The National Security and Defense Council of Ukraine announced a major setback to Chinese investors who have been trying to acquire Motor Sich, the major Zaporizhia-based aircraft engine manufacturer.
Oleksiy Danilov, the secretary of the security council, announced the company would be nationalized in the “near future” during a briefing in Kyiv on March 11.
“It will be returned to the ownership of the Ukrainian state in a legal, constitutional way in the near future,” Danilov said, adding that the investors will be compensated fairly.
Danilov said that the decision was based on the security council’s 2018 ruling to protect Ukraine’s aviation industry.
This is the latest chapter in the four-year standoff with Skyrizon Aircraft Holdings, a Chinese company which has sought to acquire a controlling stake in Motor Sich amid fierce opposition from the United States.
If Skyrizon acquired Motor Sich, it would gain access to state patents for advanced helicopter engines. The U.S. fears that China would use this technology to try to dominate the South China Sea region.
Some of that technology may also end up in the hands of Russia, with which China has joint defense projects.
Wang Jing, the owner of Skyrizon, released a public statement on March 6, threatening to sue Ukrainian authorities and pledging to “resolutely protect and safeguard the legitimate rights of Chinese investors.”
“We have already filed and are preparing to file a number of additional lawsuits in Ukraine, in China, and at the international level,” Wang stated. In December, Skyrizon launched a $3.5 billion international arbitration case against Ukraine, aided by Ukrainian company DCH Group and its owner, Kharkiv businessman Oleksandr Yaroslavsky.
The nationalization announcement follows a March 4 statement by David Arakhamia, the head of the Verkhovna Rada’s ruling 248-seat Servant of the People party that a draft bill on Motor Sich nationalization would be submitted to parliament “this week.”
“This is a matter of national defense capability,” the lawmaker said.
On Jan. 29, the president’s office and the security council had announced three-year sanctions against Wang, Skyrizon, and its parent company, Beijing Xinwei Technology Group.
The sanctions block Wang’s and Skyrizon’s assets in Ukraine, ban the movement of capital out of Ukraine and prohibit buying or selling Motor Sich securities to the sanctioned parties.
Skyrizon, with Yaroslavsky’s help, has tried to unfreeze the sale of Motor Sich. Yaroslavsky, who would own 25% of the company if the deal went through, strove to be the Ukrainian face of the sale.
Ukraine’s recent moves to shut down the acquisition should please the U.S. but anger China. The U.S. is Ukraine’s biggest ally against Russia but China is its biggest trading partner.
The Chinese investors tried to buy a majority stake in Motor Sich in 2016. Ukraine’s security services froze the company’s shares in 2017 after the U.S. and Japan got wind of the deal.
