Ukraine Seizes Aircraft Maker to Prevent Chinese Takeover

In this Tuesday, Oct. 1, 2019, file photo, Ukrainian President Volodymyr Zelensky speaks to media during his press conference in Kyiv, Ukraine. (Ukrainian Presidential Press Office via AP, File)
Ukrainian Presidential Press Office via AP

The government of Ukraine announced Thursday that it would seize Motor Sich, a private corporation that specializes in building jet engines and other military hardware, and return it “to the people” after multiple attempts by a Chinese company to buy it.

Last month, Ukraine sanctioned a Chinese company, Beijing Skyrizon Aviation, for attempting to take over Motor Sich. Ukrainian officials protested that Motor Sich is too important to the Ukrainian military to allow it to be bought by a foreign actor, and thus Skyrizon posed a national security threat. Motor Sich remained nonetheless owned by majority-Chinese shareholders, which the administration of President Volodymyr Zelensky deemed concerning enough to end their ownership of the company by force.

Zelensky’s unilateral actions against China — despite Ukraine’s minimal economic power to confront China and the fact that it remains embroiled in a civil war against Russia-backed separatists in its east — defied much of Kyiv’s attitude towards China before the comedian and outsider took the presidency. Ukraine remains, due to past policy, a member of China’s “Belt and Road Initiative” (BRI), a global economic project in which the Communist Party of China offers predatory loans to developing countries.

“The decision has been taken to return Motor Sich to the Ukrainian people,” Oleksiy Danilov, the head of Ukraine’s Security and Defense Council, said this week, according to Radio Free Europe/Radio Liberty (RFERL), following a meeting to determine the fate of the company on Thursday. Danilov assured the company’s shareholders that, unlike nationalizations in socialist or communist countries, Kyiv will compensate the owners of the company for the fair price of their shares.

The declaration followed comments from ruling lawmakers last week that the administration had set a plan in motion to protect Motor Sich. The company itself responded to the reports last week by accusing the Chinese owners of the company of not paying Motor Sich for their shares. Motor Sich President Vyacheslav Bohuslayev said last week, “there are no Chinese investors and no investment program” as Motor Sich has received “not a penny.” Outraged Chinese investors denied the claim.

At the time of Danilov’s announcement, about 75 percent of Motor Sich was in the hands of Chinese nationals and companies, including the sanctioned Skyrizon, the Agence France-Presse (AFP) reported Thursday, citing Ukrainian government sources. As China is a communist country, it controls the nation’s most powerful businessmen and “private” companies, making the nationalization of the Ukrainian company a direct challenge to Beijing’s purchasing power in the country.

The Chinese Foreign Ministry responded curtly to the move Friday.

“We urge the Ukrainian side to safeguard the legitimate rights and interests of Chinese companies and investors in accordance with law and properly handle relevant issues,” Foreign Ministry spokesman Zhao Lijian told reporters Friday, without elaborating. There is no public evidence at press time that any higher-level communication has occurred between Beijing and Kyiv.

The Kyiv Post reported this week that the Chinese investors affected by the seizure of Motor Sich are planning to sue the Ukrainian government to keep their stakes. The owner of Skyrizon Aircraft Holdings, Wang Jing, made his intent public last week, prior to the Zelensky administration confirming its decision. Zelensky imposed personal sanctions on Wang when handing down sanctions on Motor Sich in February.

“We have already filed and are preparing to file a number of additional lawsuits in Ukraine, in China, and at the international level,” Wang asserted, claiming it necessary to “resolutely protect and safeguard the legitimate rights of Chinese investors.”

“The state of Ukraine will be disgraced in front of the whole world community,” Wang warned, using the typically belligerent language of Chinese state actors, though nominally only a Chinese businessman. Reports have linked Wang to the People’s Liberation Army (PLA) and observers have remarked that the jet engines and cruise missile technologies that Motor Sich manufactures would be extremely valuable to the PLA, as China cannot currently manufacture them domestically.

There is little indication Kyiv would abide by a ruling in Chinese court, or vice versa, potentially leading to international litigation. The Chinese Communist Party brazenly denies the legitimacy of these venues, as well. In 2016, China lost a case at the Permanent Court of Arbitration at the Hague which the Philippines filed against Beijing’s construction of military facilities in Philippine waters. Chinese officials decried the case as illegitimate and have continued the illegal construction.

Skyrizon, on its own, filed an international arbitration claim against the Ukrainian government in December in an attempt to pressure it to let the Chinese company buy Motor Sich.

The United States has supported Zelensky’s endeavors to keep Chinese companies from controlling Motor Sich and has independently banned Skyrizon from the American market.

“Skyrizon’s predatory investments and technology acquisitions in Ukraine represent an unacceptable risk of diversion to military end use in the PRC [China],” the American embassy in Kyiv said in a statement in January, describing the company as “manufacturing conglomerate with significant ties to the PRC and the People’s Liberation Army.”

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