Swords into ploughshares

Missiles as commercial launchers

Michael Potter

The signing of an INF arms control treaty in 1987 and the reduction in East-West tension has resulted in a surplus of missiles. Getting rid of them remains a problem, but two distinct initiatives have been advanced in the USA and the USSR for their conversion into low-cost launchers. The author de- scribes these two initiatives and dis- cusses the political and economic issues they raise before speculating on the likelihood of their achievement.

Michael Potter is a principal of Icomnet, 1920 L Street, NW, Fifth Floor, Washing- ton, DC 20036, USA.

One of the most contentious issues confronting space policy architects in 1991 involves the use of missiles for the commercial launch market. This article sets out to frame the larger issues arising from the commercial development of launch vehicles based on the Poseidon submarine- launched ballistic missiles and the intermediate-range SS-20 missiles.

Recent efforts to convert missiles for peaceful purposes ought to be examined in the context of 'restructuring', which is essentially the strategic and advantageous positioning of organizations and products in a shifting competitive environment. There are two converging trends that underpin restructuring efforts of missile providers trying to break into commercial markets. The first, military conversion, involves trans- forming portions of the military-industrial complex for commercial and civilian purposes. This is largely the result of nations coming to terms with the end of the Cold War. Conversion is also driven by arms control agreements calling for the elimination of certain categories of weapons. The second, space commercialization, is characterized by private inves- tors who are increasingly taking monetary risks in space-related business ventures. The process of commercialization has received increasing attention as a result of the success of space-based communications, the increasing market potential of space remote sensing, the success of the space launch vehicle industry and the optimism associated with the space microgravity market.

These trends of conversion and space commercialization have become intertwined with the issue of how nations choose to eliminate existing missiles. A nation may decide to dispose of missiles to comply with arms control treaty provisions, to get rid of obsolete equipment, or because it no longer has the security needs for such weapons. There are a range of options for dealing with missiles: destroying all excess assets on the ground, placing assets in storage, transferring assets to other govern- ment entities, launching the missiles without payloads, and making assets available for private use.

1 have selected two case studies to illuminate some of the larger challenges involved with transforming missiles into commercial launch

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~John Morrocco, 'US, Soviet firms to de- velop, market, commercial booster based on SS-20', Aviation Week & Space Tech- nology, 7 August 1989, p 21. 2Associated Press, 'Will transform arms factories, Soviets say', Richmond Times- Dispatch, 29 September 1990, p 1. 3The distinction between 'commercializa- tion' and 'privatization' of space hardware and services is an important one, particu- larly when assessing space commerce in centrally planned economies. Neverthe- less, in this paper I use the term 'commer- cialization' in the broadest sense, to in- clude privatization.

Swords into ploughshares

vehicles. By exploring a Soviet and a US initiative a pattern of interesting similarities and contrasts can be established.

The 'START' initiative

Space Commerce Corp (SCC) based in Houston, TX, has an exclusive agreement with Glavkosmos, the Soviet space marketing agency, for sales of space hardware and services in the USA. On 29 July 1989 SCC signed a Memorandum of Understanding with Technopribor, a recently formed Soviet consortium established to export previously classified technology. The two agreed to develop 'START' - a new commercial launch vehicle based on the SS-20 missile.

The START project has been described as an effort by ' . . . the Soviet Union to transition its SS-20 production facilities and workforce into commercial activities. Labeled the Conversion One Project by the Soviets, START could be the first step in the practical implementation of a long-term conversion process as outlined by Soviet leader Mikhail Gorbachev to transition the nation's military-industrial complex into commercial activities. '1 Gorbachev has announced plans to convert 550 arms factories to civilian production. The factories will be transformed in stages over the next five years with the goal of producing $472.5 billion worth of consumer goods. 2

The Poseidon initiative

Lockheed Missiles and Space Company has put forward an initiative called 'Lodestar' that seeks to adapt a version of the US Navy's C-3 Poseidon missile which is being retired from naval inventories as part of an established weapons modernization plan.

