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07KYIV88, UKRAINE: AIRCRAFT ENGINE BUILDER MOTOR SICH AND

January 12, 2007

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Reference ID Created Released Classification Origin
07KYIV88 2007-01-12 15:05 2011-08-30 01:44 CONFIDENTIAL Embassy Kyiv

VZCZCXYZ0007
PP RUEHWEB

DE RUEHKV #0088/01 0121505
ZNY CCCCC ZZH
P 121505Z JAN 07
FM AMEMBASSY KYIV
TO RUEHC/SECSTATE WASHDC PRIORITY 0893
INFO RUCPDOC/DEPT OF COMMERCE WASHDC

C O N F I D E N T I A L KYIV 000088 
 
SIPDIS 
 
SIPDIS 
 
DEPT ALSO FOR ISN, EUR/PRA, AND EUR/UMB 
 
E.O. 12958: DECL: 01/11/2017 
TAGS: PARM ETTC EAIR EIND PINR PREL RS UP
SUBJECT: UKRAINE: AIRCRAFT ENGINE BUILDER MOTOR SICH AND 
ITS EXPORT CONTROL PROGRAM 
 
REF: A. 04 KIEV 3875 
     B. 04 STATE 206898 
     C. 04 KIEV 3271 
 
Classified By: Political Counselor Kent Logsdon for reasons 
1.4(b,d) 
 
1. (C) Summary/comment:  Ukraine's aircraft engine and 
industrial gas turbine producer Motor Sich occupies a 
dominant position in both Ukraine and Russia's aviation 
industries.  The venerable company, which began producing 
aircraft engines in 1915, remains dependent on Russia for 41 
percent of its sales.  As a result, Motor Sich president 
Bohuslayev, a Party of Regions parliamentary deputy, is 
vocally opposed to NATO membership for Ukraine.  Company 
officials told us they meticulously observe export control 
requirements.  Although its business dealings include the 
supply of engines for an Iranian version of the An-140 
commercial aircraft produced in Esfahan, Motor Sich does 
behave generally like a responsible corporate citizen. 
(Reftels report on the Ukrainian MFA and Motor Sich's prior 
consultations with us under MTCR procedures regarding the 
sale of turbojet engines to China.)  End summary/comment. 
 
2. (U) We met December 19 with the management of 
Zaporyzhzhya-based Motor Sich Joint Stock Company during an 
unrelated NATO outreach trip to Zaporyzhzhya.  While Motor 
Sich has a fairly good website (www.motorsich.com), the 
publications that we received and the briefing provided 
additional detail regarding the company's operations.  In 
introducing ourselves, we explained that the United States 
enjoyed good cooperation with Ukraine on regulating exports 
of military and sensitive dual-use technology, but we hoped 
to hear directly from Motor Sich about industry's 
implementation of export control procedures and internal 
compliance programs, as well as to learn about the operations 
of Ukraine's leading aircraft engine maker.  Motor Sich 
Director Volodymyr Shyrkov provided the primary briefing, 
with amplifying comments from Export Control Department 
director Viktor Srebrodolsky.  Halfway through our meeting, 
observing Shyrkov's rather defensive manner, we stressed that 
we were visiting Motor Sich only because we were in the area 
and not because we had any specific concerns about the 
company. 
 
The Internal Compliance Program 
------------------------------- 
 
3. (U) Shyrkov said Motor Sich had organized a special unit 
in 2002 to audit export control procedures, but he emphasized 
Motor Sich had observed export control requirements since the 
1990s.  The export control department coordinated with other 
departments involved in the export of military and dual-use 
technologies from the initial sales discussions with 
potential customers to ensure compliance with Ukraine's 
export control regulations.  The export control department 
reviewed all sales contracts and also maintained a close 
liaison with the State Export Control Service of Ukraine 
(SECS).  Srebedolsky said the export control department had 
nine staff members, but Motor Sich's sales departments also 
had an individual designated to ensure compliance with export 
control requirements.  Srebedolsky said, as a retired 
Ukrainian Air Force lieutenant colonel, he was personally 
committed to ensuring that sensitive technologies did not 
fall into the wrong hands.  (Reftels report on the Ukrainian 
MFA and Motor Sich's consultations with us under MTCR 
procedures regarding the sale of turbojet engines to China.) 
 
4. (U) Srebedolsky added that SECS regularly provided 
training to Motor Sich's export control specialists and Motor 
Sich also participated in SECS-arranged conferences.  SECS 
had a high regard for Motor Sich's competence in the export 
control area, citing Motor Sich for its record.  Motor Sich 
also provided comments to SECS draft regulations and had 
recently received a 3-year operating license from SECS. 
 
5. (U) Srebedolsky said he was confident that Motor Sich had 
one of the best export control systems in Ukraine.  This was 
the result of management emphasis in this area beginning with 
Motor Sich President Vyacheslav Bohuslayev.  In fact, the 
U.S. Government had invited Bohuslayev to the U.S. to 
participate in an export control meeting.  (Note: In 1997, 
the U.S. Department of Commerce invited twenty Ukrainian 
industry and government representatives, including 
Bohuslayev, to attend an industry-government relations 
executive forum held April 28-May 2, 1997, in Boston and 
Washington.  The Cooperative Threat Reduction program funded 
the Ukrainians' travel.) 
 
