Roscosmos chief Igor Komarov (left) with Russian President Vladimir Putin. Credit: Kremlin.

Ever since NASA retired its shuttle program in 2011, the Roscosmos, ‘the Russian NASA’, has been enjoying a steady uptick in revenue as new orders kept piling up. Only a year earlier, SpaceX had performed Falcon 9’s maiden voyage. In 2012, the rocket launched only three times and with no commercial payload to boot. But from these humble beginnings, SpaceX has innovated itself into the leading private space company in the world that’s capable of competing with any space faring nation.

Poking the bear

While Russia is still launching relatively cheap Soyuz rockets, SpaceX is now delivering goods into space with reusable boosters. SpaceX hopes to begin reusing its rockets 10 to 20 times, and Musk has on various occasions claimed that reusability can reduce costs for launching things into space by a factor of 100.

The last couple of years hasn’t been exceptionally good for Roscosmos. The agency has an excellent engine-making subsidiary called Energomash which supplies parts major rocket manufacturers around the world, including United Launch Alliance (ULA) for its Atlas V rocket. After Russia annexed Crimea, however, sanctions made such sales extremely difficult if not impossible. To make things worse, the rubble toppled.

In 2011, Roscosmos charged NASA $70 million for each seat to take astronauts to and from the International Space Station. Musk promises to undercut that significantly, charging around $20 million on his “Dragon” spacecraft. Roscosmos has only about a $2 billion yearly budget over the next decade which means losing private contracts, by some estimates 25% of its budget, could slash its lifeblood.

These developments have been minimized by the Russians who have seemed skeptical of SpaceX success, at least publically. That tone has clearly changed now to a more precautions one, to say the least.

In a recent interview on the agency’s website, Roscosmos chief executive Igor Komarov basically acknowledged SpaceX as a direct threat to its business, which still amounts to a 40 percent share of the global launch market. Komarov called SpaceX a “serious challenge” before outlining some of the measures the agency is considering in response to SpaceX gobbling up its market share.

The Roscosmos chief says his team is almost ready with the Soyuz 5 rocket, a medium-lift rocket in the same class as Falcon 9 which will cost 20% less to fly. It will still be expendable, though. “If we achieve this goal, it will ensure its competitiveness,” Komarov said.

Komarov seems confident that in the next five years, there will be no more than 10-20% of a reduction in revenue as a result of competition. But one can’t help but notice Komarov is being overly optimistic. After all, he’s got nothing else to show. Where’s the Russian reusable rocket?

Meanwhile, SpaceX is making headlines with one successful reusable launch after another, and next year it will be ready to launch the Falcon Heavy — the most powerful rocket in the world capable of delivering three times as much payload into orbit than Falcon 9. SpaceX hasn’t yet reported any sizable drop in its launch price tag but it did claim the reusable booster means a 30% discount. For now, it seems like that discount is being funneled into the company’s pocket but no one should act surprised if SpaceX announces a steep price cut for its clients overnight, leaving its competition with a stiff lip.

As Eric Berger wrote for Ars Technica:

“If SpaceX has come this far in five years, it is difficult to see the company only offering a 15 or 20 percent reduction in launch costs by the year 2022. It seems more likely the reduction will be on the order of 50 percent or more, especially if the company makes strides on recovering the second stage and payload fairing of the rocket—which it is working avidly toward.”

“Perhaps the only strategy by which the Russian space enterprise succeeds commercially is one in which SpaceX fails.”

While Berger actually deems this scenario plausible (and I agree), I can’t help but notice rooting for your competition to fail sounds like an unwise business strategy. Really though, it’s not just the Russians that should be afraid. Anyone in direct competition against Elon Musk doesn’t sleep well at night from the likes of it.