UPDATE 1-Ukraine president approves sanctions against China's Skyrizon

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KYIV, Jan 29 (Reuters) - Ukrainian President Volodymyr Zelenskiy signed a decree on Friday imposing sanctions on Chinese aviation firm Skyrizon, which has sought to acquire control of the Ukrainian aerospace company Motor Sich, a statement said.

The United States and China have tussled over the fate of Motor Sich, posing a dilemma for Ukraine which relies on Washington as its biggest military aid donor but is seeking to forge deeper commercial ties with Beijing.

The United States has opposed Chinese investors acquiring Motor Sich and in the final days of the administration of President Donald Trump, Washington added Skyrizon to a Military End-User (MEU) List over its ability to develop military products including aircraft engines, restricting its access to U.S. exports.

Ukraine’s sanctions block Skyrizon’s assets, restrict their trading operations and prevent it from moving capital outside of Ukraine for three years.

Skyrizon and the Chinese Embassy in Kyiv could not immediately be reached for comment.

Skyrizon bought a majority stake in Motor Sich, but the shares were frozen in 2017 pending an investigation by Ukraine’s security service (SBU). The Chinese side brought a $3.5 billion arbitration case against Ukraine for blocking the shares.

A U.S. Embassy statement earlier this month said “Skyrizon’s predatory investments and technology acquisitions in Ukraine represent an unacceptable risk of diversion to military end use in the PRC (China).”

China’s Ministry of Commerce said the United States was using “all kinds of excuses” to suppress Chinese companies abroad and urged Washington to correct its alleged wrongdoing.

Motor Sich severed ties with Russia, its biggest client, after Russia’s annexation of Crimea in 2014, and the wrangle over its future has held up efforts to find new markets. (Writing Matthias Williams Editing by Mark Heinrich)