High-Tech Business At Mercy of Politics

The successful launch from the Russian space base of Plesetsk last week of a U.S.-built satellite is a nice piece of news. But it is also a reminder about how businesses could be affected if relations between Russia and the West continue to deteriorate as a result of the Chechen crisis.


The launch was a small test case for U.S. rules affecting the export of high-technology equipment to Russia. It was the first time the U.S. government had allowed a U.S.-built satellite to be shipped to Russia to be launched on a Russian rocket.


Until March last year, all such shipments would have been covered by the complex system of Cold War export controls known as COCOM, which was designed to stop Russia getting hold of advanced Western technology. These restrictions, which covered all Western governments, stopped exports of everything from personal computers to fiber-optic cables to telephone switches.


Last spring, however, at the high-water mark of good relations between U.S. President Bill Clinton and the then triumphant democrat, President Boris Yeltsin, the American government announced that COCOM would be dissolved and export restrictions substantially reduced. This was hailed as a clear sign of the end of the Cold War.


Final Analysis, the U.S. space-technology company behind last week's launch, knows all about the problems of working with COCOM and the hassles of export restrictions.


In fact, the satellite and payload that Final Analysis was launching was not that high-tech. It was a basic communications satellite designed only for data, not voice, transmission.


But the company still had to struggle through the complex system of COCOM defense and security checks for about a year. Ironically, it only received COCOM approval for its deal a few weeks before COCOM was abolished.


Even after COCOM died the company had to go through a long security-clearance process in order to receive the U.S. Department of Commerce license needed to ship its satellite to Russia, says Nader Modanlo, the president of Final Analysis.


Apparently, the Department of Commerce considered that since this was the first time a U.S. satellite had been shipped to Russia it should take all due precautions. It asked the Defense Department and security agencies to give the deal the go-ahead.


The fact that it went through at all is a good sign for other, much bigger, deals now underway that will see larger Russian rockets launch satellites that are more complicated and more sensitive from a security point of view. These will take longer to approve and will get closer scrutiny from the U.S. military.


The Lockheed aerospace company, for example, has been marketing Russia's famous Proton rocket on the world market for satellite launch services and has already scored a host of orders. Motorola's Irridium consortium, designed to develop a worldwide mobile-phone network, is relying on the same rocket to launch half a dozen of its satellites.


All these companies, plus scores of computer, aerospace and telecommunications companies, must be hoping that the liberalization of technology exports to Russia will continue.


This raises the question whether the deterioration of relations between Russia and the West could encroach on this new freedom of trade.


One recent hint about where minds in Washington are headed is the negotiation now under way, or rather, deadlocked, on creating a successor organization to COCOM.


When COCOM was allowed to die, the United States announced it wanted to form a new body to control post-Cold War technology trade, restricting sensitive exports to pariah states like Libya and North Korea.


Russia, rather than being the target of the restrictions, would, it seemed, become a part of its apparatus.


Unfortunately, meetings last year revealed that the West, especially the United States, was not ready to agree to the terms of Russian participation in such an organization. This deadlock was reached before the Chechen crisis in the wake of arguments over Russian participation in NATO.


The reason for this reticence could be that Russia does tend to be more indulgent than the United States when it comes to selling sensitive technology to pariah states. Russia backs early lifting of sanctions against Iraq and has plans to sell its nuclear power technology to Iran.


But the United States is not just worried about Russia reselling to other countries. It is concerned about letting Russia, still an uncertain ally, have the technology in the first place.


All of this must make high-technology people a little jittery about a downturn in relations. Clearly, their industries are the first that would be affected by any new restrictions.


This is all clearly hypothetical. As Foreign Minister Andrei Kozyrev points out, the West may not like what has happened in Chechnya, but no one has imposed any sanctions on Russia for what it has done.


The point is that technology export controls are such a delicate issue that it will require not just a cold peace but a positive flowering of brotherhood if they are to be completely overcome.





Geoff Winestock is a Moscow-based correspondent for the Journal of Commerce.