As Ukraine geared up for parliamentary elections, the Ukrainian aerospace firm Motor Sich also had an eventful few weeks. The company has long sparked controversy with its links to China and Russia. Now, law enforcement says it also has ties to the Kremlin-backed militants that are occupying parts of Ukraine’s eastern Donbas region.
Meanwhile, the company’s owner was voted out of parliament — but Motor Sich will maintain its presence through other lawmakers.
New investigation
On July 19, the Security Service of Ukraine (SBU) opened a new investigation into Motor Sich, alleging that executives managing one of its factories in the war-torn Donbas had “financed terrorism” by making illicit payments to Russian-backed forces there.
“The plant also provided its commodities for free to the so-called Donetsk People’s Republic, which were later used to finance the insurgents,” alleged the SBU, referring to the unrecognized pseudo-state proclaimed by the militants.
Motor Sich has denied the accusation, but did not respond to the Kyiv Post’s request for further comment.
It is not the only SBU investigation into Motor Sich. The company has faced similar accusations since 2015, when Russian-backed militias who took over large parts of the Donbas and Kremlin-appointed authorities began trying to levy taxes on the territories. The Ukrainian government says these taxes are illegal.
About 35 million Russian rubles, or roughly $650,000, were paid in 2015 alone, according to the SBU. Some experts found it strange that Ukrainian Motor Sich had been able to continue operating its Donbas factory, despite the de facto Russian occupation.
It is possible that Motor Sich factories have, in fact, been shadily supplying the Russian armed forces.
On July 9, journalists in Ukraine published an investigation which appears to show that Motor Sich has, through proxy companies and a Bosnian middleman, been supplying parts to the Russian military and its Federal Security Service, or FSB, in spite of Russia’s ongoing war in Ukraine and a ban on such trade.
But the company is no stranger to such scandals.
Acquisition scandal
Motor Sich, based in the southeastern city of Zaporizhia, located some 600 kilometers from Kyiv, is one of the world’s most important manufacturers of engines and parts for helicopters and airplanes.
In April 2018, the SBU and the Ukrainian courts intervened in an attempt by Motor Sich’s owners to allegedly sell a controlling stake in the company to investors from Beijing with close ties to the Chinese armed forces. In recent years, economic troubles and a major downturn in trade with Russia have forced Motor Sich to seek new clients or a new owner.
But lawmakers and experts from the U.K., U.S., Ukraine and Japan all sounded the alarm, saying it was a strategic move by China that threatened NATO and raised serious security concerns. The SBU warned of an “enemy plot” and “preparation for sabotage.” One Japanese official who works closely with the Ukrainian government told the Kyiv Post that G7 representatives must urgently intervene to stop the deal.
On July 12 this year, seven days before the SBU announced their latest probe, Chinese media reported that Beijing Skyrizon Aviation, which is at least partially owned by Chinese government entities and trusts, had said they were awaiting the decision of the Ukrainian antimonopoly committee before they could complete the Motor Sich acquisition.
In February 2019, the Kyiv Post reported that the acquisition appeared likely to go ahead, despite the concerns of experts and lawmakers.
Behind the scenes, Chinese officials, Beijing Skyrizon Aviation executives and Beijing’s ambassador to Ukraine, Du Wei, held meetings in Kyiv with Deputy Prime Minister Stepan Kubiv and Deputy Minister of Economic Development and Trade Yuriy Brovchenko. Those meetings were intended to resolve what had become an impasse in the attempted Chinese takeover, according to Brovchenko.
On July 24, Ukraine’s antimonopoly committee (AMCU) confirmed to the Kyiv Post that the Motor Sich acquisition case was still being reviewed and that it would announce the outcome in the near future. An AMCU spokesperson did not elaborate further.
However, the AMCU’s ability to review the renewed takeover attempt appears to indicate that the SBU and courts have failed to prevent it.
Election punishment — or not
Vyacheslav Boguslaev, 80, is the president, chairman of the board and general director of the Motor Sich company. He is also one of Ukraine’s richest and most powerful men, with an estimated net worth of some $327 million.
