WSJ: Security contractor Erik Prince is in talks to acquire Ukraine's Motor Sich

13:20, 06 November 2019
Economy
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Photo from UNIAN

The Trump administration has approached Mr. Prince and at least one other potential buyer from the private sector about Motor Sich, a U.S. official said. In recent weeks, Mr. Prince has discussed the company with Ukrainian officials and visited the company's main plant, according to people briefed on the matter, according to The Wall Street Journal.

Motor Sich is a leading maker of helicopter and airplane engines and the U.S. wants to scuttle its pending sale to a group of Chinese companies to keep Beijing from acquiring vital defense technology.

As a result, the company has become a point of contention in the global rivalry between the U.S. and China. Ukraine, whose government is a focus of the U.S. House's impeachment inquiry of Mr. Trump, is also at the center of this tussle between Washington and Beijing over Motor Sich.

In late September, the chargé d'affaires of the U.S. Embassy in Kyiv, Bill Taylor, and Donald Winter, the Pentagon's senior defense-industry adviser on Ukraine, visited the company in the eastern Ukrainian city of Zaporizhia.

Read alsoChinese envoy tells U.S. not to meddle in Ukraine's affairs – media

Mr. Prince, a former Navy SEAL and billionaire founder of the defense contractor formerly known as Blackwater, is the executive director and deputy chairman of Frontier Services Group, a Hong Kong- and Beijing-based private security contractor. He has other business interests outside China and has traveled a number of times to Ukraine, visiting at least nine times since the start of 2014, the start of the country's war with Russia, according to Ukrainian immigration records.

A U.S. government official sought out Mr. Prince in Washington earlier this year. Mr. Prince expressed interest in Motor Sich, as long as the company remained a Ukrainian entity and he could receive its client list, the U.S. official said.

Mr. Prince declined to comment. A spokesman for Frontier Services Group and Mr. Prince confirmed that he is "looking to invest in" Ukraine.

Motor Sich didn't immediately respond to requests for comment. A Ukrainian government official declined to comment, citing national-security concerns.

During his most recent Ukraine trip, Oct. 24-27, Mr. Prince visited the Motor Sich factory, people briefed on the matter said. According to a company official, he was "impressed by the high level of technology."

One of the people briefed on the visit said Mr. Prince, if he agrees, "will front the deal."

Read alsoU.S. aims to block Chinese acquisition of Ukraine's Motor Sich aerospace giant – media

The U.S. has been searching for a buyer and other support for Motor Sich, which is privately held and publicly traded. The Trump administration has also discussed a Motor Sich purchase with Max Polyakov, whose Austin, Texas-based Firefly Aerospace manufactures and operates space-launch vehicles, according to a U.S. official. "It's premature to talk about buying Motor Sich shares now," Mr. Polyakov said.

The company, the successor to a linchpin in the Soviet Union's defense industry, has for years supplied engines for the bulk of the Russian military's helicopter fleet. After war broke out between Russia and Ukraine in 2014, Kyiv outlawed military exports to its neighbor, which crippled Motor Sich's business.

On Oct. 3, officials from the Departments of Commerce, Defense, and State and others met with defense contractors at the National Defense Industrial Association, a nonprofit group in Arlington, Va., to discuss defense sector opportunities in Ukraine, including Motor Sich.

Speaking to a collection of representatives from major U.S. aerospace companies, Army Lt. Col. Alexander Vindman, the Ukraine specialist on the National Security Council, stressed the importance of preventing the Chinese from acquiring Motor Sich, according to a person who attended the discussion.

Several representatives told Col. Vindman that the government hasn't provided practical incentives to consider a Motor Sich investment, the person said. "The industry is looking at opportunities in Ukraine with caution, understanding that those opportunities come with risks that need to be understood and mitigated," said Wesley Hallman, the senior vice president of strategy and policy for the National Defense Industrial Association.

A National Security Council spokesman declined to comment on the meeting.

On a visit to Kyiv in August, John Bolton – then Mr. Trump's national security adviser – attempted to persuade Ukrainian President Volodomyr Zelensky to squelch Motor Sich's purchase by a group of companies led by Beijing Skyrizon Aviation, which is controlled by Chinese businessman Wang Jing.

China has struggled to build a state-of-the-art engine maker for military aircraft and has designated aerospace technology a government priority. A deal, if clinched by China, could also give Russia renewed access to Motor Sich engines. In July, China said it planned to expand military cooperation with Russia to thwart what it called a growing threat from the U.S.

Ukraine's Antimonopoly Committee has yet to render a ruling on the sale. The Chinese consortium has effectively purchased Motor Sich, having transferred payment and assumed control of the offshore companies that in total hold a majority stake in the manufacturer, according to Ukrainian government officials.

A Skyrizon representative declined to comment. Asked previously about the U.S. effort, Skyrizon's Mr. Wang noted unspecified uncertainties about the purchase and said he hoped it could go ahead.

Mr. Prince is the brother of Trump administration Education Secretary Betsy DeVos. He has worked with Chinese-backed entities; Frontier Services Group provides logistical and security support to Chinese businesses in Africa and its largest shareholder is CITIC Group Corp., a Chinese state-controlled investment fund.

He also has ties to Russia, In April, the U.S. House Intelligence Committee referred Mr. Prince for criminal prosecution to the Justice Department over allegations that he misled Congress in testimony describing a January 2017 meeting in the Seychelles with the chief executive of Russia's sovereign-wealth fund. The referral is pending.

"Any business activities that Erik Prince may be exploring in Ukraine are entirely independent of any government North, South, East or West," Mr. Prince's spokesman wrote in a text message.

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