Mr. Chairman, Members of the Committee, thank you for inviting me here to testify about the International Space Station. You asked that I focus my testimony on the state of the Russian space program, the health of its aerospace industry, and its ability to meet its obligations to the International Space Station program. I am testifying today as an individual, representing no government or private agency. I am employed as a full-time member of the Political Science faculty at Virginia Commonwealth University. My interests are simply as an observer of Russian politics and economics for the past 15 years, and more specifically as a student of the Soviet and now Russian defense and aerospace sector for 10 of those 15 years.

Many Western observers and Russians alike have, for several years, warned of the imminent collapse of Russia's space operations. The faltering, and now clearly failed, post-Soviet reform effort has taken its toll. Attempts to create a stable ruble economy and balance the government budget have resulted in dramatic cuts of resources to the space sector, catastrophically affecting both industry and operations. The politics of democracy-building and industrial restructuring have held Russian space institutions captive to prevailing political winds, and to the uncertainties of reform processes whose only constant is their inconsistency.

The common wisdom regarding Russia's difficulties in space is that the issue is money. The argument is this: their technical capability is intact, and if only the Russian government, or someone else, were to provide full and reliable funding, then Russia could rapidly resume meeting its own national goals and its international obligations. But there is ample evidence that questions the validity of that assessment. It is more likely that the events of the last decade have produced degradation of both operational and industrial capability, to the point that even a substantial infusion of new funding could not renew previous levels of activity in the short or medium term. In other words, money is a necessary, but not a sufficient, short-term fix.

"Brain Drain"

This is true for two reasons. One is the departure of key scientific and technical personnel, better known as the "brain drain" problem. Employment in Russia's space sector is down by almost 50% from its peak in 1990. Delays in government funding for space have meant that space institutes and enterprises routinely lay off most of their remaining employees during the summer, rehiring those still interested and available after fall financial installments have been received. By this time, the youngest, most energetic and creative members of the space industrial workforce have joined the more lucrative commercial or financial sectors, applying their talents to subjects far removed from space and decimating aerospace research and design teams which took years to train and assemble. The senior engineer who designed Russia's manned maneuvering unit, for example, is driving a cab. One Russian report indicates that more than half of the research and design personnel in the aerospace sector are now over the age of 55; about a third are 45-55 years old; and only one percent are under the age of 35. Even those who remain often spend only a few hours a day at the workplace before turning to second jobs, or to the constant hunt for food and supplies. Wages in the space production sector are only three-quarters of the national average. Vital intergenerational transfers of knowledge about space industry and operations are not systematically taking place.

Neglect of Infrastructure

The second reason that money cannot quickly solve Russia's problems is the ongoing decay of its material infrastructure. Russia has slashed its financing of the aerospace industry over the last decade. From 1990 to 1995 alone, Russian civilian space programs suffered government funding reductions of 80 percent, and military space programs were cut by 90 percent. In addition, the Russian government routinely does not give final approval to the current calendar year budget until mid-spring, which leaves all agencies, including military and civilian space, forced to survive on a series of month-by-month handouts based on the previous year's allocations. Lower-tier subcontractors are most affected by these payment delays, and many of them are now demanding payment in advance for delivery of goods, resulting in further production stoppages at the prime contractor level. Furthermore, state funds can be unexpectedly diverted to other uses as national emergencies arise; RSA's 1994-1995 budget reportedly suffered because of the need to pay for the war in Chechnya, and it is likely that money is currently being channeled toward politically charged payments of back wages to striking coal miners and other workers. Of course, these funding dynamics enormously complicate attempts at long-term planning and investment.

The bulk of scarce government funding has gone to current operations likely to attract foreign cash, such as commercial launch activity. Funding for aerospace programs is sufficiently tight and spasmodic that pipelines for research and procurement have been stretched out almost indefinitely for the few new projects that remain; according to one Russian source, strict funding priority has been assigned to "space systems which can be activated in the near future." This emphasis on current operating costs and procurement of hardware near the end of the pipeline is most certainly taking place at the expense of investment in infrastructure and research and development. The diversion of scarce resources toward current operations and away from long-term investments carries serious long-term consequences. The cumulative impact of years of neglect has been a severely eroded research and development capability and a significant degradation of physical plant.

