DOCUMENT A/1821

4 June 2003

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Cooperation between the European and Russian aerospace industries

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Document A/1821

4 June 2003

Cooperation between the European and Russian aerospace industries

REPORT¹

submitted on behalf of the Technological and Aerospace Committee²
by Mr Le Guen , Rapporteur

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¹ Adopted unanimously by the Committee on 13 May 2003.

² Members of the Committee: Members of the Committee: Mr Arnau Navarro (Chairman); MM Mauro, O'Hara (Vice Chairmen); Mrs Alvarez-Arenas (Alternate: Yañez Barnuevo), MM Anacoreta Correia, Atkinson, Azzolini, Bindig, Braga, Ceder, Danieli, Dimas, Duivesteijn, Etherington, Haupert, Höfer, Kucheida, Le Guen, Letzgus, Martínez Casañ (Alternate: Agramunt Font de Mora), Meale, Mrs Melandri (Alternate: Piscitello), MM Monfils, Pintat, Reymann, Siebert, Van Winsen, N...

Associate members: MM Açikgöz, Ates, Bergvinsson, Çavusoglu, Eörsi, Gawlowski, Komorowski, Konradsen, Rockenbauer, Mrs Senyszyn, Mr Titz, N..., N....

N.B. The names of those taking part in the vote are printed in italics.

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RECOMMENDATION 727¹

(i) Considering the strategic importance of space from a political, economic and military point of view;

(ii) Pointing out that the development of space activities could be an important and vital dimension for Europe, allowing it to attain its main security objectives;

(iii) Noting besides that space research is acquiring a growing commercial importance for European industry, making it possible for Europe to become the most dynamic and competitive knowledge-based economy in the world in line with the goals set in Lisbon;

(iv) Welcoming the growing interest Europe is showing in space, as demonstrated by the European space strategy that has been drawn up jointly by the European Commission and the European Space Agency;

(v) Noting with satisfaction that the Commission is seeking to strengthen its efforts in this sphere, intensify its relationship with ESA and develop international cooperation on space;

(vi) Considering that the question of cooperation between Europe and Russia should be placed in this context;

(vii) Observing that the United States benefits from a protected market, especially with the "Buy American" Act, while European space policy does not preclude competition, given that Europe invites tenders internationally;

(viii) Considering that it is essential for Europe's space effort to be autonomous and that technological superiority is an absolute condition for maintaining that autonomy;

(ix) Underlining the fact that the exploitation of space has become a major factor in the military policy of larger nations and therefore that the European Union should have the appropriate space systems for intelligence gathering and analysis;

(x) Recalling that it is not enough to own satellites but that access to space is paramount and that autonomy in the field of space is based on the ability to put up satellites;

(xi) Taking the view that should Europe want to develop its own missile defence system to defend its territory, such a system would require a minimum satellite cover that Europe does not have at present, and consequently larger budgets, while in European countries defence spending is actually falling;

(xii) Recalling that Russia has put forward a proposal for a pan-European non-strategic missile defence system that might provide Europeans and Russians with a framework for global cooperation;

(xiii) Noting that the United States, having grasped the advantages of cooperating with Russia, has entered into numerous cooperative projects on space with that country, which means steeper competition for Europe in this field;

(xiv) Welcoming the fact that Europe and Russia have also built up cooperation over trade, with the establishment of various companies for commercialisation of the Soyuz launcher and the smaller Rockot launcher;

(xv) Pointing out that Russia's interest in cooperation is primarily financial and economic, its aim being to support its heavy industrial machinery, formerly driven by state funding which has now dried up;

(xvi) Taking the view that, economic considerations apart, cooperation of this nature is for Russia part and parcel of the refocusing of its foreign and security policy on Europe;

(xvii) Considering that the momentum generated by the new European Strategy for Space has served to strengthen cooperation between ESA and Russia's Rosaviakosmos agency, in the following areas in particular: launch services, development of the Global Monitoring for Environment and Security (GMES) initiative and development of the Galileo satellite navigation system;

(xviii) Welcoming the signature of the EU-Russia cooperation agreement relating to the above areas, including Soyuz rocket launches from the European Space Centre at Kourou, in French Guiana;

(xix) Stressing that cooperation in those areas appears promising, not simply in economic terms, at the level of world markets but politically, strategically and in terms of technology;

(xx) Welcoming the proposal put by EADS, in cooperation with Airbus, to the Russian authorities for the development of a long-term industrial cooperation programme, which has concluded in the signature of a strategic partnership agreement;

