Chinese shareholders of the Ukrainian aviation engine manufacturer Motor Sich criticized the Ukrainian government for the “looting of China’s foreign assets.” The investors voiced their objections in a statement published on WeChat on November 9.
According to the statement, the Ukrainian government has consistently created problems, falsely accusing, suppressing, and persecuting Chinese investors since 2020.
The Chinese investors also claimed that Kyiv even put specific economic sanctions on investors for no apparent reason, trying to illegally nationalize motor Sich and brazenly plunder China’s foreign assets.
In 2016, a Chinese company Beijing Skyrizon purchased a 56% stake in Motor Sich, one of the largest producers of industrial gas turbines and aircraft engines. However, in 2017, a Ukrainian court blocked Beijing Skyrizon from acquiring the majority stakes in the Ukrainian firm due to national security concerns.
On November 7, it was reported that the Ukrainian government had instructed to confiscate privately-owned shares in five major companies, including Motor Sich.
The company’s longtime director and former co-owner, Vyacheslav Boguslaev, who sold his shareholding to Chinese investors, is currently being investigated by the Ukrainian police for allegedly conducting business with Russia.
Chinese shareholders of the company protested the forcible nationalization of its assets. The investors claimed that they had consistently and vehemently opposed the “criminal actions” of the Ukrainian state regarding the abuse of state power.
The investors would keep in touch with all parties in various ways and vowed never to give up on their efforts to uphold their legal rights.
Additionally, the Chinese shareholders declared that they would simultaneously employ all available legal means to steadfastly, unwaveringly, and continually defend their legal rights.
USA’s Concerns Regarding The Acquisition
However, the controversy over China’s takeover of Motor Sich has been in the news for quite some time. China’s interest in Motor Sich was ignited in 2009, the Centre for European Policy Analysis (CEPA) argues, and that year the country made its initial acquisition attempt.
The main client of Motor Sich was Russia, but after the annexation of Crimea in 2014, bilateral relations have deteriorated, causing financial losses to the business.
Russian helicopters of the ‘Mi’ and ‘Ka’ series are equipped with the Motor Sich engines. Furthermore, the different variants of the Motor Sich engines are used in the United States and at least 14 other nations, including India.
In the past, Beijing had also purchased aircraft engines from Ukraine, including the Motor Sich AI-322 and AI-222-25 for its L-15 combat training aircraft.
Meanwhile, the US has been very critical of the takeover of the Ukrainian manufacturing behemoth. It also placed the Chinese company on its Military End-User List, limiting access to American exports.
Washington claims that Skyrizon is actively looking to purchase technology and intellectual property to improve critical military capabilities.
These efforts by the Chinese corporation could endanger US national security, including the country’s capacity to create, manufacture, or sustain military hardware like satellites, aircraft engines, and cruise missiles.
In 2019, the US sent its then-national security advisor, John Bolton, to Kyiv to persuade the Ukrainian government to block the agreement.
Early in 2021, the administration of President Volodymyr Zelensky eventually placed sanctions on Beijing Skyrizon and its owner, Wang Jing, for trying to operate Motor Sich or transfer funds out of Ukraine.
Why Does Ukraine Nationalize Major Companies?
The Ukrainian government argued that the assets had to be operated by the Defense Ministry owing to the military confrontation with Russia.
Oleksiy Danilov, secretary of the National Security and Defense Council of Ukraine, said that the critical strategic Ukrainian companies, including Motor Sich, have been handed over to the country’s Ministry of Defense for management.
“In accordance with the decision taken by the Supreme Commander-in-Chief Headquarters and due to the military necessity, on November 6, 2022, five enterprises were alienated: Motor Sich, Zaporizhtransformator, AvtoKrAZ, Ukrnafta, and Ukrtatnafta,” Danilov said.
“The seized assets acquired the status of military property, and their management was transferred to the Ukrainian Defense Ministry,” he added.
According to the Interfax-Ukraine agency, the decision was based on the law on transfer, expropriation, or seizure of property under the legal system of martial law, which was passed on November 6.
The National Commission on Securities and Stock Markets of Ukraine later also released a statement on its website regarding the forced transfer of shares of these firms into state hands.
Nevertheless, Kyiv said that after martial law ends, these assets may either be given back to their rightful owners or their worth may be compensated.