US firms ‘doing serious evaluation’ on Ukraine’s Motor Sich amid pressure to block sale to China

Albert Han

The top US diplomat in Ukraine says American companies are in “serious evaluation” on buying the country’s aircraft engine maker, as Washington ramps up pressure to block the sale of the strategic asset to China.

The comments came as Washington has voiced its opposition to Beijing Skyrizon Aviation’s takeover bid for Motor Sich, one of the world’s largest manufacturers of civilian and military turbine engines.

Outgoing acting ambassador William Taylor told local media on Thursday, ahead of his January departure, that the US was helping Motor Sich to find other investors.

“They’re doing some due diligence, checking balance sheets, visiting the plant, talking to the owners,” Taylor said, referring to potential investors. “They’re doing some serious evaluation.

“We put them in touch with the right officials,” he added. “Not just Motor Sich offices, but government officials.”

Cash-strapped 112-year-old Motor Sich is caught in a geopolitical dispute, as Kiev fears Chinese ownership of an important state asset, while Washington is wary of China’s growing reach as a military and economic power.

Motor Sich’s fortunes declined as Russia embargoed Ukrainian goods in 2014. Photo: Handout

Beijing Skyrizon Aviation, a subsidiary of the state-owned Aero Engine Corporation of China, has been looking to acquire the troubled company that traces its roots to the Soviet era.

Motor Sich’s fortunes declined as Russia – once its chief export destination – embargoed Ukrainian goods in 2014 as part of the ongoing conflict between the two former Soviet countries.

In a surprise move, Ukrainian authorities froze Skyrizon’s shareholding in Motor Sich in September 2017, calling the takeover an “enemy plot”. Court documents showed Skyrizon had acquired a 56 per cent stake in the company.

On Thursday, Taylor reiterated calls from former US national security adviser John Bolton warning against the takeover.

When he visited Ukraine in August, Bolton promised greater assistance from the US and warned of the dangers of letting Chinese business into the country.

“Military and sensitive technologies should not reach enemies or potential enemies,” the Evropeiska Pravda news site quoted Bolton as saying. “We inform friends and partners about the danger of Chinese investment.”

In early November, The Wall Street Journal reported that Erik Prince, an informal adviser to US President Donald Trump and founder of private security firm Blackwater, was in discussions to buy Motor Sich.

However, despite pressure from Kiev and Washington, the company’s 80-year-old owner, Vyacheslav Boguslayev, said earlier this month that the sale to the Chinese state firm would continue, according to Jane’s Defence Weekly. The deal still needs approval from the Ukrainian government.

Ukraine is a familiar source of military technology for Beijing – the country’s first aircraft carrier the Liaoning is a refitted vessel that Ukraine sold to China in 1998, after the Soviet Union dissolved.

China also became Ukraine’s largest trading partner earlier this year after overtaking Russia, according to Ukraine’s central bank.

Meanwhile, China’s arms industry has grown rapidly in recent years. Seven of the world’s top 20 firms by defence revenue are Chinese, according to an annual ranking published in July by Defense News magazine.

Vasily Kashin, a Moscow-based political scientist and expert on China’s military-industrial complex, said if the Skyrizon acquisition went ahead, it would create savings for maintaining the country’s fleet of Soviet helicopters. Beijing could also transfer key technology to develop its own engines, he said.

But the senior fellow at Russia’s Higher School of Economics said American influence over Ukraine could prevail when it came to the Motor Sich deal.

“There is no doubt that [the] US will derail any Chinese attempts to establish full control over strategic enterprises such as Motor Sich,” Kashin said. “Motor Sich will likely be transferred under [the] control of an American shell company … and then gradually dismantled in order to prevent any possible future technology leaks to China and other countries.”

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