recommended reading

Who’s Behind the Supply of Russian Rocket Engines to the US Is Still a Murky Question

NASA Administrator Charles Bolden, stands in front of the ULA-made Atlas V first stage booster while taking questions from the media

NASA Administrator Charles Bolden, stands in front of the ULA-made Atlas V first stage booster while taking questions from the media // NASA/AP

The US is issuing ultimatums and threatening to jack up sanctions on Russia, but it appears the limited restrictions deployed so far aren’t always stopping Russians they’re aimed at from doing business in the US.

Take the man known as the “Russian Rupert Murdoch,” the oligarch Yuri Kovalchuk. The media mogul and financier owns a large stake in Bank Rossiya, which in turn owns 40% of a public US company called CTC Media through a Cyprus shell company. Kovalchuk and his bank were sanctioned earlier this year because of their closeness to president Vladimir Putin’s regime, and so CTC has recused the directors appointed by the Russians and is putting their dividends in escrow.

The twist, however, is that CTC is also working closely with a Russian advertising firm, Video International. Bank Rossiya says it owns only 16% of the company, which would exempt Video International from the US sanctions on Bank Rossiya. But Bloomberg revealed yesterday, citing a well-placed source, that Video International is in fact directly controlled by Bank Rossiya, through a different series of Cyprus shell firms. Because of secrecy rules there, it’s almost impossible to prove who the real owners are. Last year, CTC paid Video International $78 million.

Could something similar be going on with the Russian company supplying rocket engines to the US military?

The engine, known as the RD-180, is bought from a company called RD Amross. But it doesn’t actually make the engine; it’s a joint venture between a US firm and the US subsidiary of a Russian one, NPO Energomash. The subsidiary is registered in Delaware, a state with strict secrecy rules. NPO Energomash, which is state-owned, makes the engines and sells them to RD Amross, which in turn sells them to a Boeing-Lockheed Martin joint venture, United Launch Association (ULA).

ULA signed a multi-billion dollar contract with the US government last December for 36 launches. ULA’s rival, Elon Musk’s SpaceX, sued the government for awarding the deal without competition. The judge in the case initially issued an injunction blocking the purchase of Russian engines because Dmitry Rogozin, who oversees Russia’s defense-industrial complex, is now under US sanctions after Russia’s invasion of Crimea. The injunction was overturned after US officials told the judge that they had no evidence Rogozin would benefit personally from the sale of the engines.

Last week, however, US senator John McCain asked the Department of Defense to investigate the imports. He says he has reason to believe that what the US pays RD Amross for the engines may be more than three times as much as what RD Amross pays NPO Energomash. He wants to know if taxpayers are getting ripped off and by whom—he’s asked US defense officials to determine the price RD Amross pays and identify “all nominal and beneficial owners” of RD Amross and of NPO Energomash’s US subsidiary. The implication is that they may not be who they claim to be; McCain notes that “the Russian procurement process is rife with inefficiency and corruption that benefits insiders while boosting retail prices.”

That will put US defense officials in a bit of a quandary: They’ve awarded a multi-billion dollar contract to ULA, but apparently without digging sufficiently into the practices of RD Amross or its pricing. SpaceX, in the latest update to its lawsuit, says this is a violation of the government contracting laws.

However, it all might become academic if tensions don’t subside. Rogozin has said Russia will not export further engines for military use, despite the end of the US injunction, though ULA will take delivery of five more this year.

Reprinted with permission from Quartz. The original story can be found here

Threatwatch Alert

Thousands of cyber attacks occur each day

See the latest threats

JOIN THE DISCUSSION

Close [ x ] More from Nextgov
 
 

Thank you for subscribing to newsletters from Nextgov.com.
We think these reports might interest you:

  • It’s Time for the Federal Government to Embrace Wireless and Mobility

    The United States has turned a corner on the adoption of mobile phones, tablets and other smart devices, outpacing traditional desktop and laptop sales by a wide margin. This issue brief discusses the state of wireless and mobility in federal government and outlines why now is the time to embrace these technologies in government.

    Download
  • Featured Content from RSA Conference: Dissed by NIST

    Learn more about the latest draft of the U.S. National Institute of Standards and Technology guidance document on authentication and lifecycle management.

    Download
  • A New Security Architecture for Federal Networks

    Federal government networks are under constant attack, and the number of those attacks is increasing. This issue brief discusses today's threats and a new model for the future.

    Download
  • Going Agile:Revolutionizing Federal Digital Services Delivery

    Here’s one indication that times have changed: Harriet Tubman is going to be the next face of the twenty dollar bill. Another sign of change? The way in which the federal government arrived at that decision.

    Download
  • Software-Defined Networking

    So many demands are being placed on federal information technology networks, which must handle vast amounts of data, accommodate voice and video, and cope with a multitude of highly connected devices while keeping government information secure from cyber threats. This issue brief discusses the state of SDN in the federal government and the path forward.

    Download
  • The New IP: Moving Government Agencies Toward the Network of The Future

    Federal IT managers are looking to modernize legacy network infrastructures that are taxed by growing demands from mobile devices, video, vast amounts of data, and more. This issue brief discusses the federal government network landscape, as well as market, financial force drivers for network modernization.

    Download

When you download a report, your information may be shared with the underwriters of that document.