(xxi) Observing nevertheless that cooperation with Russia is bedevilled by that country's slender financial resources and its difficulties in reorganising its industry;

(xxii) Noting furthermore that Russia has a sophisticated science and technology infrastructure which, even today, makes it a world leader in many fields;

(xxiii) Pointing to the long legacy of institutional rigidities and dysfunctional institutional arrangements inherited from the former regime, the constraints imposed by the legislative and administrative environment, in particular bureaucratic problems over taxes, customs duties, regulation and certification and especially the whole question of industrial property, which are holding back programmes and making it more difficult to make them viable,

1. Request the WEU member states and observer countries, as members of the European Union, together with other WEU and ESA countries to ensure that the basis of aerospace cooperation between the EU and Russia is not simply economic, but also political, strategic and technological;
2. Request the member states and observer countries, as members of the European Union, to ensure that the Galileo and Glonass satellite navigation systems, the development of reusable launch vehicles and associated facilities, and the Global Monitoring for Environment and Security (GMES) initiative continue to constitute a major priority for the EU-Russia space partnership, and to that end to endeavour:

3. Request the member states and observer countries, as ESA member states, to ensure that an agreement is reached as soon as possible to allow Russia to use the Kourou launch base for Soyuz launches and that, to that end, the necessary funding is found;
4. Encourage WEU member states to urge Russia to abolish the legislative and administrative constraints, and in particular resolve the bureaucratic problems affecting taxes, customs duties, regulation and certification and especially the whole question of industrial property, which are holding back programmes and hindering cooperation that is of mutual benefit.

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EXPLANATORY MEMORANDUM

1. There is no question about the strategic importance of space, which is where political, economic and military authorities deploy telecommunications (television, telephone links), intelligence (meteorological, earth observation) and navigation systems. From Europe's point of view, space developments can be used to help it achieve its main security and defence goals².
2. Furthermore, space research is acquiring a growing commercial importance for European industry. It may be the means of achieving the goals set at Lisbon³, which is to become the most dynamic and competitive knowledge-based economy in the world⁴.
3. Having already made a major contribution to space developments, alongside the United States, Russia and Japan, with investments of less than a sixth of the US space budget, Europe is now taking a growing interest in space, as can be seen from the document on a European Strategy for Space⁵ drafted jointly by the European Commission and the Council of the European Space Agency (ESA).
4. The Commission clearly wants to strengthen its action in this sphere and has included aeronautics and space among the seven priority themes of the Sixth Framework Programme for Research and Technological Development (Sixth FP)⁶. To do so, it wants to deepen its relationship with the European Space Agency⁷ and develop international cooperation on space. It is in that context that the issue of cooperation with Russia should be placed.

