Ukraine is recklessly attacking the interests of the new world leader, China.
While the National Security and Defense Council announced the nationalization of Motor Sich, and the Verkhovna Rada promised to draft a bill on nationalization, the SBU and ARMA carried out a "de facto nationalization," or, to be more precise, the expropriation of the Zaporizhzhia corporation.
A new, very sharp turn of events has further exacerbated an already critically difficult situation, in which Ukraine is very recklessly striking at the sensitive interests of the new world leader, China.
Why the controversial Motor Sich case is inevitably reaching a dead end that is dangerous for official Kyiv, and why the Ukrainian side is irreversibly escalating the situation – we investigate Vesti.ua.
Chronicles of Nationalization
Even after President Volodymyr Zelenskyy's January decision to impose sanctions on Chinese investors in Motor Sich and the subsequent chain of events in February, there was still a theoretical possibility of defusing tensions and even peacefully resolving the dispute surrounding the Zaporizhzhia-based engineering giant.
However, the March "three-move plan" executed by official Kyiv left virtually no chance of avoiding an extremely dangerous outcome in the Motor Sich case.
On March 4, David Arakhamia, head of the Servant of the People faction, somewhat unexpectedly announced that a bill on the nationalization of the engine-building corporation would soon be submitted to the Verkhovna Rada. He emphasized, however, that prior negotiations with China on the company's nationalization were necessary.
Another escalating attack followed on March 11, this time from the National Security and Defense Council. Security Council Secretary Oleksiy Danilov announced a decision according to which the Motor Sich enterprise would be returned in the near future "to the Ukrainian people and the Ukrainian state through legal, constitutional means."
This was followed by a reaction from official Beijing. "We demand that Ukraine take into account the legitimate rights of Chinese enterprises and investors... China insists that this issue be resolved in the right manner," Chinese Foreign Ministry spokesperson Zhao Lijian said rather harshly during a briefing on March 12.
On March 20, Kyiv's escalating confrontational approach reached a point of no return. At the request of the Security Service of Ukraine (SBU), Kyiv's Shevchenkivskyi District Court seized 100% of the Zaporizhzhia corporation's shares, as well as Motor Sich's assets, which were transferred to the National Agency for Detection, Search, and Management of Assets Obtained from Corruption and Other Crimes (ARMA).
Beijing Skyrizon Aviation Industry Investment President Du Tao, commenting on the seizure and confiscation of all Motor Sich assets and shares, spoke quite decisively.
"In international arbitration, we will provide sufficient evidence to prove that Ukraine violated the rights of Chinese investors, including instances of hostile behavior at the level of various ministries, law enforcement agencies, courts, and even the highest levels of government leadership," he said.
On March 24, President Zelenskyy signed a decree implementing the National Security and Defense Council's decision of March 11. The Security Council document contains a list of measures classified as "for official use only." The specific measures in question are not yet clear, but it is important to understand that the National Security and Defense Council's decision itself and its implementation by presidential decree do not constitute the "nationalization" of PJSC Motor Sich. There must be some legally binding procedure (and preferably one that complies with current legislation).
Thus, exactly 20 days later, Arakhamia's stated "preliminary negotiations" with the Chinese side, and Danilov's declared "legal, constitutional path" to nationalizing Motor Sich, escalated into a de facto "state takeover" of the corporation. The most distressing aspect is that its assets were transferred to the management of one of the most notorious and corrupt structures in Ukraine.
"Efficient Owners" from ARMA
The fact that the Zaporizhzhia corporation's assets were acquired by a new manager probably deserves special attention in the overall Motor Sich case.
The National Agency of Ukraine for Detection, Tracing, and Management of Assets Derived from Corruption and Other Crimes (ARMA) is primarily tasked with identifying and tracing corrupt assets abroad. Temporary management of seized assets is more of a secondary function. However, the current leadership of the state agency has focused most of its attention, effort, and interest on this very "management."
ARMA's management is also in no hurry to search for the illegally acquired foreign assets of domestic corrupt officials, showing a keen interest in the assets of law-abiding Ukrainian businesses. Vesti.ua has already written extensively and repeatedly about how a real group of corrupt officials and corporate raiders operates under the guise of an "anti-corruption agency."
We've detailed three specific cases of how ARMA is taking businesses away from Ukrainians.
The latest "informational benefit" for ARMA's leadership was a story about a suspect in a fraud scheme aimed at embezzling $400, which fell into the hands of the anti-corruption agency during the trial. However, after the trial concluded and the decision to return the property to its rightful owner, National Agency officials were in no hurry to relinquish their responsibility for "managing" the dollar asset.
Stories like these, particularly the "successful management" of the burned-down resort (which, as it turns out, didn't burn down by accident), are the business and professional "portfolio" of the leadership of the government agency that now single-handedly manages all the assets of Europe's largest aircraft engine manufacturer.
What awaits Motor Sich and the Zelensky team?
The transfer of Motor Sich assets to the control of ARMA creates two possible scenarios for further cause-and-effect chains.
Firstly, the inevitability of the virtual destruction of Motor Sich's production potential if the agency continues to manage it for any length of time. Most likely, the unified complex of the machine-building corporation will be divided into separate groups of assets, each individually worthless. These production islands will subsequently be driven to bankruptcy and sold off at a rock-bottom price.
Incidentally, a similar scenario awaits the engine-building company if its assets are transferred to the state-owned concern Ukroboronprom, which has already announced its readiness to take over the management of the Motor Sich property complex.
Secondly, the court's decision to seize the shares and transfer the property to ARMA's control reduces Ukraine's chances of winning international commercial arbitration to zero, if not to a negligible percentage.
After all, the transfer of Motor Sich's property complex to a state agency with special status allows Chinese investors to easily prove and justify the expropriation of their assets. The legality of the Chinese investors' acquisition of shares may not even be considered as a significant factor in the arbitration. It is outside its jurisdiction, and the illegality of the Chinese acquisition and concentration of a controlling stake in Motor Sich has not yet been established or proven within the Ukrainian judicial system.
With this initial position, it would be possible to immediately clarify with the plaintiffs whether they want the estimated compensation in dollars or yuan. However, it seems that official Kyiv isn't particularly concerned about such a distant prospect. In the current government's thinking, a demarche against Chinese investors and extremely harsh confrontational steps regarding the Motor Sich case are a "brilliant strategic" move that will create extremely favorable conditions for the upcoming phone call (as interpreted by the Ukrainian side) between President Volodymyr Zelenskyy and White House President Joe Biden.
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