Lockheed's commercial strategy for the Poseidon missile is first to acquire the obsolete missiles from the US Department of Defense (DoD). Lockheed will then refurbish the rockets and provide them to US government agencies interested in launching small scientific satel- lites. Like the START vehicle, Lodestar would only use components of the Poseidon. These include the C3 first stage, the C3 nose faring and nose cap, and auxiliary equipment.

Issues and analysis

There are striking similarities - and differences - between the commer- cialization, or privatization, of the Poseidon and the SS-20 missiles. 3 Although both launch vehicles were a product of the East-West ideological and military rivalry, the commercial obstacles confronting each missile (arms control constraints, market competition and trade, technology transfer controls) are different. Below I explore some of the issues that make these initiatives distinctive.

Arms control constraints on commercialization

Upon learning of the Soviets' plan to base a commercial launch vehicle on the SS-20 missile the immediate concern of US officials was that the Soviets might develop a way of 'breaking out' of the INF treaty. Some policy makers argued that the START project was contrary to the spirit, if not the letter, of the INF treaty. However, most accusations of Soviets contravening the treaty were based on a lack of understanding as to how

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Swords into ploughshares'

4See Michael Potter, 'Swords into plow- shares: legal, policy implications of a com- mercial launch vehicled based on the SS- 20 missile', presented at the International Institute of Space Law 33rd International Colloquium on the Law of Outer Space, Dresden, Germany, October 1990. 5Debra Polsky, 'Lockheed pushes Poseidon: missile rejected by NASA in small launcher contest', Space News, 3 December 1990. 6At a meeting on the 'Disposition of excess strategic missiles assets', held at the Office of Space Commerce, 1 November 1990.

the START project was to be achieved. I have argued in an earlier paper that INF concerns have subsided in the USA, making it unlikely that the treaty would be a show stopper for the START commercializa- tion project. 4 Because the START initiative is consistent with the letter of the INF treaty, the greatest barriers to its success are likely to be fair trade issues.

In 1990 US DoD officials stated that they would not release the Poseidon missiles to Lockheed for commercialization until after the signing and US Senate ratification of the expected Strategic Arms Reduction Treaty between the USA and the USSR. 5 Possibly the DoD is using the treaty as a stalling tactic until they determine their own requirements for surplus missiles, and before they formulate a policy that may have a substantial impact on commercial markets. This linking of the commercialization of the Poseidon to arms control is artificial and bureaucratic and not based on current international law.

Technology tramfer controls

The announcement of the START initiative provoked US officials into considering two potential areas of unwanted technology transfer. They felt that technology could be compromised if western payloads were launched on a Soviet START vehicle. They also suspected that Third World countries could obtain launch technology from the vehicle itself, contributing to the problems associated with missile technology prolif- eration. However, START proponents argue that they are selling a service, not the vehicle itself. Customers would not have access to the actual hardware, nor would the Soviets need to handle sensitive payloads.

Unlike the SS-20, the Lockheed proposal has not generated much concern in the area of technology transfer. Gil Rye, of Orbital Sciences Corporation, has discussed his company's concerns relating to the adverse national security threat that could arise from missile prolifera- tion as a result of missile conversion. 6 Nevertheless, these concerns seem unfounded for two reasons. First, the US Department of State's Office of Munitions Control has extensive legal power to prevent technology transfer; second, the DoD can contractually limit Lock- heed's use of any surplus missiles the company acquires from the US government.

Unfair competition and trade

Both the START and the Poseidon initiatives have provoked cries of unfair competition from the established western launch vehicle industry.

The START proposal has forced the revisiting of a larger trade issue. Western launch suppliers have argued for some time that launch services provided by centrally planned economies constitute unfair trade practices or 'dumping'. Because labour and resources are inexpensive, non-market economies are able to build and sell launch vehicles for comparatively less money than can free market economies. Western launch suppliers argue that by permitting unfair pricing from centrally planned economies, governments of free market economies place their own industries in peril.

