an ATM and anytime there was a cash shortage, they could make a withdrawal and the Russians would be forced to pay. The Russians convinced the Kazakhs that plans to leave Balkinor were real. It was pointed out that Balkinor was where the commercial satellites were launched and Russia sold these “launch services” to a growing list of foreign customers. If Russia paid the higher fees the Kazakhs were demanding the foreign customers would have to pay more than what other competitors charged and Russia would have to abandon Balkinor as uneconomical.

Russia can turn Baikonur into a big cash cow via commercial launches but the Kazakhs were not convinced until of Vostochny began and moved ahead with unusual speed. The Kazakhs agreed to more reasonable rent and, for the moment, Russia's largest satellite launch site is still in Kazakhstan. When Vostochny is fully operational the Kazakhs have to pay more attention to being a good landlord.

Founded in 1955 by the Soviet Union, Baikonur was long the main satellite launch facility for the Russians. But after the breakup of the Soviet Union in 1991, Baikonur found itself in the newly minted Central Asian nation of Kazakhstan. There it became more expensive and difficult for the Russians to use. Russia has leased the Baikonur complex from Kazakhstan since 1991 but this has led to periodic disputes over lease terms and the danger to locals from launch accidents. These disputes were settled but the costs kept rising. The Russians valued the Baikonur launch site as it is very efficient for some types of launches; geostationary, lunar, planetary, and ocean surveillance missions, as well as all manned missions. But having your main launch site in a foreign country was seen as untenable. Russia began building a replacement site to the east, in Russian territory. Its manned space programs did not get moved Vostochny by 2020. That means Russia cannot yet abandon Baikonur. This is not a disaster because the current lease lasts until 2050. If the Russians leave, they will take or destroy all their gear with them. No point in leaving anything to help a competitor launch satellites.




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