Cold war for Motor Sich: why it is still a long way to a world war with the Chinese

Author

Kirill Danilchenko

On March 12, at a press conference after the meeting of the National Security and Defense Council of Ukraine, its Secretary Oleksandr Danilov announced the nationalization of the enterprise Motor Sich. The wording was quite diplomatic: "It will be returned legally into the ownership of the Ukrainian state."

Cold war for the plant

Out of the blue, a paradoxical situation arose when, before the deal, the AMCU and the republic's leadership did not see any problems for the sale of a strategic enterprise to the Chinese. And as a result, the country came to sanctions against foreign citizens, notes of the Chinese embassy, and a claim against the state for $3.5 billion.

An international scandal, a deterioration in the investment climate, a threat to the fulfillment of contracts for the same Turkey, and uncertainty regarding the modernization of helicopters for the Ukrainian Armed Forces are a cluster of rather unpleasant problems.

On March 20, the SBU through the Shevchenko District Court arrested all 100% of the shares and property of Motor Sich. On March 23, President Zelensky signed the Decree No. 108 of the National Security and Defense Council on the assets return to public administration.

Officials at press conferences did their best to avoid the term "nationalization", and Danilov even gave a special interview that the actions carried out with the enterprise de jure were not nationalization, and that all those interested would receive compensation, like, everything is quiet in Baghdad... Clarifying at the same time that they would receive money only if they did not transfer money through the Virgin Islands.

Moreover, the Ukrainian side hired international lawyers, which means that there is no agreement on the amount. So, it is still a long way to a world war.

And since the stake was acquired through six offshore companies, the press conference itself looked like a subtle trolling.

Bulldogs under the carpet

However, the process of transferring the property of the state management company never began, attempts to remove the management appointed by Boguslayev failed. And accompanied by noise in the press about raider seizure and trade in engines with the aggressor state, everything goes on as usual.

Boguslayev's people are in control, and the Chinese are incurring losses—$100 million in the modernization and capitalization of MS and an unknown amount invested in the now frozen plant in Chongqing, where the engines were supposed to be localized.

And even the question arises: are the US sanctions a reason or a pretext? To, for example, seize the moment by killing two birds with one stone. And to take into account the interests of Western partners and not to forget own interests, having blown off investors.

By the way, there are enough absorbing investors. Mr. Wang Jin, who was included in the sanctions lists of the United States and Ukraine, is the same businessman who agreed to build a deep-water port near Yevpatoria with Yanukovych for $10 billion, but the Maidan and the invasion of Crimea prevented that.

And before that he planned to create a competitor to the Panama Canal in Nicaragua on shares with a total budget of $50 billion. The place of his education is unknown, but he made his fortune by investing in gold mines in Cambodia.

This is usually how the relatives of the CCP functionaries look like in China. Little-known non-partisan guys with a billion, doing business in telecommunications technologies and infrastructure construction—areas where officials and security officials dominate in Celestial Empire.

They want to either build strategic channels through which 5% of world traffic should pass, or buy a plant for combat aircraft engines—having no experience in either the first or the second.

Unbrotherlike trail

But there is also a Kharkiv businessman Yaroslavsky, who entered the project, and before that had planned to invest in the unprofitable Kharkiv Aircraft Plant. And he is no less than a companion of Deripaska and godfather of his child. Deripaska is an aluminum tycoon from the Russian Federation, against whom the United States is waging a war of sanctions. And it was Yaroslavsky’s DCH company that showed a keen interest in the 25% stake in Motor Sich when problems began with the Chinese.

Is such a systemic interest in strategic enterprises of the Ukrainian defense industry accidental? And is the fierce opposition of the United States accidental? As always, when politics gets involved, it’s not clear.

Definitely, after the Chinese brought money here, MS showed growth—in 2019 there was $24 million in net loss, in 2020—$31 million in net income. $2.5 million a month is not so bad in Ukrainian reality.

Plus, unambiguously, according to the SIPRI report, in the export reports to the Russian Federation, engines for the combat trainer Yak-130 and engines for the Be-200 apparently produced under license by Moscow appear, but the degree of participation of Ukraine in the person of Boguslayev is still to be installed.

Is there only a license or also components? Boguslayev himself at the air show in the Russian Federation in 2018 claimed that he was fulfilling old contracts, so perhaps the SSU was digging into that not for nothing. And the systemic interest of Deripaska's partner in defense enterprises is not for nothing.

In any case, the damage to the investment climate in Ukraine has yet to be assessed. And despite rattling a saber in the media and the seizure of assets, the enterprise is far enough from being transferred to state management.

There are questions to the AMCU that did not see any problems in selling the strategic plant to the Chinese until the United States made claims. There are questions about the future maintenance of a hundred helicopters remotorized for the security forces of Ukraine, plus the blades project if the cold war for the MS drags on. There are no answers to them yet.