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Nationalization of Motor Sich: Five key questions and answers

Author : 112.ua News Agency

Source : 112 Ukraine

March 20, Shevchenko District Court in Kyiv decided to arrest the integral property complex and 100% of Motor Sich JSC shares
13:55, 24 March 2021

KP.UA

The property of the complex was transferred to the management of ARMA. The full name of this structure is long, but it is definitely worth remembering in the context of the current situation.

Related: Defense Secretary: Motor Sich to be returned to Ukraine's ownership soon

ARMA is the National Agency for the Identification, Search and Management of Assets Received from Corruption and Other Crimes.

Actually, this is how we immediately approached the first important question.

What is Motor Sich and why is it a very important enterprise?

First, a little help.

Motor Sich PJSC is a Ukrainian company engaged in the development, production, repair, and maintenance of aircraft gas turbine engines for airplanes and helicopters. In addition, the enterprise produces industrial gas turbine units.

In general, Motor Sich is one of the world's largest manufacturers of engines for aviation technology. And it supplies its products to more than 100 countries around the world.

To roughly represent the scale. For three quarters of 2020, the company received UAH 7.68 billion in revenue. As of November 2020, 19,304 people worked at Motor Sich.

So that's it. In the 90s, the enterprise was privatized by the people's deputy of several convocations Vyacheslav Boguslaev. And he remained the owner of Motor Sich until recently. Until there was a deal with the Chinese.

Related: China sends protest note to Ukraine due to sanctions against Motor Sich investors

Deal with Chinese investors

Open source

Most of Motor Sich's earlier revenues came from contracts with the Russian Federation. In the current realities, Boguslaev, in view of the ban on trade with the Russian Federation, had, in his own words, to look for investors in order to "avoid the collapse of the enterprise."

And he found it. Chinese. In July 2017, Motor Sich and Skyrizon in Chongqing, China, were to establish a joint venture and build a plant for the production of engines and gas turbine units. But then, as Liga specifies, the agreements became much broader. And the Chinese company through a number of firms became a major shareholder of Motor Sich.

Related: Zelensky imposes sanctions on Chinese investors of Motor Sich

And got into a scandal. The SBU conducted a series of searches, the court, at the request of the special services, seized 56% of the shares. The case was opened under the articles "Sabotage" and "Preparation for a crime." It was about the possible withdrawal of technology and the weakening of defenses.

US trace

Let's just say that the States voiced their position quite bluntly. The US was against the sale of Motor Sich to the Chinese. And from time to time representatives of the Ukrainian authorities were reminded of this.

It is known that the adviser to President Donald Trump on national security issues John Bolton came to Kyiv, who tried to "convince the Ukrainian authorities of the danger of cooperation with China."

Later, US Secretary of State Mike Pompeo raised the issue of "China's harmful investments in Ukraine" in a conversation with President Volodymyr Zelensky. According to Washington, Skyrizon's attempts to acquire foreign military technology threaten US national security.

Related: Zelensky imposes sanctions on Chinese investors of Motor Sich

How did the Ukrainian authorities act?

Motor Sich
Radio Liberty

At this point, we will add little specifics on criminal cases. So, the Main Investigation Department of the Security Service is conducting a pre-trial investigation of Motor Sich in two directions.

The first direction – signs of crimes provided for in Articles 14, 15, 111, and 113 of the Criminal Code of Ukraine (regarding sabotage and subversive activities in favor of the Russian Federation).

The second direction is the signs of crimes provided for by Articles 209, 212, 233, and 364 of the Criminal Code of Ukraine. More specifically: violations of the law during the initial privatization and subsequent "illegal concentration of shares" are being investigated.

Related: Why Ukraine frittered away Motor Sich and $ 3.5 billion

Previously

At the end of January, Zelensky imposed sanctions against Chinese investors in Motor Sich for three years. Among the restrictions introduced are blocking assets, restricting trading operations, and preventing the withdrawal of capital from Ukraine.

In the meantime, National Security and Defense Council of Ukraine Secretary Oleksiy Danilov said that Motor Sich would be "returned to the Ukrainian people." In other words, the enterprise is being nationalized.

How is China responding?

Skyrizon called the Ukrainian sanctions unreasonable. And they stressed that "specific reasons are not indicated in the presidential decrees." The Chinese Foreign Ministry said that China opposes any government imposing sanctions on Chinese companies.

"We hope that the Ukrainian side, in accordance with legal norms, will ensure the protection of the legal rights of companies and investors in the PRC," the Chinese diplomatic department said.

Related: Ukraine's Motor Sich company loses USD 715 mln due to arrest of its shares in 2017-2020, - expert

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