Ukraine introduces sanctions against Chinese investor in Motor Sich

Ukraine’s president issued a decree on Jan. 28 to
introduce personal sanctions against Skyrizon Aircraft Holdings Limited and its
three related companies, as well as against Chinese citizen Jing Wang, the
president’s website reported on Jan. 29. The sanction actions include the
freezing of assets (a ban on the use and disposal of property), a ban on any
operations with securities, limits on trade operations, as well as a ban on
official visits and cancelling permissions to enter Ukraine. Skyrizon is the
owner of about 80% of the shares in Ukraine’s leading producer of aviation
engines, Motor Sich (MISCH UK). Earlier in January, the U.S. Department of
Commerce introduced its own sanctions against Skyrizon.

Following the president’s decree, which introduced a
decision of Ukraine’s Security and Defense Council, Ukraine’s Security Service
blocked Motor Sich’s shareholder meeting scheduled for Jan. 31. At the meeting,
the shareholders were planning to initiate the replacement of the company’s
supervisory board which is still controlled by “red director” Viacheslav
Boguslayev (who allegedly sold his stake in the company to Chinese investors in
2016-2017).

In its comment on Jan. 30, Skyrizon called the
development “a barbaric robbery and a serious violation of the legitimate
rights and interests of Chinese companies” and a “serious violation” of the
agreement on the mutual encouragement and protection of investments between
Ukraine and China. The company promised to use all available means to protect
its legal rights and interests.

Alexander Paraschiy: The
Ukrainian sanctions only add uncertainty about the future of Motor Sich, which
is one of the most economically successful and technologically advanced
Ukrainian aerospace & defense companies. Namely, they increase the risk
that Motor Sich will continue losing its markets, orders and workforce, thus
lowering any chance for its turnaround. While the interests of the U.S. in
sanctions against Motor Sich’s shareholders are clear – the nation will benefit
from the failure of the aviation giant – the reasoning for the Ukrainian
sanctions looks unclear. By having satisfied the ambitions of the U.S.
government to kill the company, the Ukrainian president is working against
Ukraine’s industry and its plan to create jobs in Ukraine. Moreover, the
Ukrainian sanctions against Skyrizon are much stricter than those introduced by
the U.S. government.

In the over three years since the conflict between
Ukraine and Chinese investors into Motor Sich appeared, the government has
offered no solution to resolve it. If no plan is offered in the coming months,
the negative processes in the company could become irreversible.