New Delhi: China’s plans to acquire financially starved Ukrainian jet engine maker Motor Sich seem to have been thwarted as Kiev decided to nationalise the company after a Beijing firm had picked up a majority stake.
This is a serious setback to China, which has been struggling to come up with a credible engine to power its various types of fighter aircraft, defence experts in India said.
The Ukrainian government’s National Security and Defence Council announced the decision on Motor Sich, a maker of advanced engines, last week, The Wall Street Journal reported.
The move still must pass the Ukrainian legislature, and could face legal challenges from the “spurned Chinese suitors”, the report added.
Oleksiy Danilov, head of the security council, was quoted as saying by Japan’s Nikkei on 18 March: “The Motor Sich enterprise will be returned to the Ukranian people.”
Blow to China and Skyrizon
The Ukraine government’s decision put an end to the efforts of the Beijing Skyrizon Aviation to take over Motor Sich, a move that had raised the hackles of the US. In 2019, the US had sent its then-national security advisor John Bolton to Kiev to push the Ukranian government to oppose the deal.
Motor Sich’s engines are installed in ‘Mi’ and ‘Ka’ series military helicopters, besides Antonov aircraft. The United States and at least 14 other countries, including India, use one or more variants of the helicopter engines produced by Motor Sich.
Russia was Motor Sich’s main customer, but since the 2014 Crimea annexation, bilateral ties got hit, which bled the company.
China, which emerged as the biggest trading partner of Ukraine, kept buying more and more shares in the company.
According to the Centre for European Policy Analysis (CEPA), China’s interest in Motor Sich was sparked in 2009, and that’s when it made its first move towards acquiring the company.
By early 2015, Motor Sich and Skyrizon signed a memorandum of cooperation, which included some technology transfers from Ukraine to China. In return, Motor Sich received a $100m loan over 10 years, CEPA said, adding that the loan was provided by the state-owned China Development Bank, which meant that if Skyrizon went bankrupt, the Chinese government would gain control over the Ukrainian aerospace giant.
In 2016, Vyacheslav Boguslayev, chairman of the board of directors and honorary president of Motor Sich, signed another agreement selling a controlling stake in the company to the Chinese.
“As a result, Beijing Xinwei Technology Group Co. Ltd — represented by a subsidiary of Skyrizon Aircraft and other offshore companies and controlled by Chinese tycoon Wang Jing — became the new co-owners of Motor Sich. According to various sources, Jing controls between 56 to 76 per cent of the company’s shares,” CEPA said.
Skyrizon, which had tried to force a Motor Sich shareholders meeting in January, was hit with sanctions by both Ukraine and the US Commerce Department, a move that is now undergoing international arbitration, Nikkei reported.
‘Motor Sich was China’s key aim’
“The Chinese defence industry thrives on industrial espionage and reverse engineering. However, when it came to jet engines, they were not succeeding, and hence, acquisition of Motor Sich was a key aim,” former vice-chief of the Indian Air Force, Air Marshal Anil Khosla (retd), told ThePrint.
Khosla said the decision of the Ukrainian government was undoubtedly a huge setback to the Chinese. “China’s defence aviation industry is very good. The only lacuna they had was with regard to the jet engine,” he added.
Meanwhile, Air Marshal Anil Chopra (retd), director general of the Centre for Air Power Studies (CAPS), said about Chinese media reports regarding success in manufacturing indigenous jet engines that “one is really not sure how truthful the Chinese are”.
“One can develop a good air frame, systems, radars and others. But the engine is the toughest part because it is completely a different phenomenon which has a number of factors including altitude, temperature, thrust, material,” Chopra said, adding that Motor Sich was a “low-hanging fruit” through which the Chinese were aiming to acquire the engine technology.
Group Captain Anupam Banerjee (retd), former IAF spokesperson, said the acquisition of the Ukrainian firm would have been a big boost for the Chinese.
“As of now, China depends on Russian engines. While there are reports from China about considerable progress with regard to engines for their fighters, one is really not sure about the actual status when it comes to Chinese claims. There is no doubt that the Ukrainian move will be a setback to the Chinese plans,” he said.
(Edited by Shreyas Sharma)