The AI-322F Turbofan is designed to power modern supersonic trainers and light combat aircraft

There are not many companies in the world that can build an aviation engine from scratch. India has none, and that has seriously compromised our strategic autonomy

by Bibekananda Modak

The JSC Motor Sich Company of Zaporizhia, Ukraine, is doing so for over last half a century and its controlling stocks are now up for sale. Built in the Soviet era, this public joint stock company builds engines for both civil and military aeroplanes, helicopters, cruise missiles as well as industrial gas turbine installations.. It produces turbofan, turboprop and rotary-wing turbo-shaft engines that power aircraft in Russian service, such as Mi- and Ka-series military helicopters, and also more famously, the giant engines for the largest transport aircraft the An-225 Mriya.

It was having a roaring business and the Russian market was the destination for much of Motor Sich’s production. After Russia annexed Crimea and invaded Donbas in 2014, Ukraine banned exports of military equipment to Russia in 2017. Having lost its major market, the company’s sales went southwards.

The helps offered from the U.S. jet-engine makers to the ailing company, including Pratt & Whitney and Sikorsky, never materialised. The reason was that the ‘Soviet DNA’ of the company was technically hard to integrate with an U.S. company.

Also, the owner Vyacheslav Boguslayev, is not optimistic about an U.S. joint venture. He still believes that the company's future is tied to Russia, its original market, and not the United States. Despite the official ban, (according to the ‘’ investigative journalism website) Russia still remains one of the key destinations for Motor Sich products, including some used for the military purposes of the Russian Federal Security Service. Boguslayev, an erstwhile member of parliament from the pro-Russian Party of Regions, with personal close ties to ex-presidents Leonid Kuchma and Viktor Yanukovych, uses countries like Belarus, Serbia and Bosnia and Herzegovina as intermediaries to supply the plant’s production to Russia.

But an official ban matters. The company’s production has nearly halved: the profits fell from $1.1 billion in 2013 to $450 million in 2018, according to the company’s financial reports.

Boguslayev’s manna arrived in the form of a group of Chinese companies, including Beijing Skyrizon Aviation, controlled by businessman Wang Jing, having close links to the Chinese govt. From Boguslayev’s viewpoint, his strategy was to regain the Russian market via China, as the two great powers get more entwined commercially and strategically, and in the process, consolidate the Chinese market and garner some of the Chinese trade surpluses gained worldwide as investments into his ailing company. At present Motor Sich generates as much as 40 percent of its revenue from China.

The company’s ties with China began in 2016, when Boguslayev carried out a number of transactions to sell the company’s controlling stake — including his own 15-percent share and shares controlled by several offshore companies. Beijing Skyrizon Aviation had agreed to invest $250 million in the Ukrainian plants, and to set up an assembly and servicing plant in Chongqing in southwest China. The Chinese companies would receive a controlling stake, while Ukroboronprom would receive at least a 25 percent blocking stake, according to the negotiators. The results shocked defence experts worldwide: a 56 percent stake was sold to investors associated with Skyrizon Aviation.

It proved to be a bridge too far. In 2017, the Ukrainian authorities — particularly the Security Service of Ukraine (SBU) — froze the deal and launched an investigation into the sale as a potential act of sabotage. In September 2017 a Ukrainian court froze the holding for national security reasons. A raid of its Zaporizhzhya headquarters happened in April 2018 and led to the seizure of its shares. The nation's stock exchange announced the same day that it would halt all trading in the company's shares. Motor Sich was valued at nearly $500 million when it ceased trading on the stock market.

There is domestic politics. The critics say that the SBU raids may have been an attempt by the former Ukrainian President Petro Poroshenko to force Boguslayev, "to surrender his control to well-connected individuals." Despite the importance of the company to Ukraine's defence industry, no laws prevent him from selling his stake. At present Ukraine's Antimonopoly committee is reviewing the proposed Motor Sich sale. President Zelenskiy's new government wants to make sure that the deal is Ukraine’s national interest.

And there are international pressures. Since 2014, the U.S. has given Ukraine more than $3 billion in aid, including $1.5 billion of military goods over the past five years to support the Ukrainian Armed Forces in their fight against Russia and has promised to increase the annual allotment. It is concerned that the Chinese will use the technology for upgrading their cruise missiles. The issue has become so important to the Washington that the U.S. national-security adviser John Bolton said he will raise his "concerns" about the sale during his visit to Ukraine."This is an issue that I think is significant for Ukraine, but (also) significant for the U.S., for Europe, for Japan, for Australia, Canada, other countries," Bolton told RFE/RL in Kyiv on August 27. The United States is advising Ukraine on the reform of its military, a necessary step before it would be eligible to join NATO, which Kyiv has said is its goal. "If this deal (with the Chinese) happens, we will never be in NATO," said Denys Hurak, a former Ukroboronprom executive.

As the things stand in limbo, should India also throw hat into the ring? The much touted ‘INFRA’ project with France is still at a discussion stage. Spending $250 million, half of what Safran quoted for upgrading & testing the Kaberi engine with their M88 engine core (the royalties are supposed to be extra for subsequent licensed usage), India gets a will get a controlling stake in an established jet engine maker firm. The commercial relationship of India with Russia is on an upward trend with increasing Indian investments in Russia’s far-east. Surely Russia will have no problem buying engines from an Indian-Ukrainian jet engine-maker especially when India continues to buy Russian air-frames. Having better intellectual property laws & arbitration facilities than China, India is more likely to assuage the Ukrainian anxiety that “our technology will be transferred to China practically for nothing”. And the U.S. is less likely to veto an Indian buy-out.

I hope the Indian defence policy makers give the idea some serious consideration.

This piece was written exclusively for IDN by Bibekananda Modak