5. From Europe's point of view, telecommunications is the principal area of the commercial application of space, but in the face of market overcapacity (too many launchers for relatively few commercial satellites, thus increasing competition)⁸, stronger international cooperation would appear to be essential.
6. Private or semi-public operators like France Télécom or Deutsche Telekom are no longer placing orders, while institutional demand for observation satellites for scientific or military purposes is insufficient to make up the commercial deficit. The slowdown is more obvious in Europe than in the United States since 80% of the work of the three major companies in the sector, Boeing, Lockheed Martin and Loral, is for the public sector (NASA and the Department of Defense) while their two European rivals Astrium (a subsidiary of EADS and BAe Systems) and Alcatel Space (a subsidiary of Alcatel) rely on private operators for more than 50% of their business.
7. Moreover, the United States protects its markets⁹ whereas European space policy does not preclude competition, given that Europe invites tenders internationally. It is essential for Europe to have an autonomous space capability.
8. In strategic terms, expertise in space technology is an absolute requirement to ensure Europe remains autonomous. Developed societies have become so used to the services space technology contributes to daily life that they have come to depend on them and their availability is taken for granted, notwithstanding the years of effort it has taken to achieve this.¹⁰
9. The need for independence in certain strategic areas has run up against a reduction in public funding. European countries have been cutting back on government support since the 1990s, in the same way as they drew their "peace dividend" by reducing defence budgets.
10. European satellite capabilities are weak and all too often still US-dependent. The Kosovo conflict recently highlighted the breadth of the gap between US space capabilities and those of the European allies.
11. The use of space features prominently in the larger nations' military policy. If Europe's decision-makers are to have an all-round, up-to-date view of a situation, the European Union must have suitable space systems which gather and analyse information¹¹. This is why not only is satellite ownership essential, but access to space is paramount: an autonomous space capability means being able both to design and develop satellites and place them in orbit.
12. Furthermore, should Europe want to be involved in the defence of its own territory by developing a European missile defence system, such a system would require a minimum satellite cover that Europe does not have. This in turn would mean budget increases at a time when European countries' defence budgets are frequently in decline.
13. In this context Russia has put forward a proposal¹² for a pan-European non-strategic missile defence system that could provide Europeans and Russians with a framework for global cooperation. It involves setting up a mobile anti-ballistic missile system for deployment in crisis areas where coalition troops might be required to operate. This is the kind of offer of cooperation that has to be given serious consideration.
14. Russia has long experience in space, as a result of having had to compete for many years with the United States during the cold war, and the legacy of a somewhat uneven scientific and technological potential, dating from that period.
15. The United States quickly grasped the advantages of cooperating with Russia and entered into numerous cooperative projects in the space field. Thus a joint US-Russian company has been set up to commercialise Proton launchers. Boeing, which uses the Russo-Ukrainian Zenith (formerly SS-19) launcher, recently built the Sea Launch platform to enable the launcher to be positioned over the equator, with the attendant advantages¹³. Such joint ventures have made it possible for the United States, Russia and Ukraine to commercialise the heavy launchers that previously exclusively served the Soviet, then Russian military markets. This means steeper competition for Europe, the more so since production costs in the countries in question, especially wages, are well below those in Western countries. The monthly salary of a Russian engineer is now of the order of US$ 125. This means that prices can be kept at very low levels which Western launch companies find hard to beat.
16. Europe and Russia have also built up trade cooperation. This has been very successful, with commercialisation by Starsem of the Soyuz rocket¹⁴. As regards smaller launchers, the Russo-European Eurokot, a joint venture set up in 1995 between Khrunichev (Russia) and the German company DASA GmbH¹⁵ (now part of EADS), is commercialising the small Rockot launcher, with less capacity than Soyuz.
17. Russia's interest in cooperation is primarily financial and economic. It is trying to support its heavy industrial machinery, formerly driven by state funding, which has now completely dried up.
18. At the end of the 1980s the former Soviet Union was producing 20% of the world's military aircraft and 25% of civilian aircraft, some 250-300 planes per year. The Russian aeronautics industry today finds itself in a critical pass. The Russian Government undertook to restructure the industry by 2004. Over the next ten years, the industry needs to be brought up to the level of a modern industrial infrastructure able to design and manufacture to Western standards, first by sub-contracting to bring in foreign exchange, and then through partnership. Seen in this light, development of partnerships with Western countries is seen as the key to success.
19. During the cold war period, the space sector was extremely well-resourced. But with the collapse of the Soviet bloc, it bore the full brunt of the cutbacks in federal budgets. Since 1992, with the creation of its Space Agency, Russia has pursued a policy of international cooperation, enabling it to attract the international finance necessary to keep the firms in the sector afloat, and to keep abreast of technologies and know-how in the international marketing of equipment that it no longer has the wherewithal to develop on its own. This policy rapidly took shape in practical terms with the signature of several strategic partnerships, especially in the launcher field. Furthermore, international scientific programmes continued with the MIR space station and then with the international space station (ISS).
20. Economic considerations apart, very broad common interests provide a basis for the development of space cooperation between Europe and Russia. That development forms part and parcel of the refocusing of Russia's foreign and security policy on Europe. Cooperation gives Russia an alternative to exclusive ties with the United States. In Henri Revol's view¹⁶, Russia's relations with the United States are characterised by a rejection of exclusive mutual dependence, a factor which would not carry the same overtones were relations between Europe and Russia to develop in parallel. Europe can benefit from the breadth of technological know-how Russia has gained in areas such as propulsion while, conversely, Russia's request for a Soyuz launch pad at the European Space Centre in French Guiana appears to indicate a greater willingness to cooperate with Europe.
21. However, Russian officials note that commercial relations with the EU do not make a sufficient contribution to Russia's economic development and modernisation. They advocate that Europe give wider market access to certain Russian "non-energy products", especially in areas of excellence like aeronautics, space or armaments, to which considerable Russian national prestige is attached. Cooperation in these sectors would counterbalance the predominance of energy in economic relations.

