Back-to-back rocket launch failures have dealt Russia one of the heaviest blows to its space industry since the Soviet collapse -- with national pride and billions of dollars at stake.
The setbacks threaten to erode Russia's leading position in the multibillion global launch market, in which it commands an estimated 40 per cent share, and dent President Vladimir Putin's efforts to boosta the country's global prestige.
The competition for lucrative commercial satellite contracts is intensifying, with American, European, Chinese and Indian companies all eager to expand their share.
Deputy Prime Minister Dmitry Rogozin warned this week that Russia could soon lose its chunk if the problems aren't fixed quickly.
Government officials and experts agree that the latest booster rocket failures are rooted in a steady decline of production standards and poor oversight at state-controlled rocket builders, but opinions vary on how the problems might be solved.
Highlighting space industry woes, the workers building the new Vostochny space launch pad in the far eastern Amur region went on hunger strike last month and appealed directly to Putin, complaining that they have gone unpaid for months.
The head of a state-controlled construction company and three subcontractors have been arrested in the case.
The Kremlin has offered yet another plan for the reorganization of the industry, which has seen numerous shake-ups in recent years.
A presidential bill that received preliminary approval by the lower house this week pulls all the nation's space assets together in one giant state-controlled commercial corporation.
In a speech to lawmakers, Rogozin cast the proposed reform as essential for establishing tight control over money flows, cutting production costs and uprooting corruption.
He admitted that US space industries are now nine times more efficient than Russia's space industry.
Critics say, however, that other giant state corporations created during Putin's 15-year rule, as part of his efforts to concentrate lucrative economic assets in state hands, have not exactly been success stories.
They say these state conglomerates suffer from mismanagement and inefficiency and are dogged by corruption.
Rogozin said that a recent investigation into the activities of the Khrunichev company, the manufacturer of the heavy-lift Proton booster rocket, revealed numerous instances of fraud, abuse of office and falsification of documents, resulting in economic damage of 9 billion rubles (more than USD 180 million).