Thus Space Commerce Corp will not only encounter accusations of helping a centrally planned economy 'dump' low-cost launch services on western markets. It will also be accused of dumping eastern military components and hardware on western civilian markets.

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7Daniel Marcus, '1990s promise to trim ranks of launch firms: Soviets, Chinese may tempt US, European customers', Space News, 19-25 February 1990, p 6. 8James Bennett, 'Creating competitive space trade: a common market for space enterprise', The Reason Foundation, Au- gust 1990, p 2. 9john Cushman, '2 companies, big and little, clash over plan on missiles', New York Times, 8 August 1990, B8. It is worth noting that Orbital Sciences has received substantial Defense Advanced Research Projects Agency (DARPA) funding. 1°Ibid. 11Quoted from a Lockheed official at a meeting on the 'Disposition of excess strategic missiles assets', held at the Office of Space Commerce, 1 November 1990.

Swords into ploughshares

Dennis Dunbar, of General Dynamics Commercial Launch Services in the U S A , argues: 'Through the end of the century, the thing that threatens us most is launch services from non-market economies'. 7 James Bennett, of American Rocket Corp, suggests that: 'Foreign subsidized competition, "dumping" strategies, the entry of Soviet and Chinese space services, and related issues were minor concerns only five years ago. Today these concerns top the agenda of the commercial launch industry. 's

The proposal to convert Poseidons into cheap rockets has also created controvery at the US domestic level. According to Richard DalBello, former Director of the Commerce Department's Office of Space Commerce, the government is torn between policy objectives: 'One is loath, in the current budget conditions, to throw away assets that are already paid for,' DalBello notes. 'On the other hand, you don't want to hurt people like Orbital Sciences Corporation, who have spent real dollars, not government dollars. '9

Orbital Sciences asserts that taxpayers have already collected their investment from the old missiles. Barbara Zadina, a spokesperson from the company, argues: 'The Poseidons have done their job, they have helped to win the cold war. The country has received its money's worth already, from the deterrence of war. '~° Whether Soviet or US missiles are used to compete in the commercial space market is the issue. Lockheed, on the other hand, argues that the destruction of Poseidon missiles would be 'counterproductive for US international competi- tiveness'. 1~ Presumably this argument is based on the assumption that the Poseidon can be offered at highly competitive prices internationally.

Conclusion

The fascination of space analysts with the issue of missile conversion can be explained by the intersection and overlap of military and civilian space interests and by the potential impact missile conversion may have on the commercial launch industry.

Logic would lead us to believe that it would be a shortcut for a company to use 'off the shelf' or existing military technology (procured at rock bottom prices) to develop a new, inexpensive launch vehicle. However, the majority of commercial launch providers has resisted Lockheed and SCC's proposals to turn missiles into ploughshares. It is likely that the resistance of the status quo launch providers will prevail in limiting the commercial success of missile conversion efforts.

Unless those who market the proposed START vehicle receive upfront orders, it is unlikely that the vehicle will ever go into produc- tion. Even with inexpensive pricing, it is unlikely that those who are seeking to place payloads in space will contractually lock themselves into involvement with a vehicle that is surrounded by such intense regulatory, and hence, business uncertainties.

The recently released commercial space policy of the US president only gives general guidance on the disposal of excess missiles. One solution suggested by an industry spokesman is that the US government allow for a limited number of missiles to be converted to commercial use. One hundred is the number that has been informally discussed.

The efforts to commercialize these former military launch vehicles are an expression of a larger shift from military to civilian and commercial space. This is not to suggest that in the post-Cold War era military space

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activity is anachronistic - in fact I would argue the opposite. For if we broaden the traditional definition of security to include monitoring and managing the environment, military space satellites can play a signifi- cant role in the post-Cold War era.

However , a new equilibrium in space spending is emerging. While 1991 may mark an important year for the issue of missile conversion, the 1990s will be a decade in which space policy architects will be forced to contend with the restructuring, not of a single launch vehicle, but of an entire industry.

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