- - Thursday, December 4, 2014

China is colluding with Russia to avoid paying $14 million to the Ukrainian government for a second Zubr-class amphibious landing hovercraft — or air-cushioned landing craft — that was delivered by Kiev to the Chinese People’s Liberation Army in early March. The delivery came days before the Russian annexation of Crimea, where the vessel was built. At issue is the question of who gets the $14 million.

Since the contract was signed between China and Ukraine before Russia’s intervention in Ukraine, Beijing is obligated to pay the remaining $14 million for the delivered vessel to the government in Kiev.

But Russia vehemently opposes any Chinese payment to Kiev and insists that China pay the fund to two shipbuilding companies located in Crimea, now controlled by Moscow after the region was annexed by Russia.

Apparently China has agreed with Russia and is ready to pay the money to the Crimean companies that built the vessel for China, main contractor Feodosia Shipbuilding Company, or Morye, and another Crimea-based company that provided the automation system for the vessel, which will receive a smaller amount.

China stands ready to repay [the] debt to Crimea’s Morye Shipyards for the second hovercraft,” the Russian-controlled Crimean Industry Minister Andrei Skrynnik was quoted as saying in the Kyiv Post on Nov. 24.

The Ukrainian government is furious with Russia and China for their collusion in negating the contractual obligation to pay the Kiev government the outstanding funds. The outrage in Kiev threatens to force China to draw a line between Russia and Ukraine, which is something China appears to have been reluctant to do.

The impasse has also doomed the second part of the 2009 Kiev-Beijing contract, reportedly worth $315 million for four Zubr landing vessels. The deal stipulates that the first two Zubr vessels would be built in Ukraine at the Feodosia Shipbuilding Company in Crimea. And the remaining two would be built inside China under the technical supervision of Ukrainian experts.

That second part of the agreement was made impossible by Russia’s annexation of Crimea that began in March. China and Russia have both agreed to scrap the plan to build the remaining two vessels inside China altogether. Instead, as a consolation, Russia wants China to order the construction of advanced surface warships for the PLA at shipyards in Russian-controlled Crimea, but at a premium price.

The Zubr landing craft, the world’s largest, features a 555-ton displacement, capable of carrying 500 troops or three main battle tanks, 10 armored vehicles or eight amphibious tanks.

When the first Zubr vessel was delivered in April 2013 by the Kiev government under then-President Viktor Yanukovych, China was ensnared in fierce naval clashes with some of its neighbors in the South China Sea, notably the Philippines and Vietnam. The Chinese military hailed the Zubr as an important addition to China’s naval prowess. “It will give us the capability for the fast delivery of troops and weapons to the shores of enemy territory, excellent for the [army’s] surprise amphibious assault and landing operations,” a spokesman for the Chinese Ministry of National Defense was quoted as saying, as reported by Inside China in June 2013.

Before Russia’s gambit in Ukraine, the Kiev government had been one of the world’s leading arms export countries, specializing in Russian-designed or Soviet surplus big-item weapons systems. For more than 20 years, China had been Ukraine’s largest arms sales customer, almost exclusively of Russian-design high-end weapons at considerably lower price tags than weapons directly exported from Russia. Some of China’s key weapons platforms and components, including its first aircraft carrier, an oceangoing ice breaker, crucial turbofan engines for the PLA’s J-10 fighter jets and Yun-series heavy bomber and transport aircraft, all of Russian design, were purchased from Ukraine.

Apparently, Russia’s annexation of Crimea, where most of the China-bound weapons of Russian design have been made in the past two decades, has ended a unique Chinese way of acquiring advanced Russian weapons systems through a backdoor.

Miles Yu’s column appears Fridays. He can be reached at mmilesyu@gmail.com and @Yu_miles

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