Feb 14, 2014

U.S.-French Deal Gives Green Light to UAE Observation Satellites

Estimated Article Reading Time: 4 min.

(By Peter B. de Selding, SpaceNews) PARIS — The U.S.-French summit in Washington has produced a U.S. agreement on the export of U.S. satellite components for a French contract to provide two high-resolution optical Earth observation satellites to the United Arab Emirates (UAE), European industry officials said.

The decision, which they said came only after the U.S. State Department agreed to the deal and then withdrew its agreement and passed the subject to the White House, should enable the $1.1 billion Falcon Eye contract to begin its production phase.

Nonetheless, the Feb. 12 U.S. approval for the export to France of satellite components used in the two satellites came about two weeks after a contractually agreed deadline of Jan. 29.

The two co-prime contractors selected by the UAE last July, Airbus Defence and Space and Thales Alenia Space, said they were confident that the UAE Armed Forces would not force a complete contract renegotiation.

The satellites carry U.S. components covered by the U.S. International Traffic in Arms Regulations, or ITAR, which for a decade has been made more strict with respect to satellite components, to the point where satellites have been considered as weapons.

The administration of U.S. President Barack Obama has begun a review of ITAR rules to make them less onerous for industry when national security is not at issue. Administration officials have said new satellite regulations should be published by the middle of this year.

The two Falcon Eye satellites will be launched in 2017 and 2018 aboard European Vega rockets under a contract signed in late 2013, said Stephane Israel, chief executive of Europe’s Arianespace launch service provider.

The Falcon Eye contract, more than a decade in negotiation, featured a rare open competition between U.S. and European bidders. A U.S. bidder said after the July decision that the win by the French consortium had nothing to do with U.S. policy on satellite-image exports, sometimes referred to as “shutter control.”

Francois Auque, chief executive of Airbus Defence and Space’s Space Systems division, said one key element was the strong support for the program from French Defense Minister Jean-Yves Le Drian, who made multiple visits to the UAE in the weeks preceding the contract decision.

“I have never seen a defense minister in France, or in Europe, devote himself to this extent on behalf of an export bid,” Auque said here Feb. 13 during a space policy conference organized by the French Aerospace Industries Association, GIFAS, and by the Euroconsult consulting firm.

Auque and Jean-Loic Galle, chief executive of Thales Alenia Space, both said the final decision on the U.S.-built components would now permit the contract to move forward. But they expressed disagreement as to how this final export approval was obtained.

“There was a lot of bureaucracy and lots of paper, but at the end of the day it was pretty much business as usual and followed the normal process,” Auque said, adding that Airbus has never sought to produce satellites, in telecommunications or Earth observation, devoid of U.S. components. Auque said Airbus’ various divisions have too much at stake in the United States to anger the U.S. government on satellite exports.

Referring to a policy that Galle’s company tried to implement until 2013 — called the “ITAR-free” satellite — Auque said a European contractor trying to keep its dependence on U.S. manufacturers limited to nonsensitive components was fighting a losing battle.

“I have never believed the idea of an ‘ITAR-free’ satellite,” Auque said. “We need to be realistic. You are dealing with a set of rules defined by the U.S. government. If the U.S. government decides that it doesn’t want you to export somewhere, it will just add current non-ITAR products to the ITAR list. So the choice is really more simple: Use U.S. products or not.”

Galle, whose multiyear use of what his company called an ITAR-free satellite recently ended with what he said was a U.S. government broadening of satellite components covered by ITAR, had a different assessment of the Falcon Eye contract.

“We are not talking about anything related to security with respect to these components,” Galle said. “And this has certainly not been business as usual [with Falcon Eye]. We are in a commercial war and U.S. industry is lobbying the U.S. administration to prevent their only real competitors — the Europeans — from selling products where they cannot.”

Galle said the U.S. State Department at first approved the ITAR export license and then withdrew its approval and forced the decision onto the table at the U.S.-French summit in Washington Feb. 11-12.

The fact that the license approval required a meeting of heads of states is by itself an indication that the subject was not handled through the normal channels, Galle said.

Galle wondered whether the decision, made after the contractual deadline, was purposely delayed to cause problems for the French contractors. Given that U.S. bidders were the losing finalists in the UAE competition, he said he could see a commercial hand in the treatment of the subject by the State Department.

Auque, who left the conference early, did not address this point, but he said that since the French contract win was announced in July, he had seen “a festival of counter-truths and fantasies trotted out into the public arena. I have never seen such a thing. It’s one for the Guinness Book of World Records.”

Galle said one of the rumors — again, he suspected U.S. industry at its origin — was that the French contractors had allowed the U.S. government to place a sensor on the Falcon Eye satellites to permit U.S. surveillance of what the spacecraft was imaging.

Galle ridiculed the idea, saying anyone who knew how the U.S. gear is integrated into the Falcon Eye satellites would not suggest such a thing.

By Peter B. de Selding Spacenews