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Ukrainian space and missile industrial giant is on the verge of bankruptcy

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Pivdenmash (Yuzhmash), the Ukrainian Dnipropetrovsk industrial giant, one of the World leaders in space and missile industry during Soviet times is on the verge of bankruptcy. In August 2015, all accounts of Pivdenmash could be frozen. If this happens, this means no orders or contracts, not a single hope for survival, Ukrainian TV Channel 'Inter' reports. "Pivdenmash" (Dnipropetrovsk Southern machine-building plant) has designed and produced missiles for many international space projects, including the Russian space program. Situation worsened when the Russian military aggression against Ukraine started. Naturally Russian orders decreased several times less (especially orders for servicing Inter-continental Ballistic Missiles SS-18 (‘Satan’) where the number of nuclear warheads constituted approximately half of Russian land nuclear potential). Russia has now problems with the missiles because of the Ukraine. Not good developments with joint US - Russia - Ukraine project Sea launch. Boeing attempts to collect $356 million from its Russian and Ukrainian former partners in the Sea Launch commercial-launch company is an open-and-shut case of contract breach. A U.S. District Court is expected to rule early this fall on this case. As Space News reported, Chicago-based Boeing has consistently argued – and did so again in a July 22, 2015 filling with the U.S. Securities and Exchange Commission – that its former partners, 'Pivdenne' ('Yuzhnoye') and 'Pivdenmash' ('YuzshMash') of Ukraine and RSC Energia of Russia, signed documents committing them to a pro rata responsibility for the Sea Launch financing that was advanced by Boeing. Frustrated in its attempts at having the Stockholm Chamber of Commerce rule on the case as arbiter, Boeing in February 2013 turned to the U.S. District Court for the Central District of California.

zenit-3-slThe Sea Launch SA successfully launched the EUTELSAT 3B satellite from its ocean-based launch platform Odyssey on May 27, 2014.