22. There has been a dialogue on space between the EU and Russia since 1997, pursuant to Article 67 of the Partnership and Cooperation Agreement (PCA) signed between the EU and the Russian Federation on 1 December 1997¹⁷, bringing together the representatives of space agencies, research institutes, public authorities and space operators and the industry.
23. The purpose of the dialogue is to deepen ties of cooperation on space research between the European Union and Russia and to develop cooperation projects.
24. The EU supports space R&D in Russia through the International Science and Technology Centre (ISTC) established under the Agreement signed by the EU, Japan, Russia and the United States on 27 November 1992¹⁸. This Moscow-based centre is regarded "as a way of ensuring the success of joint efforts to redirect the work of scientists formerly specialising in military research into peaceful areas"¹⁹.
25. In parallel, since 1992, Russia has signed framework agreements on space with most EU member states.
26. Thus there is a long tradition of space cooperation between France and the Soviet Union, beginning with the de Gaulle-Brezhnev agreement in 1966, initially confined to scientific research and then extended to flights by French astronauts to Soviet space stations. The STARSEM organisation seeks to promote commercial production of the Russian Soyuz launch system, development of satellites for the study of scientific processes and manned space flights.
27. Cooperation has been strengthened considerably since Mr Putin came to power. Russia has stated its wish to deepen scientific and technical cooperation with the European Union.
28. The new European Strategy for Space, adopted in November 2000 by the EU Research Council and the ESA Council, has given further impetus to cooperation between the EU, ESA and Russia.
29. This impetus has served to strengthen cooperation between ESA and Russia's Rosaviakosmos agency in three areas: launch services, development of the Global Monitoring for Environment and Security (GMES) initiative and associated intelligence activities based on remote sensing, and development of the Galileo satellite navigation system.
30. In October 2001, as part of a cooperation agreement between the EU and Russia on energy and space research, a joint instrument on a Europe-Russia space partnership was signed by Philippe Busquin, the European Commissioner for Research and Yuri Koptiev, Director-General of the Russian Space Agency.
31. Under this agreement there is to be a concentration of effort on satellite navigation systems like Galileo and Glonass (the Russian GLObal Navigation Satellite System), the GMES initiative and launch services, in particular, Soyuz rocket launches from the European Space Centre at Kourou, in French Guiana. These are all areas that could benefit from enhanced cooperation between Russia and the EU. Cooperation in those areas appears promising, not simply in economic terms, at the level of world markets but politically, strategically and in terms of technology.
32. The partnership will also involve new activities linked to the space programme. These include manned spaceflight, planetary exploration, development of future transport systems and use of the International Space Station (ISS).
33. On the occasion of the 10^th EU-Russia Summit on 11 November 2002, the European Commission stressed that the Galileo and Glonass satellite navigation systems, the development of reusable launch vehicles and associated facilities, and the Global Monitoring for Environment and Security (GMES) initiative constituted a priority for the EU-Russia space partnership. The European Research Commissioner has furthermore invited Russia to join the GMES management committee and to become a member of the EU taskforce set up to prepare for the Earth Observation Summit due to take place in the United States in June 2003.
34. A document relating to this meeting shows that work done during the definition phase of Galileo revealed the potential for industrial cooperation between European and Russian firms, Russian experts having been involved in the studies for this phase. The sectors considered most promising for fruitful cooperation were identified as: frequency spectrum-sharing, satellite position determination, constellation and atomic clock interoperability between Galileo and Glonass signals. Until recently, the setting up of a Joint Undertaking by the European Commission and the European Space Agency for management of the development of the Galileo programme was delayed by the failure of Italy and Germany to agree on their respective funding levels (and hence on the industrial leadership) within the ESA financial envelope.
35. For the present, the priority for Europeans is to identify the part Russian industry could play with regard to the Galileo programme. The political discussions currently under way could involve Russia in the Galileo Joint Undertaking.
36. The Commission's communication on GMES²⁰ underlines the need for international cooperation in relation to the development of this project, stating that the latter opens up a major sector where there is a very great potential for cooperation with Russia.
37. The 5^th Framework Programme contains an accompanying measure called "GMES-Russia". This involves six Russian institutes, in the following areas: satellite remote sensing (operations and applications), geographic information systems and atmospheric and marine sciences. The Commission is also in the process of embarking on cooperation with a number of Russian research institutes in areas such as "gas pipeline monitoring from space, a monitoring system for the Siberian forests, coastal zone studies to support policies on prevention of pollution and control of water quality, decision support in the management of the coastal areas and sustainable exploitation of the marine resources, collaborative measures for the 4^th International Polar Year (2007) and extension of the European Environment Agency and Commission and CORINE Land Cover Mapping Project to Russian Territory".
38. The question of Russia's request to use the European launch site at Kourou in French Guiana for Soyuz rocket launches is referred to in the Technological and Aerospace Committee's report on European defence-related space activities and the development of launcher autonomy (Rapporteur, Mr Etherington). Your Rapporteur therefore does not propose to go into detail on this subject.
39. Again in agreement with the European Commission, Russia will be able to take part in the 6^th Framework Programme of Research (FP6) (2002-2006). Loans are available, in particular for cooperation on navigation systems, GMES and telecommunications satellites. Priorities in relation to these activities are to be defined jointly on the basis of Russian and European economic and social needs and of the aims and interests of political partnership. In the longer term, Europe and Russia might work together on areas such as the exploration of the solar system, new means of space transport and propulsion systems.
40. With a view to discussing opportunities for cooperation offered by FP6, a workshop, organised by the EU and Russia with the participation of ESA and Rosaviakosmos, took place in Moscow on 23 and 24 January 2003. According to ESA's Director-General, Mr Rodotà, the workshop was mainly taken up with information exchange.
41. Also, in a meeting with Mr Busquin, the European Research Commissioner, and Mr Koptiev, Director-General of the Russian Space Agency, Rosaviakosmos²¹, about enhanced cooperation in the space sector, one of the subjects reportedly discussed was the need for joint research in connection with the GMES programme, launchers, the Galileo and Glonass navigation systems and other long- term projects connected with the exploitation of the solar system.
42. Finally, Mr Liikanen, the European Commissioner for Enterprise and Information Society, visited Moscow on 4 April 2003²² to hold discussions with the Russian authorities, including Mr Klebanov, the Industry Minister, on "framework conditions" for companies and investment, the space industry, telecommunications and the information society. An EU-Russia industrialists' round table has been set up and is to hold a plenary session in the autumn. Here industrialists will have the opportunity to put forward joint recommendations to the European Commission and the Russian Government as regards investment opportunities and conditions, and industrial cooperation on both sides.

