China, Russia and the Possibility of ITAR Reform

At SATELLITE 2010, I was privileged to moderate the launch service providers’ panel, bringing together the chief executives of Arianespace, International Launch Services (ILS), Sea Launch and China Great Wall Industry. I was struck anew by how the satellite industry crosses and challenges geopolitical fault lines. European-developed, -owned and -operated Arianespace sat next to the U.S.-based operators of Russian launch vehicles — ILS’s Proton and Sea Launch’s Zenit. Next to them was the operator of China’s Long March vehicle. Combined, these four operators were responsible for 17 of 2009’s 24 commercial launches.

The U.S., Russia and China were Cold War adversaries, and Germany, home to two of Arianespace’s 24 European shareholders, was divided during the Cold War between NATO and the Warsaw Pact. Among these countries, there remain sharp differences in levels of trust and cooperation, yet they own, host and manage the companies that compete for and divide the bulk of the commercial launch services market.

The Obama administration is contemplating sweeping changes to the technology export regime that for 10 years has consigned most communications satellite and launch vehicle technology to the munitions list of the U.S. State Department’s International Traffic in Arms Regulations (ITAR) technology export regime, sharply restricting export of those technologies. Front and center in the debate over these changes are U.S. relations with China and Russia, one the emerging space power, the other, the first spacefaring nation. As readers of this column know, the move of communications satellite technology from the more trade-friendly U.S. Commerce Department to the more restrictive ITAR regime was prompted in 1999 by a finding that U.S. companies’ assistance to Chinese commercial launch capabilities might have ballistic missile applications. Of course, broadly speaking, that is true. Most of the launch vehicles that have placed commercial satellites in orbit started life as ICBMs.

The twin March events of the Obama administration’s announcement of a new strategic nuclear arms reduction treaty with Russia and Internet search engine provider Google’s decision, in the face of Chinese blocking of searches on its site, to move its China server to Hong Kong (to which the administration responded with studied diffidence and expression of hope that China and Google would resolve their commercial differences), highlight the different relations. The United States and Russia are cutting their strategic nuclear deterrent capability by about one-third. The administration hailed the treaty as key to its announced intention to “reset” relations with Russia. No such reset, which is needed, has occurred with China.

There is a tension in the U.S. trade, military and homeland security policy communities between recognition of China as the emerging economic power of the 21st century, and, not incidentally, the holder of $1 trillion dollars of U.S. debt, and the historic mistrust of China that unites odd bedfellows on the American political left and right wings, with those on the left activated by human rights concerns and those on the right by national security issues. On the one hand, China cannot be ignored; on the other hand, there is an embedded legacy policy to continue doing so. The current regime prevents U.S. operators and U.S.-manufactured satellites from using Long March vehicles. The situation contrasts strongly with U.S.-based companies’ use of Russian-built launch vehicles to compete for business from U.S. operators to launch U.S. manufactured satellites.

One good question posed by the proposed ITAR reforms is: “What valuable interests in commercial satellite service has ITAR protected?” There is clearly sensitive, cutting edge, black box U.S. missile technology that the defense and homeland security communities have a valid basis for restricting from export. However, that technology is seldom seen on commercial launch manifests, if, for no other reason, that commercial operators demand that manufacturers use flight proven buses and subsystems. These systems may steadily improve in capability, durability and innovation, but they rarely represent technology so sensitive that it could not be replaced from other sources if export was restricted. As we said, most space technology is dual use, and restriction of unclassified, dual-use technology that is flight proven and off-the-shelf is counterproductive. If there are paths for the United States to embrace China’s inevitable entrance into the commercial space sector without compromise of genuinely (and not reflexively) sensitive technology, for which a substantively valuable basis to restricting access exists, the administration will be right to seize the opportunity.

Owen D. Kurtin is a founder and principal of private investment firm The Vinland Group LLC and a practising attorney in New York City. He may be reached by e-mail at okurtin@vinlandgroup.com.

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