"I think it's terrible. Can you imagine if you went back 40 years ago and told people that in 2014 the United States would be at the mercy of Russia for access to low-earth orbit, let alone the moon or anything else? ... Something needs to be done to get us out of this."
-- SpaceX CEO Elon Musk

"The main goal today is to make space cheap [but] competitors are stepping on our toes. Look at what billionaire Musk is doing with his projects."
-- Russian Deputy Prime Minister Dmitry Rogozin


SpaceX marks the spot -- where high prices come to die. Image source: SpaceX.

Ever since the fall of the Soviet Union, when the U.S. began buying RD-180 rocket engines from Russia, the American and Russian space programs have enjoyed a love-hate relationship. On one hand, United Launch Alliance partners Boeing (BA 0.01%) and Lockheed Martin (LMT 0.01%) love buying cheap Russian rocket engines, and using them to power their expensive Atlas V rockets -- and Russia loves siphoning hard currency away from foreign rivals and plowing it into its space program.

On the other hand, the U.S. Air Force is less than thrilled at relying on Russian engines to get our rockets into space, and NASA resents the ever-rising cost of renting rides on Russian rockets for astronauts heading to the International Space Station. At the same time, Russia has found that threatening to cut off access to its RD-180 is a useful tool for retaliating against U.S. sanctions.

Now, this conflict is finally coming to a head.


What's all the fuss about? Russia's RD-180 rocket engine. Image source: NASA.

Capitalism versus... state capitalism
Recent moves in Congress to restrict the use of Russian rocket engines on national security missions sparked a revolution in the U.S. commercial space program. Private businesses such as SpaceX and Blue Origin, as well as Aerojet Rocketdyne, are lining up to offer homegrown rocket engines to NASA. Meanwhile, Russian President Putin just abolished his country's own Federal Space Agency, replacing "Roscosmos" with a new corporation that "will design new spacecraft and implement new projects by itself."

But before you assume that Russia has been bitten by the Capitalism bug -- don't. In contrast to SpaceX, which is a private venture, Russia's new-and-improved Roscosmos will be wholly owned by the Russian state.

Asserting complete control over the space effort is, to Putin's mind, a way to control costs and prevent corruption, such as when certain persons at Roscosmos famously embezzled or wasted as much as $1.8 billion in 2014. Whether the restructuring will also make space travel "cheaper," as Rogozin hopes, remains to be seen.

Who charges how much?
Consider: SpaceX publishes the price it charges for a rocket launch right up front on its website: $61.2 million for a simple Falcon 9 launch; $90 million for a ride on the new Falcon Heavy.

Already, ULA (the Boeing-Lockheed Martin joint venture) is finding these prices hard to beat. Citing the oft-mentioned price tag of "$400 million" that ULA has famously charged for some of its larger launches, SpaceX COO Gwynne Shotwell once quipped: "I don't know how to build a $400 million rocket. ... I don't understand how ULA are as expensive as they are."

And yet, other SpaceX rivals are in much the same boat as ULA. At a Congressional hearing on the subject of launch costs last year, California Congresswoman Loretta Sanchez described a conversation she had with France's Arianespace a few years ago: "They were telling me that their launch costs about $200 million equivalent. They said they weren't worried about UAL [sic] but could I get rid of SpaceX? Because they were going to drive them out of business!"

And over in China, officials interviewed by Aviation Week recently lamented that "published prices on the SpaceX website [are] very low." So low, in fact, that with China's own Long March rockets costing $70 million per launch, "they could not match them."


China's Long March rocket is cheap -- but still not as cheap as SpaceX. Image source: DLR via Wikimedia Commons.

What it means to investors
Boasting that it is "very competitive on price," Arianespace confirmed in 2014 that its share of the global market for purely commercial space launches had reached 60%. That left 40% to be fought over by rivals at ULA, Roscosmos, and the rising national space programs of India and China. Charging as much as $400 million per launch, ULA was pricing itself out of the market -- and then SpaceX arrived and complicated matters even further.

Today, we see China complaining that it can't beat SpaceX on price, Arianespace fantasizing about "getting rid of" SpaceX, and Russia complaining about stubbed toes. The clear implication: If SpaceX can stick to its published prices, earn a profit at those prices -- and then earn an even bigger profit once it turns its rockets reusable -- then everybody else is going to be hard-pressed to survive in this business.

The moral of this story: If you own shares of Boeing and Lockheed Martin, you had better darn well hope their military and civilian airplane businesses do well. Because the way things are going, they're not going to be in the space-launch business much longer.


On Dec. 21, SpaceX successfully launched, and a few minutes later landed, a Falcon 9 reusable rocket. Space launch prices will never be the same. Image source: Timelapse photo by SpaceX.