Sanctions and satellites: The space industry after the Russo-Ukrainian war

When the first commercial space mission launched in 1962, few could have suspected that, a mere 60 years later, a nation’s existence might hinge on a tweeted request that a private corporation beam communication-enabling internet services down from the stars. Or that private remote sensing industries, fielding more advanced systems than the then-state-of-the-art Corona spy satellites, would hunt national armies. Commercial space launch and technology industries would reach a level of significance and profitability such that nations could use them as tools of economic warfare. Risks to orbital commercial assets would result in the development of new military organizations, devoted to defending the “space-lanes” of the heavens as national navies defended the sea-lanes of old.

The ongoing war in Ukraine, the economic sanctions placed on the Russian Federation by the United States and its allies, and Russia’s response to these sanctions are affecting the outer-space environment in wide-ranging ways. I previously examined the effects of the Russo-Ukrainian war on civil-space relations between Russia and the West; however, as the list in the preceding paragraph demonstrates, the fallout of the war is not limited to the realm of civil-space cooperation. Russia, and its quasi-civil space agency Roscosmos, have played a significant role in the commercial space market — particularly the global space launch-services market, valued at $12.42 billion in 2021 — for decades. In the wake of the Ukrainian conflict, Russia’s role in commercial space launch is likely to be diminished, to the benefit of alternative launch-service providers in the United States, Europe, and, potentially, nations like India and Japan. The war is also affecting space and technology import and export streams, with both commercial and national security effects. Most ominously, the Ukraine conflict has demonstrated the prominent military benefits of commercial space systems — likely making such systems targets for belligerents and potentially necessitating countermeasures, or at least consideration, from the private companies that control them.

Recent History of Russian Commercial Space Activity

Russia’s rocket fleet has been a mainstay of the international space-launch industry since Western-Russian partnerships opened the door to increased commercial use of Russian space systems in the mid-1990s. Indeed, Russia entered the 2010s in an enviable position in the field of commercial space launch: high launch costs in the United States made commercial launch with Russian Soyuz and European Arianespace rockets more attractive to private businesses and national governments alike, effectively pushing the American United Launch Alliance (a joint venture between Lockheed Martin and Boeing founded in 2006 that, at least prior to the rise of NewSpace businesses like SpaceX, served as America’s primary launch-services provider) out of the commercial launch business entirely. In 2011, for example, Russia conducted 10 commercial space launches, making an estimated $707 million in revenue; the United States, by contrast, conducted no commercial launches. Particularly after the 2005 partnership agreement between the European Space Agency and Roscosmos to create a Soyuz launch facility for commercial and civil-space launch at the Agency’s spaceport in French Guiana, it seemed as though Russia’s role as a leader in international commercial space launch was secure.

A combination of factors resulted in Russia losing ground in its overall share of the international launch market over the past several years. These factors included the rise of new private space-launch competitors, such as SpaceX, which contributed to falling launch costs; a failure to innovate or expand the Russian space industry beyond its aging launch-service fleet; and sanctions imposed after its annexation of Crimea in 2014. Still, the significance of the country’s launch services to the international commercial market should not be understated. Russia remains among the top three launching states, consistently performing between 14 percent and 24 percent of overall orbital launches annually between 2017 and 2021. (For comparison, the United States has ranged from between about 20 percent to 32 percent of overall annual launches during this time). Russia’s Soyuz rocket has been considered the most reliable, and has been the most frequently used, space-launch vehicle since its development early in the Space Age. Though Russia’s Soyuz monopoly on crewed space launch to the International Space Station between 2011 and 2020 allowed Roscosmos to radically inflate prices for flying American astronauts (the United States supposedly paid Russia up to $90 million per seat!), for cargo and satellite launch, the Soyuz is a competitive launch option. Newer Soyuz launch vehicles are, at least according to Russian sources, as cheap as SpaceX’s private Falcon 9 rockets.