1. Cooperation with CNES²³

43. Cooperation between France and Russia under the aegis of the French and Russian space agencies, CNES and RKA²⁴, is the legacy of the joint scientific and technological research that has gone on since the signature of an intergovernmental Franco-Soviet cooperation agreement on 30 June 1966²⁵.
44. The main purpose of this research cooperation was initially scientific, but its thrust has changed in recent years to take advantage of industrial and commercial opportunities.
45. As far as science is concerned, the main Franco-Russian cooperation projects currently under way concern research missions using Russian satellites and manned spaceflight²⁶.
46. For the purpose of programmes of interest to the international scientific community, CNES is working on bilateral (or multilateral) cooperation programmes, such as Scarab (with Russia) for the study of the environment, Interball (with Russia) to study the earth's magnetic field and, as a partner with Russia and the United States, is also developing space probes for the study of planets.
47. CNES's industrial and commercial activities began when DERSI, a CNES subsidiary, was founded with the aim of developing industrial ties between France and the Commonwealth of Independent States. These are beginning to take shape, for example in the telecommunications satellite sector²⁷.
48. Launchers are another possible area of cooperation. To encourage the economic development of space activities, CNES, in partnership with various public bodies, space sector firms and investors, has set up marketing companies such as Arianespace for Ariane launchers, or Spot Image for Spot satellite products.
49. Arianespace²⁸ has had to diversify, both in response to increased competition and to diversification of the government satellite market. While Ariane 5 is well suited to larger military communications satellites and Galileo, smaller satellites are used for earth observation. Arianespace has therefore had to develop a family of launchers that can be used for all types of mission. In addition to the heavy-lift Ariane 5 launcher, which specialises in dual launches, there are plans to use Soyuz for medium-sized payloads and Rockot for small payloads²⁹. As cooperation is a requirement for the development of a range of launchers, Arianespace has called on the services of the Russian Soyuz rocket for missions that are complementary to those undertaken by Ariane.
50. The Franco-Russian venture STARSEM was set up in 1996, to promote commercialisation of the Soyuz launcher. The foundation of the company, which is the exclusive operator of Soyuz and its activities on the international market, represents a major industrial, financial and commercial challenge to meet the need to place small satellites in low Earth orbit.
51. Early in 2001, Russia officially requested France and Europe to allow it to operate from the Kourou space centre in French Guiana, which, because of its location close to the equator, is a better site than Baikonur for Soyuz launches. Russia hopes in this way to earn foreign currency. The matter was discussed by the ESA Council, meeting at ministerial level in Montreal in June 2002, and a decision in favour was taken in principle. The funding still needs to be found. Construction of a new Soyuz launch pad would cost around 250-300 million euros.

