Italy Signs Contract for Two Boeing Delta 2 Launches

European Officials Blame Schedule Issues, U.S. Export Laws for Loss of Business

PARIS — Italy’s decision to launch two civil-military radar observation satellites aboard Boeing Delta 2 rockets followed an attempt to secure less-expensive Russian Soyuz vehicles that failed in part because of U.S. technology-export regulations, according to European industry officials.

The move will cost Italy at least $70 million — the difference between the estimated total price of two Delta 2 launches and two Soyuz launches , officials said.

Boeing Launch Services announced Dec. 11 that it had signed a contract with Cosmo-Skymed system prime contractor Alcatel Alenia Space for the launch of two Delta rockets in 2007. Each one will place a Cosmo-Skymed high-resolution radar satellites into low Earth orbit.

Massimo De Lazaro, director of Alcatel Alenia’s radar business unit, said the choice of Delta 2 was made after a consideration of both price and schedule issues. He conceded that Delta 2 is more expensive than Soyuz, but said it is “more convenient for us based on our need to launch” by certain dates.

Before signing with Boeing, Cosmo-Skymed managers had sought two possible avenues for a Soyuz launch — with the French-Russian Starsem company, which sells Soyuz for civil and commercial missions; and with Russia’s export agency, Rosoboronexport, which oversees the export of military hardware.

In what industry officials said may have been an attempt to find the lowest possible price, Cosmo-Skymed managers negotiated with Starsem for a euro-denominated launch at the same time they negotiated a ruble-priced launch with Rosoboronexport.

One official said that in early 2006 a Starsem launch would have been priced at around 35 million euros per launch, which today is equivalent to $46.2 million — or close to half the price of a Delta 2 vehicle.

To justify Rosoboronexport talks, Cosmo-Skymed managers had identified the satellite as a military spacecraft with a dual-use mission. In the past, Starsem’s Soyuz mandate has not included military satellites.

But in August, the U.S. State Department applied two-year sanctions on Rosoboronexport, alleging it has played a role in exporting missile technology to Iran. Cosmo-Skymed includes U.S.-made components, meaning any launch involving Rosoboronexport faced a veto from U.S. export-control authorities.

The sanctions meant Cosmo-Skymed’s launch could not be handled through Rosoboronexport. But by then the Starsem option had been compromised by the fact that Cosmo-Skymed was labeled a military satellite.

Dual-use Earth observation satellites are not uncommon. But when there is a formal military presence in the funding or operations of the satellite, Rosoboronexport has a right to intervene — and to collect its fee — in what otherwise would be a straightforward commercial contract. A launch labeled as military goes through a separate set of procedures in the Russian government and is managed by Rosoboronexport, which in return for its services charges a fee that adds to the launch cost.

This occurred before the launch in August by Sea Launch LLC of Long Beach, Calif., of the Koreasat-5 dual-use telecommunications satellite. Industry officials said Rosoboronexport entered the negotiations and insisted on its export license-related fee, long after the launch contract had been signed.

But for Cosmo-Skymed, any Rosoboronexport involvement was made impossible by the U.S. State Department ruling.

Starsem and Alcatel Alenia Space attempted to negotiate a launch contract that would bypass Rosoboronexport with the blessing of Russia’s space agency, Roskosmos, but apparently this effort was undertaken too late.

De Lazaro conceded that the Cosmo Skymed launch “had problems with these kinds of [export-license] issues,” but said the final decision was based on schedule. He said it is possible that one or both of the remaining Cosmo-Skymed satellites will be launched aboard Soyuz.

The first Delta 2 launch is scheduled for early 2007, with the second about six months later, De Lazaro said. The two other satellites will be ready for launch in 2008.

The Cosmo-Skymed satellites, each weighing about 1,750 kilograms, will be placed into a 619-kilometer polar low Earth orbit to provide images with a ground resolution as sharp as 1 meter for Italian and French military and commercial users. Each satellite is designed to operate for at least five years.

Cosmo-Skymed is Italy’s contribution to a French-Italian system that includes Italian access to France’s future two-satellite Pleiades optical satellite system, and the Helios-2 military and Spot 5 civil observation spacecraft currently in orbit. Each nation’s defense ministry will have ground stations that can access the other nation’s satellites under the bilateral agreement, called ORFEO — Optical and Radar Federated Earth Observation.

Alcatel Alenia Space of France and Italy is prime contractor for the construction of the Cosmo-Skymed satellites and is also responsible for the launch of the satellites. Cosmo-Skymed system costs total nearly 1 billion euros ($1.3 million).