Ukraine To Nationalize Jet Engine Producer Motor Sich From Chinese Skyrizon

KYIV, Ukraine (GDC) — Ukrainian President Volodymyr Zelenskiy signed a decree on Friday imposing sanctions on Chinese aviation firm Skyrizon, which has sought to acquire control of the Ukrainian aerospace company Motor Sich, a statement said.

The United States and China have tussled over the fate of Motor Sich, posing a dilemma for Ukraine which relies on Washington as its biggest military aid donor but is seeking to forge deeper commercial ties with Beijing.
Ukraine plans to nationalize Motor Sich, an aerospace manufacturer that is majority-owned by Chinese companies, due to its strategic importance to national defense.

“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 following a meeting of the body on March 11.

The nationalization will proceed in “a legal, constitutional way” and investors will be compensated, he added.

U.S. And China Tussle Over Motor Sich

The nationalization of the jet engine manufacturer is likely to irk China but please the United States, Ukraine’s chief foreign backer against Russian aggression.

Washington has opposed Chinese investment in Motor Sich in recent years out of concern it would help transfer its advanced technology to Beijing.

In January, the United States blacklisted Chinese aviation firm Skyrizon, which has sought to acquire control of Motor Sich, and said the firm’s “predatory investments and technology acquisitions in Ukraine represent an unacceptable risk of diversion to military end use” in China.

Two weeks later, Ukrainian President Volodymyr Zelenskiy signed a decree imposing sanctions on four Chinese companies including Skyrizon that were seeking to gain control of the aerospace firm.

Skyrizon bought a majority stake in Motor Sich, but the shares were frozen in 2017 pending an investigation by Ukraine’s security service (SBU). The Chinese side brought a $3.5 billion arbitration case against Ukraine for blocking the shares.

A U.S. Embassy statement earlier this month said “Skyrizon’s predatory investments and technology acquisitions in Ukraine represent an unacceptable risk of diversion to military end use in the PRC (China).”

In December, the Chinese investors behind Skyrizon filed a $3.5 billion arbitration case against Ukraine, accusing Kyiv of expropriating its investment in Motor Sich after the government froze its shares in the company in 2018.

The United States has opposed Chinese investors acquiring Motor Sich and in the final days of the administration of President Donald Trump, Washington added Skyrizon to a Military End-User (MEU) List over its ability to develop military products including aircraft engines, restricting its access to U.S. exports.
Ukraine’s sanctions block Skyrizon’s assets, restrict their trading operations and prevent it from moving capital outside of Ukraine for three years.

Skyrizon and the Chinese Embassy in Kyiv could not immediately be reached for comment.

About Motor Sich

Motor Sich makes engines for helicopters and aircraft. It also makes engines that can be used for cruise missiles and drones. Motor Sich severed ties with Russia, its biggest client, after Russia’s annexation of Crimea in 2014, and the wrangle over its future has held up efforts to find new markets. Motor Sich engines are used in Turkish drones, Russian Yak-130 training aircraft, Russian cruise missiles, Chinese L-15 aircraft and Chinese helicopters.

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