ZTE Documents Indict Partner Company Huawei

The U.S. Depart­ment of Com­merce is expect­ed to lift — tem­porar­i­ly — export restric­tions imposed on China‘s state-con­trolled ZTE Cor­po­ra­tion.  This devel­op­ment fol­lows the recent man­dat­ed release of clas­si­fied com­pa­ny doc­u­ments detail­ing how U.S. export laws were cir­cum­vent­ed to sell con­trolled items to sanc­tioned coun­tries.  Clear­ly, this action was a func­tion of vig­or­ous Chi­nese gov­ern­ment protest and pos­si­bly threats of retal­i­a­tion.

The doc­u­ments indi­cate that these vio­la­tions are not exclu­sive to ZTE, but are com­mit­ted by sev­er­al Chi­nese com­pa­nies with links to the Chi­nese gov­ern­ment that are kept delib­er­ate­ly ambigu­ous.  Specif­i­cal­ly, the doc­u­ment cites a com­pa­ny it calls ‘‘‘F7‘ that has made use of a sim­i­lar scheme.  The New York Times has strong­ly indi­cat­ed that F7 is Chi­nese telecom­mu­ni­ca­tions giant, Huawei Tech­nolo­gies.

Descrip­tions of F7 activ­i­ties inex­orably leads to the con­clu­sion that F7 is Huawei:

  • F7 had a failed bid to buy the Amer­i­can com­pa­ny 3Leaf;  Huawei with­drew its bid for the same com­pa­ny in 2011 fol­low­ing oppo­si­tion from U.S. offi­cials
  • F7 and the dig­i­tal secu­ri­ty com­pa­ny, Syman­tec, had a joint ven­ture;  In 2012, Syman­tec dis­solved a joint ven­ture that it held with Huawei

Huawei has been using ‘‘‘cut-off com­pa­nies‘ as devices to con­tin­ue sell­ing U.S. prod­ucts in embar­goed coun­tries such as Iran, Syr­ia, and North Korea.  In 2015, Huawei pub­licly signed an agree­ment with the Syr­i­an gov­ern­ment to rebuild its telecom­mu­ni­ca­tion infra­struc­ture.  ZTE doc­u­ments indi­cate that in order to pro­tect its rela­tion­ship with U.S. trade author­i­ties, Huawei is like­ly moti­vat­ed to hide sim­i­lar trans­ac­tions.

Although Huawei main­tains that it is a pri­vate­ly-owned com­pa­ny, U.S. intel­li­gence strong­ly argues that the com­pa­ny has close ties with the Chi­nese gov­ern­ment, and facil­i­tates Chi­nese sur­veil­lance through the com­mu­ni­ca­tion net­works it builds.  The use of such shell com­pa­nies fre­quent­ly results in the illic­it trans­fer of tech­nol­o­gy to regimes that pose a direct threat to U.S. and allied secu­ri­ty inter­ests.