Cablegate: Ukraine: Space Deal with Brazil Uncertain

VZCZCXRO3018
RR RUEHDBU RUEHSL
DE RUEHKV #2182/01 3561422
ZNY CCCCC ZZH
R 221422Z DEC 09
FM AMEMBASSY KYIV
TO RUEHC/SECSTATE WASHDC 9016
INFO RUCNCIS/CIS COLLECTIVE
RUEHZG/NATO EU COLLECTIVE
RUEHBR/AMEMBASSY BRASILIA 0001
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEANAT/NASA WASHINGTON DC

C O N F I D E N T I A L SECTION 01 OF 02 KYIV 002182

SIPDIS

STATE FOR EUR/UMB AND OES
COMMERCE FOR 4231/ITA/OOEENIS/NISD/CLUCYK

E.O. 12958: DECL: 12/21/2019
TAGS: TSPA ETRD ECON BR UP
SUBJECT: UKRAINE: SPACE DEAL WITH BRAZIL UNCERTAIN

Classified By: Economic Counselor Edward Kaska for reasons 1.4(b) and (
d)

1. (C) Summary. During his December visit, Brazilian
President Lula de Silva announced that Ukraine and Brazil
would move ahead to launch the Ukrainian-designed and built
Cyclone-4 space launch vehicle from Brazil's Alcantara
launching pad. Ukraine and Brazil signed a cooperation
agreement in 2003 to conduct the first launch in 2006.
However, lack of political will and unresolved financing and
intellectual property issues repeatedly threw the project off
track. Lula de Silva's December visit has reportedly helped
resolve issues surrounding the project, and according to
Ukrainian President Yushchenko, the first launch now is to be
completed in 2010. Insiders, however, doubt that the parties
will be able to secure a necessary agreement with Russia,
which partners with Ukraine in building the launch vehicle,
and do not expect the project to become operational before
2013, if ever. End Summary.

CYCLONE-4
--------

2. (C) The Cyclone is a family of space launch vehicles
derived from the SS-9 Intercontinental Ballistic Missile.
Originally introduced in 1967, its last flown derivative, the
three-stage Cyclone-3 was reportedly retired in January 2009.
The Cyclone-4 is a new derivative, which is to be built
specifically for Brazil's Alcantara launching pad. It has
three stages and can carry a payload of 1.5 tons into
Geo-Synchronous Orbit and 5.0 tons into Low Earth Orbit. The
first stage engine for the Cyclone-4 is produced by the
Russian state-owned company Energomash.

UKRAINE,S SPACE POTENTIAL
-------------------------

3. (SBU) Ukraine has a long tradition as a major space
industry player, chiefly based on the activities of
Dnipropetrovsk-based Yuzhnoye Design Bureau and Yuzhmash
Machine Building Plant. (Note: The two companies, often
referred to simply as Yuzhnoye/Yuzhmash closely cooperate in
designing and building space launch vehicles, and their
tradition of joint work dates back to the Soviet
Intercontinental Ballistic Missile program. End Note.) Yet,
despite Ukraine's technical capabilities, the country has no
launching base of its own and has to use other countries'
launching facilities. Ukraine has most often used Russia's
Plesetsk and Kazakhstan,s Baikonur as launch sites. The
agreement with Brazil would allow Ukraine to diversify its
launching bases and make better use of its space program.
Brazil, on the other hand, strives to build out its own space
program and make use of the advantageous position of its
launching pad near the equator, according to Ukrainian media.

