Roscosmos’s Director General Exemplifies Inefficiency in Russian Government

Executive summary:

• Roscosmos, Russia’s state-owned space corporation, struggles with financial difficulties, inefficiencies, and the loss of Western partnerships despite its preeminent role in Russia’s space and defense sectors. 
• Russian President Vladimir Putin’s appointment of Dmitry Bakanov as Roscosmos’s Director General is part of Russia’s broader push to enhance efficiency across multiple sectors. 
• Entrenched bureaucracy and systemic issues could hinder meaningful progress in potential reform based on Bakanov’s initial personnel changes.

On February 6, Russian President Vladimir Putin appointed Dmitry Bakanov to replace Yuri Borisov as the Director General of Roscosmos, Russia’s state-run space corporation (President of Russia, February 6). Bakanov’s appointment is intended to remedy debilitating challenges at Roscosmos, including financial difficulties, inefficiencies, and the loss of Western partnerships since Russia’s full-scale invasion of Ukraine.

This change in Roscosmos leadership signals a shift in the organization’s commercialization direction. Previous Roscosmos leaders included Dmitry Rogozin and Borisov. Bakanov’s appointment indicates Russia’s priorities in space and follows a series of promotions that have given economists and auditors greater influence than politicians or military leaders over strategic sectors, including defense and space. Bakanov is tasked with addressing long-standing procurement inefficiencies and making the corporation more attractive to private investors. As director general, Bakanov is also required to collaborate closely with Russia’s Ministry of Defense on space-based Command, Control, Communications, Computers, Intelligence, Surveillance, and Reconnaissance (C4ISR) capabilities.

Roscosmos State Space Corporation, established in 2015, emerged from a comprehensive restructuring of Russia’s Federal Space Agency (Roscosmos, accessed via Web Archive on March 4). As Russia’s premier space organization, it serves as both a state corporation and a government agency. Roscosmos’s role in supporting Russia’s military capabilities is difficult to overstate as a key procurement source for the Ministry of Defense (Armaments and Economy, 2023; also available at Viek). The corporation produces rockets, spacecraft, and satellite systems, including the USSR-designed Soyuz (Roscosmos, accessed March 3; Interfax, December 21, 2021). Roscosmos controls eight percent of the Russian military-industrial market, three percent more than Rosatom, Russia’s state-run nuclear energy firm (Armaments and Economy, 2023).

Roscosmos inherited a complex bureaucratic structure from its Russian and Soviet predecessors. It has struggled to commercialize projects and has consistently depended on government financing. Over the years, multiple projects failed to attract sustainable investment outside the government and defense sectors, such as the Angara-5 rocket, which was reportedly too expensive for commercial use (RussianSpaceWeb.com, August 1, 2017).

Unlike Rosatom, the state-owned nuclear corporation, Roscosmos has faced staunch criticism for wasteful spending and inefficiencies throughout the procurement process (Armaments and Economy, 2024). Inefficiencies in Roscosmos’s procurement from 2011 to 2015 included contracts being awarded to sole suppliers, inflated procurement costs, and excessive overhead expenses. Some contracts had unjustified price increases, and high overheads were used to cover unrelated expenses, raising concerns about mismanagement and lack of production capacity. For example, in the purchase of seven Gonets-M satellites from the Russian satellite manufacturer ISS Reshetnev, overpricing amounted to an estimated 360 million rubles (nearly $4 million) (Vedomosti, July 29, 2015). Likewise, in the procurement of four Proton rockets, overhead expenses were 3.5 times higher than the fund for employees’ wages, indicating either inefficiencies or potential misallocation of funds, or both. (Vedomosti, July 29, 2015). Roscosmos has also been scrutinized over numerous corruption scandals involving its senior staff, with more than 15 criminal cases opened against the corporation in 2019 (TASS, November 28, 2019). Russia’s current Minister of Defense and former economic aide to President Vladimir Putin, Andrey Belousov, criticized Roscosmos in 2017 for wholly relying on the state budget and operating virtually without profit (RBC, December 12, 2017).

Financing shortages have led to attempts to attract private investment by allowing Roscosmos to issue bonds (TASS; President of Russia, December 28, 2024). Since 2022, Roscosmos has reportedly lost 180 billion rubles ($1.95 billion), primarily due to the termination of contracts with Western partners in the wake of Russia’s invasion of Ukraine (Interfax, August 5, 2024). In December 2024, then-Director General Borisov argued that the corporation would become profitable by the end of the year, in part through new contracts with countries like India, China, Iran, Algeria, and South Africa (TASS, December 24, 2024). The sustainability of Roscosmos’s financial recovery remains uncertain, particularly given Russia’s international isolation, the ongoing sanctions regime, and the broader challenges facing Russia’s space sector.

