Russia's Federal Security Service (FSB) and its cash-strapped space agency Roscosmos are in conflict over a $1bn contract to launch private satellites on behalf of a US company.
The FSB reportedly intervened to demand the cancellation of the contract between US firm OneWeb and state corporation Roscosmos to launch a constellation of internet-connectivity satellites.
But the space agency's chief executive, former deputy prime minister Dimitry Rogozin, has been bullish about the project according to Russian news agency Interfax.
In a press conference on Monday, Mr Rogozin said he had sent Roscosmos' opinion on the intervention to the government, stressing the contract was "extremely important" and hadn't been cancelled.
The contract involves launching 21 Soyuz rockets over 2019 and 2020 as part of a project by OneWeb to launch a constellation of satellites which would offer global broadband coverage.
According to the Russian newspaper Kommersant, the FSB intervened in the project over fears satellite internet access in Russia would allow people to route around the agency's internet monitoring abilities.
The FSB is the successor organisation to the KGB and is headquartered in the same building at Lubyanka Square in Moscow.
Vladimir Putin was made the agency's director a year before he became the country's premier.
Its duties include conducting counter-espionage in Russia and Kommersant cited sources who claimed security officials feared that OneWeb's satellites could be used to spy on military locations.
According to Kommersant, an FSB representative stated there was no guarantee the "system is not of intelligence nature and will not be able to harm the interests of the individual and society of the Russian Federation".
Neither the FSB nor Roscosmos commented on the matter when contacted by Sky News.
OneWeb, which was founded by American internet communications entrepreneur and former Google executive Greg Wyler, also declined to comment.
Kommersant reported that a final decision will be made on the launches before the end of 2018.
Whether the company could find a new launch partner if the FSB succeeds in demanding the cancellation is unclear.
Elon Musk's SpaceX may potentially provide the launch capacity, but SpaceX is currently developing its own rival satellite constellation.
Other constellation projects are being developed by companies such as Kepler, Telesat, and Leosat, and industry sources told Sky News they believed all of these services were generally capable of complying with jurisdictional requirements in Russia.
The loss of the estimated $1bn contract would be a significant blow for Roscosmos, which has faced consistent funding issues in recent years.
The recent failure of a Soyuz rocket transporting astronauts to the International Space Station has also posed risks to its income, although NASA stated it would not be cancelling its contracts.
Professor Mark Galeotti, an expert on Russian security affairs, told Sky News: "It's an interesting story that additionally implies the FSB doesn't realise that OneWeb could also use ground stations outside Russia to provide service across the country.
"This may be driven by ignorance – after all, the FSB is very exercised about the question of internet control – but also potentially politics.
"Roscosmos is pretty vulnerable at present given a string of corruption cases and the recent Soyuz accident, and it, or its new director general, former deputy prime minister Dmitry Rogozin, might be the target.
"But an additional possibility is that this is also a clumsy case of the 'counter-sanction syndrome' of simply wanting to deny a US company something, however self-harming it may be."
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