Western Sanctions and Russian Commercial Space Response

In response to Russia’s invasion of Ukraine, the United States and its allies implemented wide-ranging economic sanctions, targeting Russia’s financial institutions, industries, and even individual Russian businessmen and politicians. The Russian space and technology sectors were primary targets of the Western sanctions campaign, with space-industry sanctions explicitly applying to commercial-sector technologies and exports. The current sanctions expand upon previous sanctions placed on the Russian commercial space-launch industry in response to the 2020 poisoning of Russian dissident Alexey Navalny, as well as even earlier space-sector sanctions resulting from Russia’s 2014 annexation of Crimea. These include individual sanctions on Dmitri Rogozin, Russia’s then-deputy prime minister, who is now the head of Roscosmos.

Russia’s reaction to the Western sanctions campaign has been multipronged, ranging from bluster (Rogozin’s bombastic statements in interviews and on social media) to the more concrete steps of suspending its joint launch operations with the European Space Agency at its French Guiana spaceport, cutting off rocket-engine servicing and exports to the United States, and embargoing Western commercial launches on its Soyuz rockets. Less than a week after the invasion, Russia held 36 commercial satellites owned by the British company OneWeb hostage on the launch pad at the Baikonur Cosmodrome in an attempt to extort concessions from the United Kingdom. (The United Kingdom refused Russia’s demands, resulting in Russia cancelling the launch. According to the most recent reporting on the incident, OneWeb has not yet recovered its satellites from Roscosmos.) Ultimately, as a result of the Russian launch embargo, nearly 200 civil-space and commercial satellites scheduled to be launched within the next two years have lost their previously contracted launches, leaving both national governments and private companies scrambling to obtain new launch options.

Short- and Long-Term Commercial Launch Impacts

If you were hoping to launch a satellite in 2022, good luck. As private companies and national and international space organizations shift their launch contracts to non-Russian launch providers, there are few short-term “winners” from the Russo-Ukrainian War’s space fallout. Nearly all available 2022 commercial space launches are already booked, with added strain in the European launch market arising from the upcoming retirement of the heavy-lift Ariane 5 booster. Arianespace, SpaceX, and others have begun attempting to re-manifest upcoming launches to accommodate at least some of the Soyuz cancellations, but between the sheer number of stranded satellites and an expected “exponential rise” in launch demand from Western companies, experts have predicted a near-term “capacity crunch” in launch services. In the immediate aftermath of Russia’s embargo, some suggested Indian launch options might make up for the loss of commercial Soyuz launches. Although India’s annual number of launches remain small and its private commercial launch industry is latent, there may be some truth in this prediction: At least one company affected by Russia’s embargo, the ill-treated OneWeb, has already contracted with the commercial arm of India’s space agency to complete the launch of its planned constellation of satellites.

Though the near-term commercial launch market is likely unable to fully absorb the private and public launch missions left without space transport by Russia’s Soyuz embargo, over the long term other launch-service providers will be eager to snap up the business that would otherwise have gone to Russian launch services. More importantly, they will be able to expand their own launch schedules to accommodate these additional missions. With its string of successful Falcon 9 and Falcon Heavy launches, SpaceX, for example, has consistently increased its annual number of launches over the last three years. American and European launch options will increase as other Western launch companies, such as Blue Origin, successfully develop their own orbital launch systems and as mainstays in the space launch industry — like Arianespace, Northrop Grumman, and the United Launch Alliance — continue to refine and update their own launch vehicles. Additional international offerings in the private commercial launch industry — in, for example, India, Japan, and Brazil — are also becoming available. Given these developments and the overall increase in reliable, affordable launch options, a longer-term shift away from the use of Russian-made launch vehicles for commercial satellite and cargo launch is likely.

Russia, meanwhile, risks being left behind completely in the increasingly competitive commercial space-launch market. If the launch trends of the past several years are any indication, the 16 launch missions canceled as a result of the Soyuz embargo represents a loss of at least 25 percent (if not more) of Russia’s 2022–2024 space launches — and, with many of Roscosmos’ launches constituting government and military missions, nearly all of its commercial launch output for this period. The cancellations, therefore, are likely to result in further revenue loss for the already cash-strapped Roscosmos. Should Russia’s aggression in Ukraine continue and Western punishments remain in place, sanctions will also have cumulative effects in the long term, further damaging Russia’s ability to reenter the commercial space market competitively. As the value of the global space-launch market is estimated to grow to over $38 billion annually by the end of the decade, the war in Ukraine and its resulting sanctions pose a significant threat to Russia’s ability to cash in on this expanding market and to maintain its status as a top commercial launch provider.

