Ukraine Reconsiders Aircraft Engine-Maker Deal With Beijing-Linked Company, Which the US Opposes

By Dimitri Simes | February 20, 2020 | 5:12pm EST
Then-Ukrainian President Viktor Yanukovych visits the Motor Sich plant in southern Ukraine in this 2006 file photo. The Moscow-friendly Yanukovych was ousted in 2014. (Photo by Mykola Lazarenko/AFP via Getty Images)
Then-Ukrainian President Viktor Yanukovych visits the Motor Sich plant in southern Ukraine in this 2006 file photo. The Moscow-friendly Yanukovych was ousted in 2014. (Photo by Mykola Lazarenko/AFP via Getty Images)

Moscow (CNSNews.com) – Ukrainian authorities are considering blocking the sale of a major aircraft engine and cruise missile manufacturer to a firm linked to the Chinese government – a deal which the Trump administration has been lobbying against for months.

Yuriy Terentyev, chairman of Ukraine’s Anti-Monopoly Committee, told Forbes that his agency could potentially prevent Beijing Skyrizon Aviation Industry Investment from acquiring ownership in Motor Sich, one of the world’s leading producers of aircraft engines and cruise missiles.

“Currently we are effectively investigating two issues: the market consequences of this transaction, and the second – w are investigating the fact that the Chinese side may have illegally acquired control over Motor Sich as of the beginning of 2017,” he said.

Terentryev said his agency would release its decision before the end of March.

Skyrizon, which has close links to China’s military and political leadership, first attempted to buy a stake in Motor Sich in 2017, but the Ukrainian Supreme Court blocked the deal in 2018 on national security grounds, after the security services raided the company’s headquarters in the south of the country.

Chinese media outlets have hailed Motor Sich as a “real pearl of Ukraine’s aircraft engine building,” which will help China modernize its military.

Skyrizon renewed its efforts to acquire Motor Sich last summer, joining with China’s Xinwei Technology Group in striking a deal with Ukrainian state defense corporation Ukroboronprom for joint ownership of Motor Sich.

The agreement stipulated that the two Chinese firms would gain a majority stake in Motor Sich in exchange for allowing Ukroboroprom to keep a 25 percent share in the company and investing $100 million into the Ukrainian aviation industry.

The Trump administration has opposed the move, arguing that it would allow China to strengthen its military at Ukraine’s expense. Last August, then-National Security Advisor John Bolton visited Ukraine to warn Kyiv against proceeding.

“Military and sensitive technologies should not reach enemies or potential enemies,” he said at the time. “We inform friends and partners about the danger of Chinese investment.”

A number of U.S. investors have expressed their interest in acquiring ownership of Motor Sich. In November, The Wall Street Journal reported that Blackwater CEO Erik Prince was exploring buying the company.

The controversy comes at a time when Beijing and Kyiv are strengthening their military ties. Ukraine became China’s second biggest arms supplier in 2017, with the People’s Liberation Army buying more than $100 million worth of weapons annually from the Eastern European nation.

Economic relations between the two countries have also expanded rapidly over the past several years. Ukraine and China saw their trade volume reach $9.8 billion in 2018, a 51 percent increase from two years prior. Trade between the U.S. and Ukraine that same year, by contrast, totaled $3.8 billion. In 2019, China overtook Russia to become Ukraine’s largest trading partner for the first time.

China has also undertaken several high profile investment projects in the Eastern European nation. A consortium of Chinese companies pledged in 2018 to spend $2.7 billion on building a new metro line in Kyiv. In October, the State Grid Corporation of China signed a deal to invest over $1 billion in building Europe’s largest wind farm in Ukraine.

With economic ties between Beijing and Kyiv on the rise, Ukraine has begun to positioning itself as a potential intermediary between China and the European Union. During a meeting with European business-people last week, Ukrainian Vice Prime Minister Dmytro Kuleba pitched his country as “the place where Chinese and European capitals should get married.”

The U.S. has been a major source of aid for Ukraine since 2014, when a pro-Western political revolution ousted Russia-friendly President Viktor Yanukovych. From 2014 onwards, Washington has provided Ukraine with $1.5 billion in military aid and $320 million annually in economic aid.

 

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