Russia was Ukraine’s top arms trade partner — until it went to war against Ukraine in 2014.
Now any business with Russia by Ukrainian state-owned or private defense firms is naturally forbidden and all arms contracts with Moscow dropped.
China has filled the gap.
Beijing quickly became Ukraine’s largest weapons buyers, striking deals worth $90 million in 2016, according to the Sweden-based Stockholm International Peace Research Institute. Since 2012, Chinese businesses have imported Ukrainian weapons worth $1 billion.
With Russia taking itself out of the picture, China will be the most promising market for Ukrainian arms sales for decades to come, experts believe.
Soviet legacy
In 2016, Beijing became the world’s second biggest military spender, allocating $215 billion to its annual defense budget, according to SIPRI data.
“Contrary to Russia or Europe, China has never put any political obstacles in the way of defense cooperation with Ukraine,” says Anton Mikhnenko, an expert with the Center for Military Conversion and Disarmament Studies, a Kyiv-based defense think tank. “Historically, our countries have been far enough away from each other to avoid there being any artificial barriers.”
The world’s third biggest weapons exporter, China’s own weapons are typically modernized versions of Soviet systems, which means it relies on Soviet-derived components – mostly Russian and Ukrainian – for its own arms production.
This practice backfires on Russians when they do deals with China, Mikhnenko says. After buying a few dozen items, China launches its own copycat versions and sells them abroad, competing against Russians in other markets.
“Besides, when seeking deals with Russia, China often faces … increases in prices in already-negotiated (contracts), which the Chinese take very badly,” Mikhnenko says. “Beijing is always very pragmatic, so it simply approaches Ukraine as an alternative source of valuable technologies or complicated units for the needs of its army, navy and air force.”
Big deals
In recent years, Ukraine has delivered up to 50 6TD diesel engines produced by the Malyshev Factory in Kharkiv for Chinese-Pakistani MBT-2000/Al-Khalid tanks, and also at least 16 DT-59 gas turbines for China’s Luyang 2-class and Luyang 3-class destroyers. By the end of 2016, the Motor Sich company in Zaporizhzhya had supplied 20 AI-222 turbofans for use in Chinese L-15 fighter-trainer jets, the first batch in a $380 million deal for 250 engines.
Apart from buying components, China also buys complete Ukrainian weapons systems: In 2009 China signed a deal to buy two giant Zubr-class hovercraft landing ships, to be built in Crimea under Chinese supervision. The hovercrafts were shipped to China just before Russia invaded and annexed the Ukrainian territory. China also secured a license to produce two more of the craft in China under Ukrainian supervision.
In 2016, Ukraine’s state-owned defense industry concern Ukroboronprom completed a $45 million contract to provide China with three Il-78M aerial refueling tankers, which were repaired and modernized at Mykolaiv Aircraft Repair Plant.
Moreover, in late August, the Aerospace Industry Corporation of China signed a memorandum with the Kyiv-based Antonov aircraft company on participating in the production of more giant An-225 Mriya airlifters, the biggest aircraft in the world. According to the memorandum, AICC will also invest in creating a production line for parts for the airlifter in Ukraine.
Avoiding rivalry
Most of Ukraine’s big defense deals are now struck with the Chinese, Mikhnenko says.
However, in 2016, Ukraine was still third in defense sales to China, behind Russia ($643 million) and France ($137 million).
“So far, we still have technologies and products that are attractive to the Chinese,” Mikhnenko says. “But in the near future China could drive Ukraine out of its traditional markets, as it will up its production of similar Soviet-based weaponry, while also making it more advanced.”
Ukraine needs to avoid direct rivalry with the powerful Chinese defense industry and instead participate in joint production with Beijing as well as third parties, Mikhnenko says.
“For instance, the contract to supply diesel engines for Chinese-Pakistani MBT-2000/Al Khalid tanks was extended in 2016. Ukraine will continue meeting Chinese production needs, while in parallel developing its technologies so as to continue being an important participant in the project.”
In the case of the L-15 fighter-trainer jet, while continuing to supply turbofans (the most complicated and expensive part of the plane) Ukraine could also offer to mass produce the Chinese plane more cheaply using its own production capacities, Mikhnenko says.
“China always tries to domesticate its weapons production. So if we don’t want to lose the Chinese market, Ukraine must always press for win-win propositions in the arms trade. It’s pretty hard to get the Chinese to make concessions, but if they do, they always stick to them.”
