Ukraine’s relations with China have long been stagnant and no one actually brings it up, not least because of the scandals that have arisen in the past and the general lack of trust.
In January 2021, individuals associated with the Chinese aviation company Skyrizon tried to assemble the shareholders of Ukraine’s Motor Sich Corporation , one of the world’s largest aero-engine manufacturers, in order to acquire a majority of shares, thus bypassing specific regulations issued by the Ukrainian Antimonopoly Committee, which prohibit such actions.
In fact, the purchase of a controlling stake would lead to the transfer of a strategic Ukrainian defense corporation to a Chinese company, which would clearly have a negative impact on Ukraine’s relations with the United States and allow China to significantly increase the range and combat capability of its fighter aircraft.
As a result, the SBU disrupted a meeting of the shareholders’ council, and the National Security and Defence Council decided to nationalize Motor Sich. At that time, it seemed obvious that Kyiv had made a firm choice in favor of the United States.
However, the summer of 2021 has seen a series of dramatic volte-faces as the Ukrainian government turns more and more toward China.
According to The Associated Press, Ukraine withdrew its signature from a memorandum supporting the rights of the Uyghur people in China in exchange for Beijing’s loyalty and supply of vaccines. A little later, one of the leaders of the Servant of the People, Davyd Arakhamiya praised the ruling Communist Party of China, while President Volodymyr Zelenskyy spoke with Chinese President Xi Jinping about establishing a visa-free regime for Chinese citizens.
It is no secret that a Ukraine-China intergovernmental agreement was signed by the Minister of Infrastructure of Ukraine Oleksandr Kubrakov and the Minister of Commerce of China on June 30. The agreement essentially allows Chinese companies to access Ukraine’s strategic infrastructure hubs, seaports, and airports, logistics hubs, etc.
Given China’s aggressive strategies in Africa, Asia, and many European countries (in particular, very significant events are taking place in Montenegro), we can be sure that China is pursuing a targeted policy of capturing logistics hubs in Ukraine .
Today, Zelenskyy’s government is intent on implementing major infrastructure projects throughout the country and proudly highlights a showcase program called Big Construction , which is aimed at developing Ukraine’s road and transport infrastructure. Meanwhile, lending on security (usually logistics hubs) has become one of China’s most high-profile means of financing infrastructure projects in other countries. In practice, China does not impose detailed criteria for granting loans, which usually require mandatory repayment.
On the contrary, China strives to instigate a non-repayment scenario, after which the Chinese take control of ports, bridges, and other facilities. This is called “debt-trap diplomacy.”
In the run-up to President Zelenskyy’s visit to the White House, Kyiv’s rapprochement with Beijing comes at a very significant moment. It is clear that this rapprochement with China is another aspect that Kyiv can use as a bargaining chip with the West. However, the very fact that this issue is on the table at this moment way significantly undermines Ukraine’s aspirations to boost Euro-Atlantic integration, which Ukrainian high-ranking officials have been so avidly discussing in recent months.
It is also important to explore this issue in terms of the domestic political environment. Despite loudly trumpeted de-oligarchization, the government’s position is highly dependent on groups of influence, and Ukrainian oligarchs are becoming increasingly consolidated opponents of European integration.
In practice, in order to obtain an IMF loan, Ukraine must introduce measures that significantly narrow opportunities for the oligarchic class, which builds its profits in a non-competitive environment… and these profits are, in turn, the result of corruption in the public sector. That is why money from China, unfortunately, can become a welcome “piggy bank” that Ukrainian oligarchs will use by lobbying it to the Zelenskyy government as an alternative to cooperation with the IMF.
Indeed, when China lends money, unlike the IMF, it does not impose obligations that can significantly impact and hurt Ukrainian oligarchic groups.
In addition, there have been a number of negative alarm signals indicating problematic dynamics in Ukraine’s relationship with the IMF:
- According to the head of the National Bank of Ukraine Kyryl Shevchenko, Ukraine was supposed to receive a tranche by the end of 2020, but no further talks took place;
- Several employees of a number of NBU departments resigned en masse in the summer of 2021, protesting against the NBU’s management;
- Employees engaged in drawing up transparent refinancing rules in the banking sector have been massively laid off.
Given that maintaining corporate governance standards and clearing the banking sector of banking institutions that have engaged in tax scams at the expense of taxpayers through refinancing schemes constitute the key conditions for cooperation with the IMF and the continuation of reforms, these signals are extremely alarming.
Therefore, Kyiv’s potential refusal to cooperate with the IMF in favor of Chinese loans should be seen as a real threat.
Although we cannot actually say that Ukrainian authorities have launched a full-fledged course to build a kind of “sovereign democracy,” the potential rejection of European integration projects, or their important components — the Association Agreement with the EU, cooperation with the IMF, and judicial reform — can significantly strengthen political groups working to disrupt relations between Ukraine and the West.
Consequently, pro-Russian forces may suddenly reach a consensus with Ukrainian oligarchs to halt Ukraine’s Euro-Atlantic and European integration in favor of projects financed by Chinese money, which does not require any reforms or other specific terms and conditions.
In the end, only transparent governance, the will to implement real reforms, and a fully competent Ukrainian government can dispel any illusions associated with a Chinese scenario.
Editor’s NoteChina’s Belt and Road Initiative (BRI)
Chinese map illustrating the European sector of the BRI. Note that the Chinese have not mapped occupied Crimea as part of Ukraine! Photo: open source
China’s strategic vision is reflected in the Belt and Road Initiative (BRI) announced in 2013 by Chinese President Xi Jinping. BRI is often referred to as “the Silk Road” and involves some 70 countries. The initiative was incorporated into the Chinese Constitution in 2017. The Chinese government calls the initiative “a bid to enhance regional connectivity and embrace a brighter future”. The completed project is targeted for 2049, which will be the centennial anniversary of the founding of the People’s Republic of China.
There is no doubt that China is particularly interested in Ukraine. China’s interest is driven by several key factors – Ukraine’s geographic location and its potential to become a major transit hub within the BRI. Moreover, China clearly recognizes the prospects of Ukraine’s proximity to Europe, strong EU-Ukraine trade relations, and Ukraine’s great investment potential. Finally, Ukraine’s agricultural sector is becoming more and more attractive to Chinese investors.
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- Ukraine’s China policy: A (not so) delicate balance
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