Imports, Exports, and National Security

The commercial space industry effects of the Russo-Ukrainian war are not limited to commercial space launch. Technology and space imports and exports are also significantly implicated in the sanctions and counter-sanctions resulting from the conflict. From a purely commercial standpoint, high-tech import and export sanctions impose economic costs on Russia and its industries, but also on the Western technology companies who would otherwise be able to profit from exporting their products to Russia. Early estimates, based on Russian tech imports in 2021, suggest that Russia will lose over $10 billion worth of high-tech imports from Europe and over $500 million worth of such imports from the United States. This loss is certainly significant for Russian industries — particularly tech-reliant ones like the space industry — but is also economically harmful to the Western tech companies who would otherwise be able to sell their products to the Russian market.

In an era of economic interdependence between nations, imports, exports, and commercial relationships also implicate significant national security concerns, a point previously noted (in the context of China) in several previous articles. The commercial space sector is no different, and these implications are on display in Russia’s recent counter-sanctions against the West, particularly its cessation of RD-180 and RD-181 rocket-engine exports to the United States. The rocket-engine embargo specifically targets the United Launch Alliance, America’s primary national security launch contractor, and Northrop Grumman, which use RD-180s and RD-181s respectively in their Atlas V and Antares launchers. While Russia’s counter-sanctions may appear threatening at first glance, the United States has developed both short- and long-term plans related to the rocket-engine issue. After Russia’s 2014 annexation of Ukraine, Congress recognized the national security risks of overreliance on Russian space technology and limited the number of RD-180s American companies could employ and mandated the creation of a domestically produced rocket-engine alternative. As a result of these legislative efforts, the United Launch Alliance is already scheduled to transition to a new launch vehicle, the Vulcan Centaur, powered by domestically produced Blue Origin rocket engines, later this year. Neither the ULA, nor the American national security establishment, has expressed concern regarding the short- or long-term effects of Russia’s rocket-engine embargo. Despite America’s apparently successful steps to preemptively mitigate the threats of over-reliance on Russian rocket engines, the RD-180 and -181 example demonstrates the vulnerabilities to which the United States and its allies expose themselves when commercially partnering with the industries of potential competitors.

Finally, no discussion of the nexus between commercial imports and exports and national security is complete without mention of the possible unintended consequences of increased export restrictions. Previous attempts to regulate space and technology exports in the United States have inadvertently resulted in significant negative consequences for commercial industries — and, ultimately, American national security. The most prominent example was the classification of most commercial satellites and space components as munitions under the International Traffic in Arms Regulations (ITAR) in the late 1990s, which caused a dramatic loss of market share for American companies in the global satellite market and encouraged the development of new, foreign satellite and space technology enterprises. This push toward “indigenization” not only bolstered foreign space and technology industries at the expense of American businesses, but also reduced

Some have argued that country-specific restrictions, similar to those now targeting Russia, might not result in the same sorts of blanket negative externalities caused by the ITAR regime. However, the second- and third-order effects of targeted sanctions remain unpredictable. Nations under severe economic sanctions, such as Iran and North Korea, have found ways to continue weapons and technology development. Similarly, even limited technology export restrictions targeting China have caused and science and technology officials at leading Chinese scientific institutions to recognize the need for indigenous technology production and the importance of finding alternative, non-American sources from which to develop and import needed products. Russia will undoubtedly seek alternative sources of high-tech, aerospace, and military technology, and may also employ increasingly brutal methods of pressuring other nations to ignore or circumvent the Western sanctions regime. It is also possible that non-Western high-tech companies could step into the vacuum created by the Ukraine-related sanctions — although even China, traditionally Russia’s closest ally, has been largely reluctant to circumvent the new sanctions. The effects of technology import and export sanctions targeting Russia will likely only be seen over the long term, but we should be prepared for surprises: Like the commercial satellite-related provisions, it is likely the new tech and aerospace sanctions against Russia may have unforeseen consequences for the commercial space and technology industry, for Western national security, or both.