Until July 21, Boguslaev was also a controversial pro-Russian, veteran lawmaker in the Ukrainian Verkhovna Rada who represented constituents in single-member district No. 77 in Zaporizhia. Twice, Boguslaev was elected as a member of ousted ex-President Viktor Yanukovych’s Party of Regions. Once he was elected as an independent.
In the last five years, however, he attended parliament just 45 times, missing 532 sessions. In this parliamentary election, voters kicked him out of the Rada by a convincing majority, instead electing a wedding photographer with no political background who stood for President Volodymyr Zelensky’s Servant of the People party.
Ejected from parliament and no longer a lawmaker, Boguslaev has lost the immunity from prosecution that he formerly enjoyed.
But Motor Sich will maintain its presence and keep its voice in the Rada with two little-known candidates elected to the parliament who work for the aerospace company. They also stood for Servant of the People, a party that injected 254 lawmakers into the Rada, many of whom are little-known individuals.
Gennady Kasay, a general director at Motor Sich in Zaporizhia, was elected in the city’s single-member district No. 74, while Artem Kunayev, the deputy head of helicopter marketing and sales at Motor Sich, was elected as candidate No. 96 on Servant of the People’s party list.
As journalists scramble to understand the individual lawmakers who will make up the country’s next parliament, most of whom are new faces to politics, serious questions hover over Motor Sich and its foreign helicopter and warplane deals.
Beijing in the background
Beijing Skyrizon Aviation, a partially state-owned Chinese enterprise that is tasked with boosting the country’s aerospace capabilities and has close ties to the People’s Liberation Army, or PLA, still looms above Ukrainian Motor Sich.
The AMCU could approve the acquisition of a majority stake in the company within days. Some Ukrainian lawmakers and the country’s Western allies are concerned. The deal could benefit both China and Russia.
On Feb. 19, Russia’s state-owned defense manufacturing conglomerate Rostec announced the conclusion of a deal with the Chinese, years in the making, to jointly produce next-generation military helicopters.
“We have prepared and will sign in the coming two months the contract of the century with China on the joint development, production and sales of a new generation heavy-lift helicopter. We have spent four years in intense talks on this project,” Rostec’s Viktor Kladov said at the time, according to Russian state media.
The Chinese acquisition of a stake in Motor Sich, and the vital technology it will acquire along with it, could be important to its joint project with Russia. Chinese aerospace analysts have admitted as much.
According to Rostec, the new Russian-Chinese helicopter will be powered by turboshaft engines that are based on one developed by the Ukrainian companies Motor Sich and Ivchenko-Progress. The Russians and Chinese will also develop new engines for their helicopter.
Previously, some Chinese aviation analysts heaped praise on Motor Sich hardware and suggested that China should prioritize the acquisition of Motor Sich tech for the Chinese military.
They also boasted, in Chinese-language media, about how the Motor Sich engines can be modified and reverse-engineered to better fit the PLA aircraft.
Ukrainian engines from Motor Sich, recently displayed at the China International Aviation and Aerospace Exhibition in Zhuhai, China, “can be directly applied to the L-15 advanced trainer (jet plane)… and (the other engines) can (be) applied to the helicopters and the KA-28/31 series helicopters that are currently heavily used by our military,” one Chinese analyst wrote, assessing the Ukrainian engines’ utility for the PLA.
The same analyst also writes that China has an opportunity to not only use the “outstanding” Ukrainian engines, but to “harness the technology” and improve them for usage in Chinese military aircraft from jet fighters to heavy transport carriers.
Some experts are alarmed by Russia and China’s growing military cooperation.
Most recently, on July 22, South Korea and Japan both said that Russian and Chinese aircraft had violated its airspace twice during a joint exercise by Beijing and Moscow, believed to be the first of its kind, according to experts.
South Korean warplanes fired some 400 warning shots and 20 flares in the direction of Russian aircraft. Japan said that it had scrambled warplanes in response to Russian and Chinese military aircraft flying near disputed islands in the Sea of Japan.
China and Russia have both denied any wrongdoing.
Kyiv Post staff writer Igor Kossov contributed to this story.