UKRAINE-BRAZILIAN SPACE PARTNERSHIP
-----------------------------------

4. (U) Ukraine and Brazil signed an agreement in October 2003
to launch the Ukraine-produced Cyclone-4 space launch
vehicles from Brazil's Alcantara launch facility. In 2006,
the two countries formed Alcantara Cyclone Space, a 50-50
joint venture to spearhead the cooperation program. With the
help of Yuzhnoye Design Bureau, which had developed the
Cyclone-4 along with other launch vehicles, Brazil planned to
redesign the launching facilities at Alcantara to accommodate
the Ukrainian rocket. The original agreement foresaw the
first Cyclone-4 launch in 2006. However, the project
repeatedly went off track as a result of political changes in
Ukraine, lack of available financing, and unresolved
intellectual property rights issues with Russia. The cost of
the project was initially estimated at $180 million, to be
shared equally by Ukraine and Brazil. According to press
reports, however, the cost has since ballooned to a multiple
of the original sum.

5. (U) Amid rumors that the Alcantara Cyclone Space project
may be scrapped altogether in favor of cooperation with
Russia, Lula de Silva's visit to Ukraine in December provided
the project with new momentum. Both presidents announced
that the countries successfully resolved all obstacles, and
the project was ready to take off. According to Yushchenko,
the first launch of the Cyclone-4 from the Alcantara Space
Center would take place by 2010, before the end of Lula de
Silva's presidential term. Brazil also reportedly agreed to

KYIV 00002182 002 OF 002

provide Ukraine with a loan to fund its part of the project.

INSIDERS SKEPTICAL
------------------

6. (C) Local insiders have largely dismissed the
"breakthrough" announcement as a mere political ploy.
According to Borys Atamanenko, the head of international
relations of the National Space Agency of Ukraine (NSAU), the
agreement has not brought the two countries any closer to
implementing the project. A launch in 2010 was not realistic
and 2013 was more feasible, Atamanenko told us.

RUSSIAN INVOLVEMENT
-------------------

7. (C) The issue is less Ukraine's technological prowess but
unresolved intellectual property issues with its Russian
partners. According to Atamanenko, "Ukraine owns 95% of the
Cyclone-4 design and Russia owns the remaining 5%," since the
Cyclone-4 is the result of Soviet-era space research.
Ukraine knows how to build the Cyclone-4 without Russia, and
could even get required "Russian" parts from others, such as
China, if needed. However, a move to complete the deal with
Brazil without Russia's acquiescence would upset Ukraine's
space relationship with Russia, Atamanenko noted.

8. (C) While working-level relations between Ukrainian and
Russian scientists continue to be good, "politics often gets
in their way," Atamanenko told us. According to him, the
future of Cyclone-4 is a political decision that Ukraine's
leaders will need to weigh carefully. Given historical and
geographical considerations, Russia is Ukraine,s most
important space cooperation partner, and maintaining a good
relationship is crucial for Ukraine. According to
Atamanenko, Ukraine cannot afford to trade its relationship
with Russia for a single project like the Cyclone-4.

9. (C) Atamanenko said the Cyclone-4 project would be most
feasible as a commercial project that would include Russia as
a partner. As an example of a successful commercial space
partnership, he showcased SeaLaunch, a space launching
venture, comprised of Russian, Ukrainian, Norwegian and U.S.
partners. (Note: The venture's future is uncertain as
SeaLaunch declared bankruptcy in June 2009 and is currently
seeking a financial backer to restart operations. End Note.)

10. (SBU) The Ukrainian Agency for International Investments
has included the Cyclone-4 venture among the ten strategic
projects, for which the country hopes to attract
international investors, according to a list unveiled on
December 21. According to the agency's head Sergei Taran,
"the project has been selected for consideration by the NSAU
--- that means that (the NSAU) believes the project requires
additional investment."

COMMENT
-------

11. (C) The recent political announcement of the Cyclone-4
revival may again turn out to be premature. Until Ukraine is
able to improve its relationship with Russia and resolve
intellectual property rights issues left over from Soviet
times, Russia has the ability to play the role of "spoiler"
in Ukraine's endeavors to turn its considerable space
research and development potential into commercial benefit.
Ukraine well recognizes that Russia still remains Ukraine's
most important strategic partner in the space sphere. As a
result, Ukraine will not likely sacrifice the partnership in
favor of projects with other countries.
TEFFT

© Scoop Media