Commercial Space Enterprises As Targets

While launch-servicing and import-export problems associated with recent Western sanctions are significant, perhaps the most troubling development facing both commercial space enterprises and the governments that sanction them is what the Russo-Ukrainian war has revealed about the long-recognized dual-use nature of outer space technology. Even private, commercial space systems can provide information or services that have military significance. Some have already characterized the Ukraine conflict as “the first commercial space war”: Private space systems and enterprises have played an unprecedented role in the conflict. Remote-sensing images from commercial remote-sensing companies have revealed troop build-ups, battle damage, and evidence of war crimes. Some private satellite companies have become even more intimately involved in the war, providing satellite imagery directly to Ukraine’s military to bolster its intelligence and targeting abilities. Early in the war, Elon Musk very publicly distributed uplink terminals to Starlink’s satellite constellation — at the Ukrainian government’s request — to keep Ukrainian internet service running even as Russia targeted Ukrainian communications infrastructure.

These developments raise the threat that commercial space systems may be treated no differently than military space systems in current and future conflicts, and that even private, commercial satellites and space networks may be targeted, interfered with, or destroyed. This is not merely theoretical; the targeting of commercial space systems already appears to be a reality. Russia allegedly perpetrated a cyber attack targeting the American commercial satellite company Viasat immediately prior to its invasion of Ukraine, causing irreparable damage to thousands of modems and terminals, as well as widespread interference with internet service throughout Europe. In response to the provision of Starlink terminals to Ukraine, Rogozin threatened unspecified consequences against Musk — likely bluster, but any such “consequences” materializing would represent a frightening development expanding the “battlefield” to even the personnel of civilian space companies. More ominously, the targeting of commercial space systems appears to be under consideration by other American competitors. Recently, a group of defense industry researchers in China published a journal article urging the Chinese government to “expand its space war strategy” specifically by developing methods to degrade and destroy the Starlink network (and, by extension, similar commercial satellite constellations).

Commercial space systems have always faced risks from launch failures, electronic signals interference, collisions with debris or other active satellites, system failure before or after reaching orbit, and even hacking. If ever-advancing capabilities make commercial systems more desirable military targets, this additional layer of risk could increase the costs to insure, protect, or replace potentially targetable space systems. While larger companies like SpaceX may be able to diffuse the risk of catastrophic damage to their systems via the sheer number of satellites in their constellations, smaller companies may have to invest in mitigation methods or counter-measures to protect satellite systems from attack or interference. This will impose additional developmental and overhead costs, at best reducing the profitability of commercial satellite enterprises and, at worst, preventing new entrants to the market or driving smaller companies out of business. Regardless of the extent of these new costs, the risk of attack, and methods to mitigate it, will have to be something companies must consider as they develop and manage their space systems.

Looking Into the Future

The war in Ukraine remains ongoing and the full extent of its effects on the commercial space industry are unlikely to be clearly understood for some time. Indeed, there are wide-ranging commercial space factors—including Ukraine’s own contribution to space technology development and its export of critical space technologies used in Western rockets such as the European Space Agency’s Vega and Northrop Grumman’s Antares — that this article has not had space to examine.

Still, the short-term impact of the Russo-Ukrainian war and its resulting sanctions provide some hints at its likely effects on the commercial space industry over time. The lines of important space-related industries, such as the space-launch market and the international market for aerospace and technology items, are likely to be re-drawn. Russia’s share of the space-launch market is likely to diminish even further than it already has over the past several years, potentially pushing the country out of the commercial space-launch business entirely. States will likely begin paying greater attention to their economic dependencies on others—a reckoning that implicates (but by no means is limited to) the commercial space market. Finally, as the military benefits and impacts of commercial and private space systems become increasingly apparent, the risk that private space systems will become military targets rises. For private space industries, these changes portend both risks and rewards. As Russia is increasingly sidelined from the outer-space launch and commercial technologies markets, commercial space entities in Europe and the United States, as well as developing space industries around the world, stand to reap the benefits of these growing markets. The increasing risk of attack or interference, however, will impose additional costs on an already expensive and inherently risky industry.