Look! Up in the sky! Is it a bird? Is it a plane?
No, it's an International Space Station. But if Russia gets its way, it's going to be off-limits to the United States soon.
For weeks now, there have been rumblings about Russia wanting to ban the United States from using the ISS while the two countries wrangled over Ukraine. While that would probably violate international law, it may be feasible from a practical perspective. Russian Deputy Prime Minister Dmitry Rogozin argued that "the Russian segment [of the ISS] can exist independently from the American one. The U.S. one cannot."
Since the United States terminated its space shuttle program, we've depended on Russian rockets to carry U.S. astronauts to the ISS. NASA has a contract to continue these flights through 2016 -- at $70 million a pop. After that, Russia would be within its rights to deny U.S. astronauts seats on Soyuz rockets. If America wants to send astronauts up after the contract expires, joked Rogozin: "I propose that the United States delivers its astronauts to the ISS with the help of a trampoline."
It never just rains, it pours (even in space)
An even more immediate problem facing America is Russia's threat to cut off access to the RD-180 rocket engines that the United Launch Alliance (the joint venture between Boeing (NYSE: BA ) and Lockheed Martin (NYSE: LMT ) ) uses in its Atlas V rockets. These are the big beasts that carry U.S. military satellites into space. They're critical to national security. But we've only got enough RD-180s stockpiled to keep ULA supplied for about another 22 months.
What's to be done?
Just two weeks ago, we told you about U.S. Air Force plans to set up a public-private partnership to develop a new rocket engine capable of replacing the RD-180. In an uncharacteristic exhibition of rapid problem-tackling, ULA is already rushing to get the project under way.
On Monday, ULA confirmed that it has signed contracts with "multiple" American rocket companies to begin working up "next-generation liquid oxygen/hydrocarbon first stage propulsion concepts" that could replace the RD-180 (the RD-180 uses liquid oxygen and kerosene as its fuel sources).
Working at a breakneck pace, ULA said it expects to select a new design before the end of this year. Then, pushing the envelope on the usual five- to eight-year timeline usually needed to develop such engines, ULA said it will have a new rocket ready to fly by 2019. (In the meantime, ULA will try to string Russia's Energomash along, negotiating to keep the RD-180s coming until they're no longer needed.)
What does it mean to investors?
It's hard to overestimate how important this news is to investors. Development of a new rocket engine, and probably a new launch vehicle to carry it, could bring the ULA contract's winner billions of dollars in development work alone -- followed by more billions in revenue as dozens of the new engines are put to work in years to come.
While ULA has not yet revealed the names of the companies that it has signed contracts with, the likely contenders remain Alliant Techsystems (NYSE: ATK ) and Orbital Sciences (NYSE: OA ) -- soon to team up in a new entity to be known as Orbital ATK -- and also GenCorp (NYSE: GY ) , which is now home to the rocket science juggernaut Aerojet Rocketdyne.
Of the two, I believe GenCorp must be considered the front-runner. The company has already invested $300 million in developing a new liquid oxygen/kerosene rocket engine called the AR-1, that when finished could lift rockets as big as what Russia's RD-180 lifts. What's more, GenCorp says it is only four years away from completing the engine -- giving it perhaps a one-year head start over its rivals, and raising the possibility that ULA could get this work done by 2018.
As an added bonus, GenCorp says that a pair of its AR-1 engines could cost as little as $25 million total -- or even as little as $20 million -- making them cheaper than the Russian rocket engine they'd replace.
Your Foolish takeaway
Cheaper rockets, delivered ahead of schedule, and not dependent on a hostile foreign government to supply them? That sounds like a winning combination for GenCorp.
Russia doesn't scare Warren Buffett. This does.
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