A Mainstay of the Aviation Industry 
----------------------------------- 
 
 
6. (U) Ukraine's Motor Sich occupies the same leading 
position within the aircraft manufacturing industry of 
Ukraine, Russia, and other Soviet successor states that Pratt 
and Whitney, General Electric, an
d Rolls Royce have as 
aircraft engine purveyors to the rest of the world.  (Like 
other aicraft engine producers, Motor Sich also produces gas 
turbine engines for electric power generation and various 
applications in petroleum extraction.)  Motor Sich, Ukraine's 
only aircraft engine manufacturer, supplies the power plants 
for Antonov, Tupolev, Ilyushin, Beriev, Yakovlev, and other 
Russian aircraft.  (Note: While the Antonov design bureau is 
located in Kyiv, most parts of Antonov aircraft are 
manufactured in Russia.)  Motor Sich is also the only 
helicopter engine manufacturer in Ukraine or Russia. 
 
7. (U) Motor Sich's literature states that it produces or 
provides testing, maintenance, and overhaul services for 70 
types of engines used by aircraft in more than 100 countries. 
 The aircraft engines and industrial gas-turbine units are 
produced in eight factories in Ukraine.  In addition, the 
company produces an odd mix of about 150 different consumer 
goods ranging from power saws and padlocks to farm machinery, 
automotive tools and outboard motors at 11 factories in 
Zaporyzhzhya and towns in Khmelnitsky, Donetsk, and Sumy 
regions. 
 
8. (U) The company began in 1907, producing agricultural 
machinery and implements in tsarist Russia, but, in 1915, 
Saint Petersburg-based company Duphlon, Konstantinovich, and 
Company (Deka) bought out the plant and reconfigured it for 
aircraft engines.  The company, relocated temporarily to 
Omsk, continued to produce aircraft engines for Soviet forces 
during World War II.  The company began producing aircraft 
gas turbine engines in 1953 and now produces, among others, 
the engines for the An-124 Ruslan and the An-140.  In 1995, 
the company was converted into the public joint-stock company 
Motor Sich.  Jane's Aero-Engines estimated that Motor Sich's 
annual export revenue since 2000 has averaged about U.S. $200 
million. 
 
Close Ties to Russia 
-------------------- 
 
9. (SBU) During his powerpoint briefing, Shyrkov flashed a 
screen with the 130 or so countries where Motor Sich has 
business activity.  He shrugged when we noted that virtually 
all the aircraft models using Motor Sich engines were of 
Russian manufacture and inquired what Motor Sich was doing to 
reduce its dependency on Russian purchases.  (In a March 2006 
interview, Bohuslayev said 41 percent of Motor Sich's sales 
were to Russia.)  Shyrkov said that concluding sales to new 
customers was difficult, implying that there was 
over-capacity in the aircraft engine production business. 
Motor Sich had negotiated unsuccessfully to provide engines 
for a Czech trainer and, when we inquired, Shyrkov 
acknowledged that his company had also had discussions in 
2004 with the son of Sikorsky Aircraft's founder, but these 
had also been fruitless. 
 
10. (U) According to media reports, Motor Sich President 
Bohuslayev is aware of the company's vulnerability and is 
working to protect Motor Sich's access to the Russian market. 
 He has mooted various joint ventures with Russian companies 
for aircraft production, such as with Volga-Dnepr to start up 
production of the An-124 and a failed attempt to sell Motor 
Sich to Oboronprom or joining with a Oboronprom in a Russian 
engine-building consortium.  Shyrkov noted to us that Motor 
Sich would be willing to partner with other non-Russian 
aviation companies.  (Industry analysts assume that 
Bohuslayev owns a controlling share of Motor Sich.) 
 
Bohuslayev Bio Notes 
-------------------- 
 
11. (SBU) Motor Sich's business interests also play on the 
national stage, since Bohuslayev is a national parliament 
(Verkhovna Rada) deputy, elected as number 5 on the Party of 
Regions list of candidates.  Not unexpectedly, Bohuslayev has 
been protective of Russian interests and critical of FM 
Tarasyuk's push to join NATO.  In a March 2006 interview, he 
blamed the Russian decision to produce its own helicopter 
engines on Tarasyuk's policies.  He also criticized PM Viktor 
Yanukovych for his lack of support to the aviation industry 
and threatened to pull out of Party of Regions.  Bohuslayev, 
an ethnic Russian born October 28, 1938, in Uralsk, 
Kazakhstan, graduated from Zaporyzhzhya Engineering Institute 
in 1985.  He is close to ex-President Leonid Kuchma.  He has 
been part of Motor Sich's management since at least 1988. 
 
12. (U) Visit Embassy Kyiv's classified website: 
www.state.sgov.gov/p/eur/kiev. 
 
Taylor

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