U.S. places Motor Sich shareholder on sanctions list

The Bureau of Industry and Security in the U.S. Department
of Commerce added Chinese company Skyrizon to its Military End-User sanctions
list, according to its Jan. 14 report. Skyrizon’s “push to acquire and
indigenize foreign military technologies pose a significant threat to U.S.
national security and foreign policy interests,” said the release, citing
Commerce Secretary Wilbur Ross. The list, introduced in late 2020, “informs
exporters, re-exporters, and transferors that a license will be required to
export, re-export, or transfer designated items to listed entities,” the
press release stated. Skyrizon is the first company on the list.

In other news, Ukrainian businessman Oleksandr
Yaroslavsky, the owner of DCH Group, reported on Jan. 18 that he has been
invited to appear on Jan. 19-22 for questioning at the State Security Service
of Ukraine (the SBU) as a witness in the Motor Sich case.

In this case, the SBU is investigating “state treason”
and “sabotage” related to the sale of Motor Sich shares to Chinese firms.
Instead, Yaroslavsky stated that “sabotage” was in the activities of state
agencies, which resulted in the arrest of Motor Sich shares and the dismissal
of almost 10,000 employees.

Recall, Skyrizon made several attempts in 2017-2019 to
legitimize its 50%-plus stake in Ukrainian aeronautics engine producer Motor
Sich (MISCH UK) that it acquired in 2016-2017. The Ukrainian government failed
to approve Skyrizon as a Motor Sich majority shareholder, which is the result
of pressure from the U.S. Namely, U.S. Secretary of State Mike Pompeo named in
2020 Skyrizon’s attempt to acquire Motor Sich as “malign” Chinese investment
into Ukraine. The latest attempts of Skyrizon to legalize its investment into
Motor Sich have been made in partnership with DCH Group.

Motor Sich produces engines for Russian helicopters,
Ukrainian planes and Russian & Chinese military training jets. The latter
engines are of special interest to Chinese firms.

Alexander Paraschiy: This U.S.
action is its latest pressure on the Ukrainian government to do its best to
avoid the legalization of Skyrizon and related Chinese companies as Motor Sich
owners. Definitely, this makes the recent attempt of Skyrizon and DCH to gain
control over Motor Sich an impossible task. This is clearly bad news for Motor
Sich, which will continue losing its market share and staff, and whose
operational performance is under threat due to an ongoing lack of clarity in
its governance.