Russian-Founded Space Start-Up Faces National Security Pressure

The Biden administration is worried that a Silicon Valley space start-up backed by Russian founders could be helping Moscow make off with U.S. technological secrets, a U.S. official briefed on the matter told Foreign Policy.

Momentus, which helps ferry commercial satellites between orbits by means of an unconventional water-based propulsion system, is seen as a major boon to expanding the business, drawing comparisons to Uber and FedEx for outer space. But it has faced trouble at nearly every turn, due to its former Russian owners, as the Biden administration becomes more aware of a technology race with Russia and China.

The U.S. official, who spoke on condition of anonymity to discuss the sensitive investigation, said government agencies are particularly concerned about the water plasma propulsion system onboard Momentus’s space transportation vehicle that could help make satellites less detectable in space. If the Russian government obtained the technology, it could be used to improve the ability of Russian satellites to tail and destroy their U.S. counterparts, the official added. The U.S. Defense Department believes that Russia began testing technologies last year that could be used to destroy other satellites already in orbit.

The issue has come front and center for U.S. regulators like the Securities and Exchange Commission (SEC) and the Committee on Foreign Investment in the United States (CFIUS). Momentus, a California-based space transportation company co-founded by the Russian exile Mikhail Kokorich, voted on Wednesday to extend the deadline to August to finalize a deal that could allow the company to go public through a reverse merger that cannot be blocked by the U.S. government. That’s despite a U.S. government review into the foreign capital behind the company and a ruling by the Federal Aviation Administration (FAA) on Monday nixing a June test launch, the latest blow to the company’s ambition to become the go-to provider for dropping off satellites in space.

But the merger could also be another sign of foreign entities and adversarial capital breaching the U.S. national security sector in ways that the Biden administration is unprepared to stop. Though the Momentus satellite project so far hasn’t broken any U.S. laws, it points to a growing fear inside the government that Russia and China will increasingly catch up by leveraging U.S. research and development money to buy and expand their technology. The U.S. official compared the situation to being handcuffed while the gates of Rome were raised to let in the Visigoths.

“China and Russia are not looking at us as competitors or an economy that they can evolve with and evolve into a peaceful future,” said Steven Kwast, a retired U.S. Air Force lieutenant general, who last led the service’s air education and training command. “They are looking at us as the king of the hill that they need to take down.”

Already, national security concerns arising from the Russian origins of the company have given pause to industry partners. In April, Lockheed Martin dropped Momentus from a NASA contract to develop technologies for lunar exploration. And the FAA-ordered delay of the Momentus test launch, which the company said in a filing to the SEC on Tuesday was due to ongoing U.S. government concerns about the firm’s corporate structure, is raising new questions about its commercial viability.

The departure of Kokorich, who left the company amid concerns of foreign ownership in January, could help Momentus get around onerous U.S. export control regulations that prevent U.S. companies from sharing sensitive technology with foreign nationals. The Delaware-based Brainyspace, owned by the wife of an executive in the Russian state-owned SberBank, also placed its shares in the company into a trust that would divest within three years.

In a statement, Momentus President Fred Kennedy said the company’s objective was to “be above reproach” and that the California-based firm was “completely committed” to resolving any U.S. government concerns about its operations, technology, and ownership.

“Since being notified of concerns by the U.S. government in January, Momentus has been open and transparent throughout the U.S. government review process and has sought to obtain more information from the U.S. government regarding the exact nature of the concerns,” Kennedy said. “Momentus also has taken the extraordinary measures to obtain the resignation of its co-founder and former CEO and to ensure that the shares of its co-founders can only be voted by U.S. citizens, voluntarily filed for CFIUS review to enable CFIUS and its member agencies to scrutinize any and all records of Momentus, and proactively proposed a U.S. national security mitigation plan intended to resolve all of the national security concerns that CFIUS and its member agencies have raised.”

But officials and industry sources who spoke to Foreign Policy still have doubts that the firm will be cut off from Russian money entirely. The U.S. official briefed on the matter said the company is currently funded by overseas capital that washes up through limited liability corporations.

“When you peel the onion of Russian ownership, I think it’s very rare that you see true divestiture of [ownership positions],” a space industry source, speaking on condition of anonymity for fear of retribution, told Foreign Policy. “Some foreign money that’s flowed into the industry, you’ve got to peel the onion three or four times to find out who the ultimate stakeholders are.”

“I don’t believe they’ve been scrubbed clean, and even if they have been, it takes a while for the scent to dissipate,” the source added.

But despite the concerns, Momentus has gained momentum, including with a spot in the coveted Y Combinator start-up program, a start-up accelerator that has helped launch companies like Airbnb, Dropbox, and Reddit. It markets itself almost like a ride-sharing company for the booming space industry. CNBC reported last year that Momentus, which was founded in 2017, had raised nearly $50 million in capital. And by some estimates, it is valued at more than $1.2 billion.

In an email to Foreign Policy, Kokorich described himself as “very loyal to the idea of Western values and democracy” and a supporter of the Open Russia and Free Russia Foundations, two prominent anti-Putin organizations. Kokorich said he applied for political asylum in the United Statesin 2018 after “years of threats” from Moscow.

“I think [what] happened with Momentus, and before with Astro Digital is not a defense of national interest but simply [a] witch hunt, based on my Russian nationality,” Kokorich said. Quartz reported last year that Kokorich was the subject of a 2019 U.S. investigation into export control violations as an investor in multiple satellite companies and was forced to give up control of Astro Digital, another space company, when it failed to pass a foreign influence appraisal by the U.S. government.

Even though U.S. government concerns have managed to slow down the project, Momentus is still examining the possibility of going public, using a vehicle called a “special purpose acquisition company,” or SPAC, a blank-check company with no operations or business plan designed to help accelerate a firm’s push to the public market. Some experts are worried that the billion-dollar boom in these ventures is creating a market bubble in the space industry. The U.S. official said SPACs can enable companies to move quickly to market before federal investigations are finished.

The combination of possibly adversarial capital entering the U.S. market while Russia and China look to move further ahead in space weaponry has put U.S. officials further on edge. The U.S. Space Force, the Pentagon’s nascent space service, has become increasingly worried about Russia’s efforts to test space-based weapons systems. Gen. Jay Raymond, the leader of the service, first called out Moscow when two Russian satellites appeared to stalk a U.S. spy satellite early last year. But the July 2020 release of a mysterious object by a Russian satellite in orbit has raised further concerns, with Raymond condemning the launch as evidence of a test of a weapons system.

“If there is significant influence over things like launch vehicles and space transportation systems, one person’s access to space is another person’s potential weapon,” the space industry source said. “That can get really scary very quickly.”

Link: https://foreignpolicy.com/2021/05/12/russia-space-momentus-biden-spacs/