Lack of Modernization Potential

These two factors -- the loss of key personnel, and the corrosion of important infrastructure -- exacerbate another problem, the basic level of technological sophistication of the Russian space industry. Much of Russia's current exploration and use of space is made possible primarily by inertia carried over from the Soviet period, although there is evidence that even those warehoused stockpiles of products, components, and R&D are coming to an end. The Soviet aerospace industries were held captive to the same perverse incentives that plagued the rest of the Soviet economy, incentives which rewarded quantity or gross output of production rather than quality, output assortment, or technological innovation. The haphazard process of Russian industrial reform has not enabled the space industry to overcome this Soviet legacy. As a result, modernization programs which would make Russia competitive with other space-faring nations are scarce and frequently unsuccessful.

Other Specific Causes of ISS Funding Delays

Many analysts, both Western and Russian, have speculated on other causes of the repeated funding crises and resultant delays in space station component construction and delivery. The most obvious is simply that the Russian economy has collapsed, and fulfilling obligations to the space station project has not been, perhaps understandably, a consistently high priority. But a deeper and more nuanced look at the Russian political situation over the last several years, at both Russian domestic politics and foreign policy, provides a series of potential additional explanations. One is that the Russian government has forced the delays intentionally, either as an expression of dissatisfaction or even punishment over plans for NATO expansion, or as a tactic to delay the abandonment of the revenue-generating Mir. Another factor may be Russian political and industrial culture, which traditionally has not taken schedules and deadlines seriously. In the words of one anonymous source within the Russian space program, "The shuttle's late, every major program is late. That's the nature of the beast. I'm fascinated by this preoccupation by the American side on an exact date."

Russian public opinion has not always assigned the highest priority to participation in the station. Some Russian commentators have denounced Russia's involvement in the project, fearing that the country's domestic space infrastructure will suffer as a result and fretting over the implied degradation of Russia's superpower status. Observing that, unlike the Mir follow-on which had been scheduled for lift-off in 1997, the international station will not fly over all of Russia's territory, Russian naysayers complain that the United States is getting the better part of Russian technology at bargain basement prices and that valuable design and production work is being taken away from Russia and assigned instead to Western contractors. One prominent Russian newspaper commentator recently complained, "Russian know-how will save Americans at least $10 billion and three years, but the U.S. will actually pay Russia only $400 million. Is it fair?" Another Russian analyst sounded the same theme: "We get the impression that the United States would like to use Russia as a kind of cab driver. We put the American spacecraft into orbit, and then -- good bye! They are aiming to manufacture all the special-purpose high-tech equipment themselves. If this is how things turn out, there will be little left of our high-tech industry." In other words, many Russian perceptions of the politics of the International Space Station partnership are quite different from those in the United States.

Finally, the politics of the Russian budgetary process itself are important. The situation with Russian funding of its space station commitments is fundamentally political as much as it is financial. The Ministry of Economics, which controls significant government budget disbursements for space, has in recent years has been vocally hostile toward the manned space program, suggesting that there is "no coherent scientific program" for Russia's participation in the space station. This means that, without direct intervention directly from the highest levels, the regular grind of the political process may continue to result in financial problems for space industry and operations.

It was precisely this kind of intervention, in the form of former Prime Minister Victor Chernomyrdin and the force of the Gore-Chernomyrdin partnership, that gave space station funding the infusions it has received, prompt or delayed, over the last several years. Now that Chernomyrdin is gone and two new governments have struggled with Russia's worst financial crisis since independence throughout the spring and summer of 1998, the prospects for space funding are not bright. With the International Monetary Fund insisting that the state budget be tightened before it will disburse desperately needed loans, major privatization deals for huge Russian natural resource conglomerates falling through (depriving the budget of over a billion dollars in expected revenues), and tax collections throughout the country still falling far below expectations, belts are being tightened in Russia's budget sector more than ever before. This is likely to translate into a familiar pattern: scarce rubles for the space sector will be channeled into projects with the greatest promise for short-term revenue generation, a set of priorities which is unlikely to include the International Space Station.