Remote-sensing satellites are considered particularly lucrative for private investment as operators sell high-resolution imagery and geospatial data to clientele including government agencies and defense contractors (GLONASS, October 24, 2024). In April 2024, the Russian State Duma passed legislation allowing Roscosmos to commercialize its satellite imagery and data services, marking a shift from its long-standing practice of providing these resources free to government clients (Russian State Duma, April 9, 2024). After less than a month since his appointment, Bakanov proposed new space projects together with Belarus, including on integrating Russian-Belarusian remote sensing satellite systems through the Union State (RGRU, March 5).

Roscosmos also recently announced the start of the “Development of a multi-satellite orbital group” project tasked with creating a group of 650 satellites by 2023, excluding commercial satellites (TASS, January 28; TAdviser, January 28). According to Borisov, this project will strengthen Russia’s position in space and enable the industry to ensure Russian technological sovereignty in this field as each satellite will become “the eyes, ears, or voice of Russia in space” (Izvestiya, January 28).

This project aligns with Putin’s prioritization over the years of the creation of an orbital satellite constellation. In 2024 he explained that “failures” in the creation of a satellite group for communications, television, and radio broadcasting “cannot be allowed under any circumstances” (RIA, December 5, 2024). This echoes Putin’s statement from 2013 that “[o]nly a balanced group of military and dual-purpose satellites can help us achieve the results we need” (Kremlin.ru, November 29, 2013). According to Putin, these results include advanced technology that meets “today’s needs and tomorrow’s warfare methods” as the “Armed Forces will be of little effect without [communications, navigation, intelligence, and target-setting] support from space” (Kremlin.ru, November 29, 2013).

Progress toward creating this satellite group signals that the Russian satellite industry may reverse its ongoing struggle to keep up with U.S. and Chinese competitors. As of January 1, Russia has 307 satellites in space (when including remote-sensing satellites), which pales in comparison to the United States’s 8,393 satellites (BBC Russian Service, January 28). Establishing a market for private satellites has proven to be a pressing challenge. Borisov admitted that Roscosmos’s efforts to garner non-state firms’ interest had been unsuccessful, suggesting that “[u]ntil … the investor sees direct benefits, you can give him a kick in the pants, you can give him anything, he still won’t [invest in private satellites]”(RBC, February 14, 2024). While there are currently eight private firms that have expressed interest in working with Roscosmos on the basis of a government contract, Roscosmos must build trust with investors to attract greater investment and expand the private side of the Russian space sector.

Bakanov has extensive experience managing satellite technology in both public and private sectors. Prior to his appointment, Bakanov served as chairman of the board of GLONASS, a Russian satellite-based navigation system that provides positioning information analogous to Western GPS. From 2011 to 2019, he was CEO of the Roscosmos communications satellite subsidiary “Gonets,” which was partially owned by private companies (Kommersant, March 3, 2018). The Kremlin appears to hope that Bakanov’s leadership will be a strong enough signal to incentivize greater private investment in space, given his track record of working with the private sector (RBC, February 6).

Bakanov’s appointment highlights another trend: the rise of auditors to positions of power, particularly those with ties to the military. With Russia’s full-scale invasion of Ukraine eroding scarce resources, the Russian government seeks to address inefficiencies across multiple sectors, including space projects (RBC, February 6). A notable example is current Minister of Defense Andrey Belousov, who was formerly Russia’s minister of economic development (Government of Russia, accessed March 5). Belousov was appointed to replace Sergei Shoigu in May 2024, likely intended in part as a response to a series of corruption scandals in the Ministry of Defense, including figures like Deputy Defense Minister Timur Ivanov (see EDM, May 16, 2024). At Sitronics, an IT company, Bakanov rose from audit specialist to head of the firm’s procurement department during 2008–2011 (Izvestia, February 6). Most recently, he led efforts to establish the National Digital Transport and Logistics Platform (GosLog) to increase efficiency in the transportation sector by digitizing and unifying the bureaucratic process involved with managing logistics for all companies involved with rail, aviation, and maritime transportation (AK&M Information Agency, March 5).

Immediately after his appointment, Bakanov took actions reminiscent of Belousov’s large-scale personnel overhaul in the defense ministry (RTVI, May 22, 2024). Bakanov dismissed two deputy directors and the head of Roscosmos’s research institute, TsNIIMash. Bakanov also fired Dmitry Yermyenko, head of NPO Lavochkin, a major space manufacturer and a key satellite technology supplier. The official press release framed these changes as necessary to align the management team with the industry’s current goals and priorities (Telegram/@roscosmos_gk, February 14).

Roscosmos’s entrenched inefficiencies, financing shortages, and loss of access to Western partnerships due to Russia’s full-scale invasion of Ukraine cast doubt on the success of Bakahnov’s reforms. The effectiveness of these reforms to remedy the long-standing challenges at Roscosmos may come too little, too late.