2. Cooperation with ESA

52. ESA is a European organisation set up in 1975 under a Convention that sets out its task as being "to provide for and to promote, for exclusively peaceful purposes, cooperation among European States in space research and technology and their space applications, with a view to their being used for scientific purposes and for operational space applications systems". ESA therefore has a natural role to play in defining a European space strategy, even if it is not part of the European Union as such.
53. The EU today regards space strategy as linked to the implementation of a number of political initiatives in the area of transport (Galileo), the information society (Lisbon objective) and the environment (observation satellites).
54. The European Commission has expressed its intention to widen the framework programme and make Russia a partner in EU-funded R&D work.
55. ESA is a partner in the international space station project with Canada - with which it has a cooperation agreement - Russia and the United States. Its Council, meeting at ministerial level, has agreed to the Russia's request regarding Soyuz launches from Kourou and is in favour of technological cooperation on launchers between Europe and Russia. An agreement has still to be reached between European nations on the budget for funding a new launch pad at Kourou.
56. Following the workshop in Moscow on 23 and 24 January 2003, organised jointly by the European Commission, the Russian government, ESA and Rosaviakosmos, the ESA Director-General, Mr Rodotà, said³⁰ that the matter of launching Soyuz from the Kourou space centre in Guiana was still on the table and that a decision would be taken shortly. He added that the feasibility of transferring the launcher from Baikonur to Kourou was still being studied, together with the practical arrangements. Lastly, the Director-General emphasised that cooperation between Europe and Russia was in no way exclusive of cooperation with the United States. However, he pointed out, with a nod in Moscow's direction, that there were times when a choice might be necessary.
57. ESA is also working on its new Future Launcher Preparatory Programme (FLPP) in which it is envisaged Russia will cooperate.

1. Cooperation with EADS

58. EADS (European Aeronautic Defence and Space Company)³¹ is having to contend with a difficult economic situation³²: there is a downturn in commercial markets, civilian institutional markets are stagnant or declining; project implementation - Galileo or GMES for example - is slowing down, even if budgets are holding steady, and there is little movement in the defence market.
59. Given market unpredictability (owing to developments regarding satellite mass, the market today consists of two thirds heavy to one third small satellites), EADS agrees that a range of launchers is required. But Europe at present does not have the means to fund the development of a complete family of launchers on its own, hence its interest in agreements with Russia.
60. Another reason for broadening cooperation with Russia is to prevent the latter from seeking another foreign partner (in particular the United States) and thus becoming Europe's competitor.
61. EADS, in cooperation with Airbus, has put a proposal to the Russian authorities for the development of a long-term industrial cooperation programme. A memorandum of understanding signed in 2001 with the Rosaviakosmos aerospace agency envisages six areas of cooperation: space, civil aviation, military transport aircraft, fighter aircraft, helicopters and staff training. The negotiations concluded with the signature of a partnership agreement on 2 July 2001.
62. This agreement provides for an expansion of the Russian-European programmes managed by the founding partners of EADS (Aerospace Matra, Dasa and CASA), and also for setting up new joint enterprises. EADS Director Philippe Camus has said that partnership will further improve both Europe and Russia's performances on the world market by bringing together their experience, know-how and markets.
63. The agreement covers:

64. On the basis of this strategic partnership agreement, EADS has begun direct negotiations with Russian industrial partners to arrange the necessary investment in the Russian aerospace industry. EADS and Russia are to set up joint ventures for cooperative management of the programmes.
65. According to Mr Camus, there will be a real workload for Russian companies as the expected production flow for the civil aviation sector alone will be one A320 panel per week, one A330/A340 fuselage section per month and 150 A320 fuselage sections per year. These figures might increase if the programmes are successful.
66. Lastly, Mr Camus has said that EADS partners have combined forces in order to become more competitive, but without losing their separate identities: the French, Germans, British, Spanish and Italians were all still there carrying out tasks that complemented one another, within a single organisation. In the same way, therefore, Russia could safely go into partnership with Europe, without risking the loss of its distinctive identity in the aerospace field.
67. Cooperation should also lead to the creation of several thousand highly skilled jobs in the Russian aerospace industry, and generate some 2.1 billion euros-worth of sales for Russia in the first ten years.
68. As a follow-up to the agreement with EADS, the European aircraft manufacturer Airbus has launched plans for cooperation in the form of an order from Aeroflot for 18 medium-haul carriers to upgrade its present fleet. The contract was signed at the end of 2002.
69. For the present, EADS is studying the initial proposals received for the manufacture of Airbus parts.