Future Prospects

The vast majority of the scientists and engineers remaining in the Russian aerospace sector are talented, creative, honest professionals. But they are trapped within an obsolete, decaying infrastructure that leaves them little room to translate their knowledge and experience into innovative, functioning products. It would take years' worth of restored political priority, resulting in full, consistent streams of funding, as well as a stable political and economic business environment within which to operate, for Russian space industry once again to develop the capacity for activity it demonstrated during the Soviet period.

Until that unlikely scenario takes place, Russian space operations will continue to be plagued with the kind of accidents and mishaps that have become familiar over the last several years, and probably at an accelerating rate. Whatever activity continues will result from the marketing of Russia's space capability to paying customers, most of them non-Russian, looking for a good deal on cheap technology and manpower. In order to generate this desperately needed revenue, the Russian government will continue to allocate whatever scarce resources it can spare on space to current operations for those projects which demonstrate the best promise in attracting foreign cash. Inertia generated by Soviet-era activity -- the inherited ground support infrastructure, the use of accumulated reserves, the availability of skilled labor at low wages -- may continue to support this marketing effort. But, in essence, Russia is very close to becoming nothing but a contractor for other countries' space programs. Basic research and development, which cannot be translated into an immediately saleable product, will continue to suffer, as will long-term investment and planning for whatever uniquely Russian priorities exist in the realm of space. As this trend continues, it will become increasingly difficult for Russia to meets its obligations even to paying customers or to partners in international cooperative space endeavors.

Can this disaster be reversed? The answer to that question lies in an examination of just how far Russia has come since the collapse of the Soviet Union. Clifford Gaddy and Barry Ickes have recently described the Russian economy not as a functioning or even a developing market, not as capitalist or socialist, but as a new type of economy: "virtual." It earns this label because it is based almost entirely on illusion or pretense about almost every important parameter of economic activity ñ prices, sales, wages, taxes, and budgets. In this respect, it differs little from the practice of Soviet central planning, where prices were ad-hoc constructs, functioning as artificial accounting tools after the planners allocated resources primarily in terms of material balances, and where official data on production, inter-enterprise trade, and sales comprised a web of lies disguising widespread barter, unfulfilled quotas, overproduction of shoddy, unusable goods, and diversion of state property. Major enterprises continue literally to subtract value as part of their ongoing industrial activity, acquiring inputs through barter and other forms of non-cash exchange, hiring but not paying workers (at least not in cash), and churning out worthless end products. This dynamic is sustained by a political process still unwilling to tolerate the sudden, dramatic leaps in unemployment that would result from the closing and/or genuine restructuring of these industrial behemoths, and by direct and indirect subsidies made possible by those enterprises, mostly in the natural resources sector, which genuinely do produce value, including hard currency.

This "virtual" economy cannot exist side by side with a stable, developing industrial market ñ it will inevitably infect it. It provides ample opportunity for rampant corruption, as recent experience has illustrated. And the Russian state cannot function effectively if it cannot find a way to tax a substantial part, if not a majority, of economic exchange taking place through barter. In other words, despite the gleaming new high-rise office towers and apartment buildings altering the landscape of downtown Moscow, despite the progress implied by a newly functioning Russian stock market, despite the proliferation of German luxury cars and cell phones among Russiaís new class of elite young businessmen ñ despite all of this, in important ways, Russia has not progressed very far at all since Mikhail Gorbachev took his place on the world stage in 1985. Money alone is not the solution. Bailouts from the West may, in fact, serve only to prolong the agony before Russia is forced to face the real work of significant financial and industrial restructuring.

The Russian space program does not exist in a vacuum. It depends on, indeed stems from, a wide variety of supporting elements in the society surrounding it: education, industry at all levels, finance, and government. Until some rationality and stability is achieved in some or all of these areas, the trajectory of Russian space industry and operations will continue along its current path. And, unfortunately for Russia and for the rest of the world, it appears at though that rationality and stability will not be achieved in the foreseeable future.

In closing, I would like to say that I am an enthusiastic proponent of manned space activity. I very much hope that the International Space Station succeeds. I also very much hope that the Russian reform effort succeeds. But there are many reasons to question whether NASA's current proposal to provide more money to Russia will further either of these goals. Thank you, Mr. Chairman.

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