Airbus wants to sell space services to U.S. spy agencies – That raises some questions

By Loren Thompson*

In a little-noticed move last summer, European aerospace giant Airbus reorganized its U.S. space and defense operations to bid for classified intelligence work. Published reports indicate an early target of its

NRO is the defense department agency responsible for designing, building, launching and operating spy satellites. That includes satellites developed to collect imagery and geospatial intelligence.

In the past, NRO generated all such overhead intelligence for its federal customers from secret, government-owned systems, but as commercial sources of remote sensing data have proliferated, the agency has moved to tap those sources.

The spy agency is now poised to seek one or more suppliers of commercial imagery, and Airbus wants to be part of that effort. The company certainly has relevant credentials: it is the world’s top exporter of Earth observation systems, offering both electro-optical satellites and synthetic aperture radar satellites that can see through clouds.

However, details about what kind of imagery NRO is seeking, how it is being used, and so on are sensitive. For instance, if the spy agency issues a call for geospatial intelligence covering specific regions of Russia or China, those countries would very much like to know about it.

The reorganization that Airbus Space & Defense put in place created a separate board of directors to manage its U.S. business, consisting in part of senior veterans from the military and intelligence communities.

Under the terms of a Special Security Agreement with the defense department, the U.S. board will have full control of the business, and prevent unauthorized access by other parts of Airbus to “critical technology, classified information or export-controlled information in Airbus U.S.’s possession.” At least, that’s what its website states.

This is not a novel arrangement. Other foreign-based firms that have gained the trust of the defense department have similar agreements. What makes Airbus different is the way in which its corporate parent came into existence, and how it has operated. Some aspects of the company’s history, culture and business ties raise questions about the advisability of granting access to sensitive intelligence.

Can Airbus be trusted to protect such information? The highly regarded people who have joined its U.S. board must think so. But there are issues to consider, and here are four of them. (I should note that some contributors to my think tank work with NRO; I have not discussed this article with any of them.)

Why would NRO hire a state-subsidized foreign company? Airbus generates most of its corporate revenues from the sale of commercial aircraft. The World Trade Organization has ruled that every plane Airbus brought to market was illegally subsidized, severely harming U.S. competitors. European countries involved in providing said subsidies are currently subject to U.S. penalties aimed at forcing compliance with trade rules. Engaging Airbus as a provider of space services would reward a company that has injured the U.S. aerospace sector by violating trade treaties.

With specific reference to space, a study published by the federally-funded MITRE research organization in October noted that “the U.S. government initially began investing in commercial [geospatial intelligence] with the strong intention to help U.S. companies lead the industry. However, the United States has fallen behind, and foreign investment, largely funded by foreign governments, has begun to dominate the industry.” It is hard to see what benefit Washington might gain by giving a further boost to foreign competitors of the U.S. imagery industry.

Why would NRO hire a company that has space business in Russia and China? The spy agency is understandably concerned that details about its overhead activities not fall into the hands of what the national defense strategy calls near-peer rivals, namely Russia and China. But Airbus has space-related joint ventures with entities in both countries. In Russia, these include ventures to exploit the Soyuz launch vehicle, build components for satellites, and market overhead imagery through the country’s sole supplier of geospatial  information. Various Airbus business units have participated in over 100 research projects with Russian entities.

In China, Airbus has been a supplier of space technology and services for decades. For example, Airbus Space & Defense was involved in a joint venture called Beijing Spot Image Co. with China’s Aerospace Information Research Institute. During the Obama years, an Airbus subsidiary secured U.S. approval to build three high-resolution remote sensing satellites for a Beijing-based company. It is not likely such approval would be granted today, given how U.S. views of the China threat have evolved. NRO would need to assess whether such ties might impact information security.

Why would NRO hire a company dependent on an offshore supply chain? Supply chain security has become a chronic concern of U.S. military planners as the manufacture of advanced technology has migrated overseas. That is where the vast preponderance of Airbus facilities, workforce and support infrastructure for space are located. The company does not appear to have significant commercial imagery operations in the United States.

The federal government has instituted rigorous standards for assuring the security of foreign-sourced technology is not compromised by overseas ownership, control or influence. Airbus Space & Defense would need to comply with extensive security requirements to convince NRO it is a reliable provider of space-related hardware and software. It is not clear that a company with operations scattered across dozens of countries and utilizing hundreds of offshore suppliers could satisfy these requirements. Supply chain restrictions for classified space programs are especially stringent.

Why would NRO hire a company targeted in a corrupt practices investigation? In January, Airbus agreed to the biggest settlement of a bribery case ever recorded, paying $4 billion to the governments of France, the United Kingdom and the United States to avoid prosecution after a four-year investigation. According to allegations in the U.S. complaint against the company (U.S. v. Airbus SE), its strategy and marketing organization “engaged in and facilitated a massive scheme to offer and pay bribes to decisionmakers and other influencers, including to foreign officials in multiple countries, in order to obtain improper business advantages.”

The bribery scheme was said to have extended over seven years, with bribes offered in China, Russia, Saudi Arabia and elsewhere (a typical headline from the Financial Times: “Airbus ran ’massive’ bribery scheme to win orders.”). U.S. district judge Thomas Hogan described the company’s behavior as a “pervasive and pernicious bribery scheme.” And while the bribes were offered mainly in connection with the sale of commercial transports, the U.S. complaint raises the possibility that some of the “third-party business partners” hired by the offending unit may also have worked with the defense unit.

The company says it has reformed its culture to emphasize ethical behavior. However, like the reliance on illegal aircraft subsidies, the $4 billion fine paid to defer prosecution under bribery statues inevitably raises questions about corporate culture. NRO will need to be satisfied that Airbus now operates ethically, or at the very least that its U.S. board can prevent bad habits elsewhere in the company from infecting sensitive U.S. operations.

I submitted the above four questions to Airbus Space & Defense on November 4 and again of November 6, seeking comment. No response had been received as of November 9.

*Loren Thompson focuses on the strategic, economic and business implications of defense spending as the Chief Operating Officer of the non-profit Lexington Institute and Chief Executive Officer of Source Associates.

Source: forbes.com

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