70. Russia is quite determined to embark upon new forms of cooperation with the West in the aerospace sector. However, there are many obstacles it must overcome if it is to achieve its stated objective.
71. They relate first and foremost to Russia's slender financial resources and its difficulties in reorganising its industry.
72. Roughly 60% of the machine tools used in the aeronautics industry are obsolete. The Iapo³³ group has invested massively in modernising production, after opting for a strategy of expansion beyond national boundaries to become part of worldwide industry. However, there are few plants rich enough to modernise on this scale. The large-scale modernisation programmes of the airline companies have come to grief.
73. According to a report by Arnold Watkins entitled "From Knowledge to Wealth: transforming Russian Science and Technology for a modern knowledge economy"³⁴:

74. In Watkins' view, given that Russia already possesses a sophisticated S&T (Science and Technology) base and a core of highly educated scientific personnel, it needs to preserve and transform what already exists rather than spend decades on re-creating this critical resource from scratch. At the same time "Russia has to overcome a long legacy of institutional rigidities and dysfunctional institutional arrangements inherited from the Soviet system".
75. Lastly, the report emphasises that at present:

76. Then there are the constraints imposed by the legislative and administrative environment, and in particular bureaucratic problems over taxes, customs duties, regulation and certification. They hold back programmes and make it more difficult to make them viable. The whole question of industrial property is a particularly important one, which raises a number of problems. The World Bank Report³⁶ notes that "it is impossible to commercialise something if the ownership is unclear or uncertain" and that "clarifying ownership is necessary but not sufficient. The debate in Russia concerns the ownership of intellectual property created at the expense of budget resources".
77. According to Watkins, there are three distinct periods in the debate on intellectual property legislation: the pre-1992 period; the 1992-98 period, characterised by the adoption of legislation covering patents to copyright, trademarks and microchip technologies, and from 1998 to the present day, where the ownership of budget-funded intellectual property is a major focus of discussion.
78. In the Soviet Union, inventions were state property and, in theory, could be used freely (in the interests of the state) without special permission, licences or royalty payments. Over the period when Russian intellectual property laws were in force (1992-98), Russia had not yet embarked on its privatisation programme and, consequently, most research institutes, manufacturing enterprises and innovative firms that were given intellectual property rights were all state-owned.
79. Privatisation has changed these arrangements and intellectual property laws have run up against a situation that was never foreseen when they were passed, leading one observer to declare:

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¹ Adopted unanimously by the Assembly without amendment on 4 June 2003 (4^th sitting).

² See the report on European space policy entitled "Towards a Space Agency for the European Union" by the "Three Wise Men" (Carl Bildt [former Prime Minister of Sweden and United Nations High Representative in the Balkans], Jean Peyrelevade [President of the Crédit Lyonnais bank] and Lothar Späth [former President of the German province of Baden-Württemberg]), commissioned by Antonio Rodotà, Director-General of the European Space Agency, ESA.

³ Lisbon European Council, Presidency Conclusions, 24 March 2000.

http://www.europa.EU.int/council/off/conclu/index.htm

⁴ According to the report by the "Three Wise Men", see footnote 1 above.

⁵ See "Europe and space: turning to a new chapter". Joint Commission/ESA document on a European strategy for space, EC Communication COM (2000) 597 final, 16 November 2000

http://europa.EU.int/comm/space/doc_pdf/esa_en.pdf).

⁶ The Framework Programme (FP) is the EU's main instrument for funding European research. The European Community and European Atomic Energy Community's six framework programmes were adopted by the Council of Ministers on 3 June 2002. The total budget for the four years covered by the programme (2002-2006) is 17.5 billion euros (16.27 billion euros for the EC FP and 1.23 billion for the Euratom FP) up 17% as compared with the programme for the Fifth FP.

⁷ An ESA-EU Commission Task Force has been set up to examine the conditions and organisation necessary for a rapprochement between the two bodies. The partnership between the European Commission and the European Space Agency should allow the latter to continue to carry out its intergovernmental tasks and in parallel act as the Space Agency for the European Union, in accordance with the latter's rules.

⁸ Outlets for telecommunications satellites, in particular, have dried up owing to advances in less expensive traditional technologies. The return on investment in space projects is perceived as uncertain and lead-in times are too long relative to market evolution. More generally, space is perceived as not very accessible, particularly in view of launch costs and the complexity of space systems.

⁹ Through the "Buy American Act".

¹⁰ See the report by Henri Revol to the French Senate's Committee on Economic Affairs and for the Plan, "La politique spatiale française: bilan et perspectives", Office parlementaire des choix scientifiques et technologiques, 21 April 2001, http://www.senat.fr.