Ukrainian President Petro Poroshenko visited the Pivdenne Design Bureau and the Machine-Building Plant Pivdenmash during a working trip to Dnipropetrovsk on October 21, 2014. [caption id="attachment_3219" align="aligncenter" width="650"]Petro Poroshenko during the visit in Pivdenmash (Yuzhmash) Petro Poroshenko during the visit in Pivdenmash (Yuzhmash), October 21, 2014[/caption] The President held a meeting on the problems, prospects and development of the space industry. General Director of the Pivdenne [Yuzhnoye] Design Bureau Oleksandr Dehtiariov presented projects in the aerospace, defense-industrial and transport spheres, particularly on participation in the international projects Sea Launch and Land Launch, the joint Ukrainian-Brazilian project Cyclone-4, the development of the rocket Antares and the Earth remote sensing (ERS) satellite system Sich. Disappointing news about Cyclone-4 project came from Brazil in April 2015.  Cyclone-4 is a Ukrainian carrier rocket, which has been developed by Design Bureau ‘Pivdenne’ (‘Yuzhnoye’) and manufactured by ‘Pivdenmash’ (‘Yuzhmash’) machine – building plant for commercial satellite launches. The Brazilian government was ending a decade-long project to operate Ukraine’s Cyclone-4 rocket from Brazilian territory following a government review that found too many open questions about its cost and future market success, the deputy chief of the Brazilian Space Agency (AEB) said. During the visit in October 2014, the President touched upon prospects for cooperation with other countries, particularly the Republic of Kazakhstan, where the Baikonur Cosmodrome, the world’s largest operational space launch facility, is located. Petro Poroshenko also visited the Machine-Building Plant Pivdenmash (Yuzhmash), which is affiliated with Pivdenne Design Office. The President stated that Pivdenmash products would be included in the 2015 state defense order. “I am giving instructions to amend the state defense order and initiate funding of production of precision weapons, cruise missiles and tactical weapons and systems,” the President said while in Dnipropetrovsk. The President noted that state defense orders for precision weapons were terminated in 2009. “We must be confident that our army, our Armed Forces and their equipment meet the highest world standards,” he said. While inspecting production capacities of the plant and communicating with its workers, the Head of State expressed his belief that Ukraine should regain the status of a country with a strong space program, noting, “The state can be proud of its achievements developed by Pivdenmash.” After visiting the plant, the President said that he is convinced that there are grounds for such confidence. [caption id="attachment_3222" align="aligncenter" width="625"]Petro Poroshenko visit in Pivdenne, October 21, 2015 Petro Poroshenko visit in Pivdenne, October 21, 2014[/caption] KB Pivdenne [“Yuzhoye”] (Design Bureau South) together with the Pivdenmash [Yuzhmash], have developed a new tactical missile complex Grom-2 (Thunder-2).  Grom-2 (Thunder-2) is a new tactical missile system developed for the Ukrainian armed forces. It uses a cruise missile developed on the basis of Korshun (Kite) to destroy ground targets. This system forms the basis for other operational missiles with a longer range. In fact, the complex is far better and advanced than its Russian counterpart, the Iskander (Nato designation SS-26 Stone). Despite little funding in 2009-2013, Pivdenne has developed fundamental solutions to improve the technical characteristics of Grom-2 (Thunder-2) targeting the export market and military-technical cooperation. Further development of the ground forces missile system will allow a unified chain of command to operate independently on the tactical level, but incorporated into a network sharing information from existing ressources as well as newly introduced sources, like unmanned aerial vehicles (UAV, drones) and observation satellite data, thus authorizing strikes at various ranges from a single launcher. [caption id="attachment_3224" align="aligncenter" width="600"]Grom-2 (Thunder-2), a new tactical missile system Grom-2 (Thunder-2), a new tactical missile system[/caption] The Ukraine Mobile Ballistic Missile System Korshun-2 [Kite-2] was presented to the public in Kyiv at the XI International Arms & Security Trade Fair in 2014. [caption id="attachment_3225" align="aligncenter" width="1003"]Ukraine Mobile Ballistic Missile System Korshun-2 [Kite-2] Ukraine Mobile Ballistic Missile System Korshun-2 [Kite-2][/caption]Pivdenmash proposed to produce not only missiles and missiles systems, but also a mobile army barracks, small arms, installing cartridge production line. No response from government followed. It should be pointed out that terrorists of so-called "Luhansk People's Republic" seized cartridge plant which was the only thing in the territory of Ukraine where produce cartridges for Makarov's gun. Later on Russian terrorist troops looted the plant. Unfortunately state orders promised Pivdenmash (Yuzhmash) by the Ukrainian President and Ukrainian government were not provided. As was reported by UNIAN on September 25, 2014, Pivdenmash wanted to help NASA to replace Russian spacecrafts with American ones by participating in joint US-Ukraine projects. Washington planned by 2017 to send astronauts to the International Space Station without the help of Russia. The State Machine-Building Plant Pivdenmash hopes to participate in the new NASA program Space Taxi to deliver cargo to the International Space Station (ISS), using American crafts instead of Russian. The proposal was made ​​by the company’s director Sergei Voight at the international aerospace forum “Ukraine’s space industry: essential for economic modernization.” According to Voight, both enterprises can benefit from a program that satisfies the requirements of NASA. “We can offer the development of launch vehicles, staging of missiles and rockets, engines, case parts and components, which we are currently able to do not worse than our American colleagues,” said Voight. He stated that proposals had been sent to the US government.  No response to this proposal known to the media is available. A U.S. Air Force would like to end dependence on Russian rocket engines. But unfortunately just over a month ago, a SpaceX Falcon 9 rocket exploded just over two minutes into takeoff. SpaceX responded by postponing its upcoming launches. The SpaceX mishap was the third loss of a cargo ship headed to the space station in the last year. A cargo rocket built by the Orbital Sciences Corporation of Dulles, Va., exploded just after liftoff from a launching pad in Virginia in October 2014. [caption id="attachment_3221" align="aligncenter" width="675"] The SpaceX Falcon 9 rocket broke apart after launch on June 28. Credit John Raoux/Associated Press The SpaceX Falcon 9 rocket broke apart after launch on June 28, 2015 Credit John Raoux/Associated Press[/caption] A Russian supply rocket successfully launched to the international space station (ISS) the week after the SpaceX failure, and the astronauts on the space station have sufficient supplies for months. The ProgressM-28M lifted off smoothly from the Baikonur Cosmodrome in Kazakhstan on July 3, 2015, with the Soyuz-U capsule atop it. The Soyuz-U is carrying more than 5,200 pounds of supplies to the ISS. It seems that any replacement by US the Russian rocket engine used to launch U.S. military satellites is still years away, officials acknowledged. It seems that the United States, EU and Russia are interdependent and interlinked in the space industry, and appear unlikely to end their cooperation till 2020. [caption id="attachment_3227" align="aligncenter" width="765"]The ProgressM-28M launch. Baikonur Cosmodrome in Kazakhstan. July 3, 2015 The ProgressM-28M launch. Baikonur Cosmodrome in Kazakhstan. July 3, 2015[/caption]
Pivdenne Design Bureau (Dnipropetrovsk) is working on a plan to establish cooperation with the United States in building rocket engines, Pivdenne CEO and Chief Designer Oleksandr Dehtiarev has said. The Ukrainian developer is ready to become a partner in the project initiated by the U.S. government to build rocket engines to replace the Russian built RD-180 used in American carrier rockets. He said that over the past five years, Pivdenne has been developing liquid-propellant rocket engines for the first stages of carrier rockets that could be effectively used in U.S. carrier rockets. No details are available about feasibility and possible time lines of this project in mass-media at the moment.

yuzhmash-protestProtest rally of Pivdenmsah employees caused by delays in payment of their salary. February 24, 2015

Meanwhile, if Kyiv will not take urgent measures the accounts of Pivdenmash could be frozen in one month time and court will start bankruptcy procedure. The employees of Pivdenmash appealed to government to take urgent measures to ensure the provision of a state order. “It’s been more than six months, and there are still no government orders”, – stated in the appeal. Protests of Pivdenmsah employees caused by delays in payment of their salaries started in February 24, 2015. Prime-Minister of Ukraine Arseniy Yatsenyuk promised that all half-year arrears in salaries (UAH 90 million approx. $ 4 milion) would be covered. He has also promised that Pivdenmash will get a defense order on UAH 400 - 500 million (approx. $18 - $23 million) during six months time. It seems that these promises were not kept. If the Pivdenmash bankruptcy happens it could forever put an end to all opportunities for Ukraine to be among space powers. Written by: Dr. Vitalii Usenko, MD, MBA, expert of the Center of Military-Political Studies in the sphere of psychology of communications and Dmytro Usenko, graduate of Rotman School of Management, University of Toronto
     

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