French Company Suspends Sale of Spy Satellites to Russian Military

Satellite maker in past improperly re-sold U.S. space technology to China

A satellite made by Thales Alenia space of France
A satellite made by Thales Alenia space of France / AP
December 9, 2014

A French satellite company has suspended a deal with Moscow to build spy satellites for the Russian military amid U.S. concerns the satellites will contain U.S.-origin technology and violate sanctions and U.S. export controls.

The plan by Thales Alenia Space to sell the reconnaissance satellites would undermine newly imposed U.S. sanctions on Moscow for its annexation of Ukraine’s Crimea earlier this year, according to U.S. officials.

U.S. intelligence agencies recently expressed concerns in internal reports that two Thales satellites being built for the Russian military were expected to contain U.S.-origin space technology.

Thales, also a major contractor for the Pentagon for high-technology goods, was implicated in the illicit transfer to China of U.S.-origin space technology several years ago, specifically radiation-hardened components, and other dual-use, military-civilian space technology.

The Pentagon currently has seven contracts with Thales Alenia Space, and Congress has considered blocking the company from all Pentagon contracts if the company’s spy satellite deal with Russia is completed.

Asked about the company’s plans for the Russian reconnaissance satellites and whether they would contain U.S.-origin technology, a Thales Alenia Space spokeswoman did not answer directly.

"Thales Alenia Space is not and will not develop any military business with Russia without complying with all U.S., French and other national technology transfer and export control regulations as applicable, including the ITAR-controlled regime under the State Department jurisdiction," said Sandrine Bielecki, a Thales spokeswoman.

"As a consequence, Thales Alenia Space has stopped all discussions for new military projects and has suspended the execution of ongoing observation military contracts with Russia," she added.

Russia currently is engaged in a large-scale military buildup inside eastern Ukraine and along Russia’s border with eastern Ukraine. The build up is part of Moscow’s war of nerves against Ukraine that has turned hot at least once in the past four months.

Aeroflex, a U.S. company, was fined $8 million last year for improperly transferring the restricted space technology to Thales, which then resold the goods to China aboard three communications satellites.

The French company had advertised the satellites as "ITAR-free," suggesting they could be sold widely around the world because they did not contain restricted U.S. technology requiring an export license under International Traffic in Arms Regulations.

An investigation by the State Department, which is in charge of arms export licensing, found that the satellites did require a license before they could be sold to China.

U.S. laws restrict exports of dual-use technology to China over concerns that American high-tech will be used in China’s large-scale military modernization.

France also has blocked the transfer of two Mistral-class helicopter-landing ships to Russia in order to avoid breaking the sanctions.

France initially said it planned to go ahead with the $1.7 billion warship deal but under pressure relented and agreed not to provide the ships.

Russia is demanding its money back for the ships.

Thales has close ties to the Russian military industry dating to 1994 when the company took part in a program to upgrade the avionics of Su-27 warplanes. Other Thales-Russia military cooperation has includes work on Ka-52 helicopters; MiG-AT training aircraft; Su-30 fighter aircraft; T-90 tanks; and the Superjet 100 regional jet, Jane’s Defence Weekly reported in July.

A former congressional aide said Thales should have been sanctioned along with the American firm in the sale of radiation hardened satellite components that were re-exported improperly to China.

Because of Thales’ past role in military space exports to China, the State Department should investigate further whether restricted U.S. space technology is being exported to Russia’s military.

"If this takes too long, Congress needs to intervene," said the former official. "We have a bad actor and this could affect our national security as well as the security of our NATO allies and Ukraine."

"If Thales is providing significant technology that could be used by the Russian military, we need stronger laws that can prevent these kinds of sales to Moscow," the former official added. "Europe’s aerospace industry needs to pick a side, and stay on it."

In April, the State Department announced it is expanding export restrictions on defense goods to Russia in response to the military action by Russian forces in southern and eastern Ukraine.

A U.S. official said the new restrictions mean each new license requested by U.S. companies for exports of military and military-related goods, as well as licenses for the re-export of U.S.-origin goods, will be approved on a case-by-case basis, and existing licenses would be reassessed in light of the new policy.

The official said there is a "presumption of denial" that will apply high-technology goods that "contribute to Russia’s military capabilities."

The State Department’s Directorate of Defense Trade Controls is in charge of the new export licensing policy.

A State Department official declined to comment when asked about the Thales re-export of U.S. origin satellite technology as part of the reconnaissance satellite deal with Russia.

According to State Department documents made public by Wikileaks, Thales Alenia Space was the subject of a technology control investigation involving a covert effort by Iran to buy technology that could be used in satellites and drones.

The case was uncovered in June 2008 when the Malaysian-based company Evertop Services, identified by the State Department as an "Iran-run procurement firm" that has covertly purchased high-technology goods for Iran.

"This system is used in ground stations for the acquisition of imagery data from satellites or potentially with unmanned aerial vehicles (UAVs)," a 2008 cable stated.

The companies that Evertop served as front company for included "entities affiliated with Iran's UAV program as well as the Shahid Hemmat Industrial Group (SHIG), which is Iran's primary liquid-fueled ballistic missile developer."

The U.S. government apparently blocked Thales from going through with the sale.

Thales announced in January that it is building a Yamal-601 satellite for Russia’s Gazprom Space System, including both the satellite and a ground station. The civilian communications satellite deal is also reportedly on hold.

A Russian representative of the Gazprom Space Systems, Igor Kot, was quoted in European news reports as saying that Thales’ Yamal-601 satellite will not be transferred because the satellite contains U.S. components that are restricted for re-export.

As a result, Thales is searching for non-U.S.-origin replacement parts.

Thales also set up a joint venture with Russia’s ISS Reshetnev, a satellite manufacturer, in February 2013. ISS Reshetnev is a leading company that produces communication, navigation, and earth monitoring satellites.

Published under: Russia , Sanctions