China military reform

Chinese firm’s stake in Ukraine military aircraft engine maker ‘frozen’

Court freezes shares in Motor Sich after security services allege military aircraft supplier’s assets were to be taken out of the country, Ukrainian media report

PUBLISHED : Saturday, 16 September, 2017, 7:02pm
UPDATED : Friday, 22 September, 2017, 4:35pm

A court in the Ukraine has frozen the shares controlled by a Chinese firm in one of the world’s largest aircraft and helicopter engine manufacturers, according to Ukrainian media reports.

The move effectively blocks the firm’s controlling stake in the aerospace manufacturer Motor Sich, whose products include military aircraft engines.

The Ukrainian security services allege that the purchase of the company’s stock by groups controlled by Beijing Skyrizon Aviation was an attempt to take its assets out of the country, leading to its liquidation, the news agency Interfax-Ukraine reported.

A court in Kyiv froze shares for a 41 per cent stake in the firm owned by offshore companies controlled by Beijing Skyrizon last week, according to the article.

The Chinese firm indirectly controls a 56 per cent stake in the firm, the report said.

Beijing-based Beijing Skyrizon was established in October 2014 with registered capital of 1 billion yuan (US$153 million) and it is owned by Wang Jing and Du Tao, according to publicly available business registration information.

The South China Morning Post was unable to make contact with the company by email. Phone calls to its office in Beijing also went unanswered.

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The company reached a deal in May with Motor Sich to invest US$250 million in the Ukraine plants of the manufacturer, which employs nearly 22,000 people. The pair also agreed a plan to set up a plant in the Chinese city of Chongqing for the assembly and servicing of plane engines.

The deal was announced by Ukraine’s First Deputy Prime Minister, Stepan Kubiv, when he was visiting Beijing for the belt and road international trade initiative summit in May.

Motor Sich’s engines include models used on the Antonov An-124 cargo plane and the Antonov An-225, the largest military cargo aircraft in the world.

China is in need of high-power aircraft engines as it carries out massive reforms of its military to make it a more modern and efficient fighting force.

The PLA now largely relies on Russian-made engines for its aircraft.

China is developing power units for its new Y-20 transport aircraft, but it can carry a much smaller payload than the An-225 planes.

Motor Sich technologies could be valuable to Chinese scientists and engineers working on developing high-powered aircraft engines, according to Xu Guangyu, a senior researcher at the Beijing-based China Arms Control and Disarmament Association.

“It could serve as good reference, but even if their technologies are unavailable it would not have too much effect because China’s domestic research has been making progress,” Xu said.

Ukraine has previously supplied military equipment to China.

Its first aircraft carrier, the Liaoning, was initially built in Ukraine before it was bought and refitted for the PLA. The carrier was originally designed for the Soviet navy.

The Ukrainian security services has investigated local officials at Motor Sich over allegations that they were aiding the “withdrawal of assets of the enterprise from Ukraine”, the Kyiv Post newspaper reported.

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The unidentified officials sold a controlling stake to the Chinese investor “to weaken the state by destroying the said enterprise as an object of important national economic and defensive significance”, the security services were quoted as saying.

The Chinese owner of Skyrizon filed for a permit from Ukraine’s anti-monopoly authorities in June, declaring ownership of a 41 per cent stake, the report said.

Ni Lexiong, a Chinese military commentator, said foreign ownership of key military industries was a sensitive issue in many countries.

“There are always political factors in such deals involving military technologies. Western powers have a strong influence on the present Ukrainian government,” he said.

The Ukrainian embassy said in an email reply to the Post that an investigation was under way in Ukraine regarding Motor Sich, relating solely to the privatisation of the enterprise. It said no Chinese citizens were involved in the case and no claims had been made against the Chinese company that now owns part of the Motor Sich factory. It added that the case had not affected cooperation between Ukraine and China, or relations between Motor Sich and the Chinese companies.