Ukraine is not afraid to offend China, supports Canada and freezes Madasic’s shares

Ukraine calls on China to immediately release two Canadians. At the same Time, the Ukrainian court has frozen all the shares and real estate of the company “Madasic”, which was acquired by Chinese investors. This incident has already provoked different reactions in Ukraine, as well as a great interest in Russia.

Uniting with Canada, China demands immediate release

After China began its closed-door trial of two Canadians last Friday (March 19), Ukrainian Foreign Minister Vladimir Kuleba said the same day that Ukraine is united with Canada and that Ukraine calls on China to release them immediately.

Kuleba tweeted that the trial of the two Canadians must be conducted with honesty and transparency, and that their right to a legal defense must likewise be guaranteed, as well as the consular services provided by Canada.

Ukraine has in the past been generally cautious in its international stance whenever it comes to Chinese affairs. At a time when China’s relations with Canada are currently chilly, it is not unusual for Ukraine to support Canada’s criticism of China.

Canada helped Ukraine, Kiev repays the favor today

Ukraine and Canada have always had close ties. Canada has a large Ukrainian immigrant community, and many of the local Ukrainian diaspora have actively supported the 2014 Ukraine Square Revolution.

After Russia’s annexation of Crimea and invasion of eastern Ukraine, Canada provided significant assistance and support to Ukraine. Freeland, a prominent Canadian political figure, was active in promoting Canada to help train Ukrainian military personnel during his tenure as foreign minister. Freeland, whose mother’s Family immigrated to Canada from Ukraine, has worked in Kiev and speaks Ukrainian.

China completely excluded, all assets and real estate of “Madasic” frozen

On the same day that Ukrainian Foreign Minister Vladimir Kuleba issued an article in support of Canada’s criticism of China, a court in the capital Kiev ordered the freezing of 100 percent of the shares of the company “Madasic” and all of its real estate, which was placed under the control of a Ukrainian government department. This department is responsible for investigating, arresting and managing assets acquired through corruption and crime. The state-owned Ukrainian Defense Industry Corporation, which is responsible for arms exports and the defense industry, has already expressed its intention to participate in the management of Madasic. The Ukrainian government has earlier decided to nationalize the company “Madasic”.

Ukrainian media reported that Chinese investors currently own about 75% of the controlling stake in “Madasic”. However, the management and operation of the company is still in the hands of the team of the former owner Boguslaev. Boguslaev has been leading the company since Soviet times. Chinese investors tried unsuccessfully to hold a shareholders’ meeting in January this year to seize the management and operation of the company. Ukrainian security agencies sent special forces military police to patrol and stand guard at the factory at the time, and local parliamentarians stepped in to organize a public demonstration at the site to stop the Chinese investor from taking control of the business.

Different reactions will affect the investment climate and the interests of retail investors

“The Madasic incident has not only become the focus of attention in Ukrainian society, but has also provoked a variety of reactions. Many people support the authorities’ nationalization actions. Poltnikov, an influential Ukrainian media personality and current affairs commentator, said that the authorities’ move had succeeded in preventing Ukraine’s cutting-edge technologies from falling into the hands of the Chinese.

However, some members of the Ukrainian economic and business community believe that the nationalization of Madasic shares, which are freely tradable, has tarnished Ukraine’s image as a country, especially in terms of the investment climate, and will discourage investors from investing in Ukraine.

“About 19% of the remaining shares of Madasic are held by minority shareholders and retail investors, including some of Madasic’s employees. The shares held by these employees were acquired in the privatization of the company. These minority shareholders had expected a big increase in the price of their shares after the takeover by Chinese investors, but now they have been turned into scrap paper.

Ukrainian activist Shemikhigiko, who represents the interests of minority shareholders, said that the interests of some 3,500 minority shareholders and retail investors were harmed when the court froze 100 percent of the shares and transferred them to government agencies, and that losses could reach $100-200 million.

Russia Concerned About Opportunity, Ukraine Tries to Balance Forces

Russia is also closely following the developments in this case, especially the possible future direction of Ukraine’s relations with China. Russian media are heavily reporting and analyzing the Chinese acquisition and the various possibilities of Chinese retaliation against Ukraine. Some analysts believe that the failure of China’s acquisition of Ukrainian engine companies will result in China’s continued dependence on Russian engine supplies and an increase in the number of orders from China that Russian companies will receive. Moscow likewise hopes that China will be more on Russia’s side in the Ukraine issue.

Ukrainian Foreign Minister Kuleba has said that how to deal with the “Madasic” incident and Ukraine’s relations with China depends on how Ukraine balances its forces and influences.

Ukraine’s strategic scholar Burkovsky said that China does not like Ukraine to fall too far to the West. If Ukraine can balance its forces and strengthen itself, it can be more confident in its dealings with China.

Borkovsky: “If Ukraine is politically stable at Home, has increased national strength and is an important balancing force between the EU and Russia, in the Black Sea and Central Europe, in this case it will be easier to find a coincidence of interests with Beijing.”

China is currently Ukraine’s top trading partner. Ukraine is dependent on the Chinese market for its exports of iron ore, metals and especially various agricultural products. Beijing’s response so far has remained limited to statements by the Chinese Foreign Ministry asking Ukraine to defend the rights of Chinese investors.

Meanwhile, the first shipment of new vaccines provided by China to Ukraine arrived in the capital Kiev on March 25.