July 22, 2011 / 6:58 PM / in 7 years

As UK sells old aircraft carriers, China buyers circle

LONDON (Reuters) - As it sells off its flagship aircraft carriers over a government website, Britain is finding enthusiastic interest from an unexpected group — Chinese businessmen potentially keen enough to outbid any other rivals.

A British Ministry of Defence handout photograph shows an aerial view of the flagship of Britain's Royal Navy HMS Ark Royal approaching Portsmouth Harbour on the coast of southern England, after operations in the Gulf conflict, May 17, 2003. REUTERS/Gary Davies/Handout/Files

But some Western strategists suspect the real agenda might be more to do with Beijing’s growing naval ambitions, that they might be stripped for construction secrets or simply pressed into the service of the People’s Liberation Army Navy.

The Royal Navy decommissioned HMS Invincible and her sistership Ark Royal as part of a wider round of austerity measures, listing them for disposal alongside unused printer cartridges, old office furniture and outdated uniforms. Both ships attracted immediate interest from buyers wanting to sail them to China to be used as floating commercial venues.

Whilst some foreign warships purchased by Chinese businesses have genuinely been used as leisure centers and night clubs, others are believed to have entered military hands. Such worries may have already helped scotch one potential UK carrier purchase and could stymie another.

“It is very difficult to gauge what is going on here,” said James Hardy, Asia Pacific editor of Jane’s Defense Weekly. “The links between Chinese businessmen and the Communist Party are always somewhat ambiguous.

“The Chinese have a reputation for playing a long game, as well as for reverse engineering ... It is (also) possible that they could (aim to) refit Ark Royal as a helicopter carrier. Such a ship would certainly be a useful vessel in terms of power projection in the South China Sea and possibly against Taiwan.”

China’s Defense Ministry declined to comment, while the buyers have been keen to stress their independence from government. But experts say China has prior form.

Its first aircraft carrier, due to start sea trials in the coming weeks, started life as the Varyag, an unfinished Soviet warship lying in Ukraine. Chinese buyers bought her in the late 1990s, ostensibly to be used as a casino in Macau.

In reality, she spent years being refitted in naval dockyards and some suspect a similar fate could be in line for any purchased British ships.

Not only might a sale breach a de facto European arms embargo on China, it might also raise eyebrows in Washington DC and irritate other Asian powers already worried by Beijing’s naval growth.

JUST A PLOY?

“The casino/entertainment center ploy is something offered by the Chinese since ... the 1980s,” said Bud Cole, a former U.S. naval officer now lecturing at the National War College in Washington DC, pointing to the purchase of former Australian aircraft carrier HMAS Melbourne, several Russian vessels and the Varyag.

“All were surveyed by Chinese ship builders and designers as fodder for an eventual Chinese-designed carrier ... I would expect the same for the ex-Brit carriers. I personally don’t think they should sell.”

But not everyone thinks it really matters.

Experts say it could still be years, perhaps well over a decade, until China overcomes early difficulties including engine problems to reliably operate the Varyag. Naval specialists are seen keen to learn whatever lessons they can, but are believed to be already heavily committed to the Soviet-style design.

“I can’t see them switching horses in midstream and moving to an Ark Royal design,” said Nigel Inkster, a Chinese-speaking former deputy chief of Britain’s Secret Intelligence Service (MI6), now head of political risk and transnational threats at London’s International Institute for Strategic Studies. “So it probably isn’t a major strategic error to sell it to them.”

But even if the Chinese buyers were being honest in their ultimate intentions of the ships, most intelligence and security experts said they would expect the ships to be given a thorough going over first by China’s military.

“There is some merit in acquiring Ark Royal, a successful design, if you want to build your own carriers and only have a badly designed and frankly clapped out vessel like the Varyag to go on,” said a London-based naval analyst, requesting anonymity because he was not authorized to talk to the media.

“There are limits to its value: all the sensitive kit such as sonar, radar and communications will be taken off. What you would do is get an insight into naval construction techniques.”

OFFERING GOOD MONEY

But with China, and particularly its rich new elite, growing in self-confidence, some analysts suspect the primary appeal for business buyers is simply the kudos of owning a former Western warship and perhaps to curry official favor.

British-based Chinese businessman Lam kin-Bong told the South China Morning Post in January he was bidding 5 million pounds ($8.1 million) for Invincible to use the ship as an international school in a marina in Guangdong.

Britain’s Ministry of Defense (MoD) refused to comment on individual bids, but naval experts say that figure was likely considerably higher than offers based on its scrap value. But Britain chose to sell the ship to breakers in NATO member Turkey instead, with experts and insiders saying potential military usage likely put ministers off the China option.

Lam could not be reached for comment, with staff at the Birmingham-based chain of restaurants he owns saying he and his family were traveling and impossible to contact. But his failure does not seem to have deterred others.

Earlier this month, Hong Kong-based investment firm Eagle Vantage Asset Management told Reuters it has put in an offer to buy Ark Royal to turn it into a floating showground.

Eagle Vantage, owned by tycoon Huang Guangyu who was jailed for 14 years in China on bribery and insider dealing charges, would not discuss what price it had offered. A spokesman said the company was wholly independent of China’s government and that Guangyu himself was not directly involved in the deal.

An MoD spokesman said money alone might not be not enough. The offer period for Ark Royal had now closed, he said, and a decision would likely be reached in September.

Assorted other schemes for the ship’s use have been floated in the British media, including mooring her in London Docklands for use as a commercial helipad for the 2012 Olympics and after.

“Obviously, the amount of money involved is an important issue,” said the MoD spokesman, asking to remain unnamed in accordance with government policy. “But we also look at the business plan for what will be done with the ship once it is sold.”

($1 = 0.61 pounds)

Additional reporting by Ben Blanchard in Beijing and Donny Kwok in Hong Kong; Editing by Jon Hemming

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