U.S. President Joe Biden and his European allies are worried China is making inroads into Ukraine’s defense industry by buying up companies, an effort officials believe Beijing is using to establish a beachhead to extend its influence into Eastern Europe.
Since former U.S. President Donald Trump’s administration, U.S. officials have urged their Ukrainian counterparts to halt sales of defense companies to China, including Motor Sich, an aerospace engineering company that designs engines for helicopters and larger aircraft, and Trident Defense, a manufacturer of .50-caliber machine guns. The acquisition of Motor Sich is currently being challenged in Ukrainian courts.
“The Ukrainians have a world-class military and security apparatus,” said one former U.S. defense official, speaking on condition of anonymity. “It’s a ripe target for the Chinese to try and go in and garner control of.” China is also looking into purchasing a handful of lower-level Ukrainian defense logistics companies, U.S. officials said.
“It’s more malleable; they have more leverage in that area,” the former defense official said of Chinese efforts in Ukraine. “Establishing a beachhead there is important to them.”
Since the Obama administration, the Motor Sich purchase has been challenged on the U.S. side, one former official said, and the Biden administration has continued high-level warnings also sounded during the Trump years. But the issue is again coming into focus as top Ukrainian officials, including Ukrainian President Volodymyr Zelensky, used the NATO summit in Brussels this week to push for their inclusion into the 30-nation bloc, sending a tweet indicating the alliance’s leaders “confirmed” Ukraine would join.
Biden and NATO Secretary-General Jens Stoltenberg downplayed those remarks, saying there was an “open door” for Ukrainian membership but not until it completes defense sector reforms. And the Chinese purchases are likely to raise eyebrows within the alliance as it begins to take a harder tack on Beijing’s assertive foreign policy that presents “systemic challenges to the rules-based international order,” NATO leaders said in a joint communique this week.
Even as the alliance has locked its sights on the tectonic movements of great powers after two decades of war in the Middle East, members of the bloc have still courted Chinese and Russian weapons purchases, mostly notably Turkey’s $2.5 billion purchase of Moscow’s S-400 air defense system.
In particular, Motor Sich is seen as a developer of advanced engine capabilities that worry Western officials if they end up in the hands of the Chinese. “There’s nothing to say that the Chinese couldn’t convert these engines into fighter or bomber capability as well,” said Alexander Gray, chief of staff on the National Security Council until January.
A State Department spokesperson told Foreign Policy the United States is encouraging Ukraine to protect “sensitive technologies and strategically vital enterprises” like Motor Sich.
“PRC state-owned and controlled enterprises are not interested in Ukraine’s defense industry to create commercial opportunities or job growth in Ukraine,” the spokesperson said. “They use these acquisitions to gain control over strategic supply chains and access to foreign technology in support of their strategic and military-industrial objectives, which are contrary to U.S. national security interests and those of our allies and partners.”
The State Department spokesperson added the United States “welcomed” Ukrainian sanctions in January against Skyrizon, a Chinese company trying to consolidate shares to gain majority control over Motor Sich. The Biden administration has also been encouraging the Ukrainians to set up a mechanism to review foreign investments for national security risks. “A review mechanism would allow Ukraine to identify and resolve national security risks arising from foreign investment transactions, including those involving companies holding sensitive technology and know-how that would affect our collective national security,” the spokesperson said.
Chinese interest in the Ukrainian defense industry is also part of a delicate dance Beijing is playing in its relationship with Russia, experts said. Ukraine was at the heart of the Soviet Union’s defense industry during the Cold War, designing tanks, heavy rocket motors, and space technology. Today, Ukraine has become an end-around for China to get spare parts and upgrades for Soviet-era equipment without leaning on the Russians, since the relationship between those two powers has become more tense with China’s rise.
“There’s enough commonality to make it worthwhile for the Chinese to get their talons into the defense industry there and get around the Russians,” said Jim Townsend, former deputy assistant secretary of defense for European and NATO policy during the Obama administration.
But the marriage is also one of convenience for Ukraine and China: The Ukrainians need investment to keep their defense factories running, and that money isn’t coming from the West. Beyond getting a secondary market for Russian equipment, China is also buying up seasoned and relatively cheap Ukrainian engineering talent and expanding their influence further into Eastern Europe, U.S. and European officials said.
“It’s very easy in the West to [say to] the Ukrainians, ‘hey, don’t sell or don’t let anyone toxic into your markets,’” said Kaimo Kuusk, Estonia’s ambassador to Ukraine. “But at the same time, if the West don’t buy or don’t invest, what alternatives do the Ukrainians have actually? The factories need to produce, they need to sell things, they need to develop things. They need investment. There should also be some kind of carrot from the Western side to avoid unwanted or bad friends.”
It’s hard for the United States to step in. Ukrainian weapons mostly don’t fit with U.S. forces. But a little carrot buys a lot of bullets. “That’s where we have to be a little bit creative and play matchmaker,” Gray said.
Yet defense sector investments are just the tip of the iceberg as China aims to expand into Europe with its so-called Belt and Road Initiative that includes road, rail, and infrastructure projects. During the Trump administration, officials were briefed on a number of Chinese investments in Ukraine, Gray said, including highways in Kyiv, a trans-Ukrainian railroad that fed into the Black Sea region, and dams, raising concerns Kyiv could be forced into accepting predatory loans from Beijing. At the G-7 summit in Cornwall, England last week, Biden urged wealthy U.S. friends to invest in developing nations in a challenge to Chinese initiatives.
Still, there is give and take on such projects within the European Union and further afield. Although a Chinese company purchased the Greek port at Piraeus, one of the largest such facilities in Europe, Italy stood down from the Belt and Road Initiative after chiding from NATO allies. Another NATO ally, Croatia, rejected a Chinese investment in the city of Rijeka. Elsewhere in Eastern Europe, the Czech Republic has been “pretty prominent in sticking it to the Chinese,” the former defense official said, including by sending unofficial delegations to Taiwan.
And Ukraine could be another success story for U.S. policy. Former officials said Kyiv has mostly gotten the message that increasing U.S. Defense Department assistance is going to be a tougher sell if Ukraine is getting closer to China.
“It’s going to be a very hard case to make if at the same time you’re not being a team player with the U.S. on its number one security priority,” Gray said. “You can’t have it both ways.”