¹¹ Telecommunications, reconnaissance, electronic eavesdropping, early warning and space monitoring systems. See "A joint European space strategy: security and defence aspects", report submitted on behalf of the Technological and Aerospace Committee by Mr Maass, Rapporteur, Assembly Document 1738, 20 June 2001; http://www.assemblee-ueo.org/en/documents/sessions_ordinaires/rpt/2001/1738.pdf

¹² In response to the United States Missile Defence programme.

¹³ ILS (International Launch Services) set up in 1995 by Lockheed Martin (US), Khrunichev and Energia (Russia) uses Proton rockets launched from Baikonur; Sea Launch, also established in 1995 by Boeing (US), Energia (Russia), Yujnoie (Ukraine) and Kvaerner (Norway) uses Zenith rockets launched from a floating platform.

¹⁴ Starsem is a French 50/50 joint venture company (Russian ownership: 25% RKA [Russian space agency] 25% Samara), French ownership: 35% EADS and 15% Arianespace).

¹⁵ Eurokot is a German company, 51% owned by Astrium GmbH (Germany) and 49% by Khrunichev, (Russia).

¹⁶ See report, op. cit.

¹⁷ "The parties shall promote long-term cooperation as appropriate, in the areas of civil space research, development and commercial application ...".

http://www.europa.eu.int/comm/external_relations/ceeca/pca/pca_russia.pdf.

¹⁸ Council Regulation (EEC) No 3955/92 of 21 December 1992 concerning the conclusion of an Agreement establishing an International Science and Technology Centre. OJ L 409 31.12.92

¹⁹ EU Russia Summit: Joint Statement, Brussels, 3 October 2001 (http://www.europa.eu.int/).

²⁰ Outline GMES EC Action Plan (Initial period: 2001-2003), COM (2001) 609

²¹ Bulletin Quotidien Europe 8424 - 20 March 2003.

²² Bulletin Quotidien Europe 8436 - 4 April 2003.

²³ The task of the Centre national des études spatiales (CNES), set up in 1961, is to develop and implement France's two-pronged space policy. It is involved in ESA programmes and undertakes development work on the Ariane programme, with the increasingly powerful launcher series (Ariane 1-5), on ESA's behalf. It also has a national programme.

²⁴ Rossikoye Kosmitcheskoye Agentsvo.

²⁵ The field of application of this agreement has been extended to new areas pursuant to an additional protocol signed on 4 July 1989.

²⁶ In 1989, CNES concluded an agreement with Russia on long-term cooperation over manned spaceflight.

²⁷ Witness the successful Eutelsat 3 tender by the Russian firm NPO PM to supply a satellite providing Eutelsat with cover of western Russia.

²⁸ Arianespace is a private company whose principal shareholders are CNES, with a 32.45% holding, EADS with 10.96%, Astrium with 16.07% and Snecma with 7.83%.

²⁹ Later on Vega will join this family of launchers. This is a European programme funded inter alia by Italy (65%) and France (approximately 13.5%)

³⁰ Bulletin Quotidien Europe 8387 - 27/1/2003 and 28/1/2003.

³¹ EADS came into being in 2000 as a result of the merger of the French company Aerospatiale Matra, the German company DaimlerChrysler Aerospace and the Spanish group CASA. With annual sales of 24.2 billion euros in 2000 and a workforce of some 100 000 people, EADS is today Europe's No 1, and second or third in the world, in the aeronautical, defence and space sector.

³² The current recession is leading to lay-offs and loss of earnings and shareholder's demands have to be met.

³³ Irkutskoye Aviatsionnoye Proizvodstvennoye Obyedinenye: Irkouts Aircraft Production Association.

³⁴ "From Knowledge to Wealth: transforming Russian Science and Technology for a modern knowledge economy", by Alfred Watkins, lead Private Sector Development Specialist, Europe and Central Asian Region, World Bank, 1 April 2002.

³⁵ "Role of the State in creating a favourable innovation climate in Russia". Background report prepared by the Ministry of Industry, Science and Technology for the Helsinki Seminar on Innovation Policy and the Valorisation of Science and Technology in Russia, 1-2 March 2001; paragraph 3.

³⁶ Report by Alfred Watkins, referred to above (note 33).

³⁷ Yuri O. Lebedev, "Problems of Taxation and Technology, Commercialisation in Russia", Technology Commercialisation: Russian Challenges, American Lessons (Washington D.C.: National Academy Press 1988), p. 51, quoted in Watkins, op. cit.