Rogue Company

U.S. Will Ask Canada to Extradite Huawei Executive

By Edward Wong, Katie Benner and Alan Rappeport

Meng Wanzhou, the chief financial officer of Huawei, arriving last month at a parole office in Vancouver. American officials are expected to ask Canada within a week to extradite Meng to the United States to face charges related to violating Iran sanctions.

WASHINGTON — The United States plans to formally request within a week that Canada extradite a top Huawei executive to stand trial for charges related to violating American sanctions on Iran.
American officials say they will seek to have Meng Wanzhou, the chief financial officer of the Chinese telecom firm Huawei who was detained in Canada on Dec. 1, sent to the United States. 

They have until Jan. 30 to make the request.
“We will continue to pursue the extradition of defendant Meng Wanzhou, and will meet all deadlines set by the U.S.-Canada Extradition Treaty,” Marc Raimondi, a Justice Department spokesman, said in a statement. 

“We greatly appreciate Canada’s continuing support in our mutual efforts to enforce the rule of law.”
The United States’ request would come as American and Chinese officials kick off a critical round of trade talks next week aimed at resolving a dispute that is causing great economic damage in China.

The talks are expected to begin Jan. 30 in Washington, when a delegation led by Liu He, China’s top trade negotiator, meets with Treasury Secretary Steven Mnuchin and Robert Lighthizer, the United States trade representative.
American and Chinese officials have tried to portray the arrest of Meng as separate from the trade talks, which are taking place against a March 2 deadline set by President Trump and Xi Jinping.
But the Trump administration has increasingly mixed talk of national security concerns related to Chinese businesses with its positions on trade. 

And American officials have tried to crack down on certain activities by Chinese telecom firms like Huawei, which is aiming to build next-generation cellular and data networks in countries worldwide.
China has already expressed alarm about the detention of Meng, a Chinese citizen and a daughter of the founder of Huawei, whose arrest set off a diplomatic crisis involving the United States, Canada and China. 

Meng is currently living with her family at one of her homes in Vancouver. 

In December, a Canadian court ruled that Meng would not have to be held in jail, but said that the authorities could closely monitor her, and that certain parts of Vancouver were off limits.
A senior official with Global Affairs, the Canadian Foreign Ministry, said the Canadian government expects the United States to proceed with the request to have her brought to the United States to face charges that she lied to American banks about Huawei’s efforts to evade Iran sanctions. 

Meng was arrested Dec. 1 in a Vancouver airport as she was stopping over between China and Latin America, and the treaty says the United States must make a formal extradition request within 60 days of an arrest.
Once Canada gets the request, the process would move to the Canadian courts, which would determine whether Meng could be extradited. 

If they say yes, the minister of justice makes the final determination. 

The Canadian official said the process could take months or years because the first decision by a court can be appealed to a higher court.
A spokesman for Canada’s Justice Department said Tuesday night that the British Columbia Supreme Court had scheduled a hearing for Feb. 6 to confirm that the United States had made a formal extradition request by the deadline.
The Chinese Ministry of Foreign Affairs indicated Tuesday that Meng’s fate would be taken into consideration as the trade talks proceed. 

While American officials insist that Meng’s case is not a consideration in the trade negotiations, Trump suggested in December that he could intervene in the matter if it would help close a trade deal.
Trump administration officials have increasingly cautioned that a resolution to the tit-for-tat trade war will be hard to reach.
“I acknowledge the degree of difficulty,” Larry Kudlow, the director of the White House National Economic Council, said on Tuesday, referring to the magnitude of the structural changes that the United States is demanding from China. 

“At the end of the day, it has to be in America’s interest.”
Members of the United States national security community say there is a risk that Meng’s fate becomes entangled with trade considerations.
“Given previous reporting, at any moment, the administration could decide that extracting a trade concession is more important to U.S. national interests than the prosecution of this individual,” said David Laufman, a Washington lawyer who served as chief of the Justice Department’s counterintelligence and export control section. 

Laufman declined to comment on the specifics of the case.
The arrest of Meng followed a yearslong investigation by Justice Department officials in Brooklyn looking at whether a company tied to Huawei did business in Iran in a way that violated sanctions, and whether Meng lied to American banks about Huawei’s connections to the smaller company, Skycom. 

Justice Department officials aim to charge Meng with fraud.
Chinese officials say the arrest of Meng was based on political motivations and are linked to a broader Trump administration campaign against Huawei.
The United States has been urging other countries to prevent Huawei from building their networks, citing security concerns that the company poses. 

American officials frequently point out that the founder of Huawei and Meng’s father, Ren Zhengfei, was a soldier decades ago in the People’s Liberation Army. 

Some American allies, foremost among them Australia, have voiced similar security warnings about Huawei.
Days after Meng’s arrest, Chinese security officers separately detained two Canadian men, Michael Kovrig and Michael Spavor, in northern China. 

Mr. Kovrig is a diplomat on leave and a researcher for the International Crisis Group, and Mr. Spavor is an entrepreneur who has organized tours to North Korea. 

Chinese officials have said security officers are investigating the men on potential national security charges. 

Canada has said the arrests were arbitrary, and analysts say it is clear the men were detained as hostages to trade for Meng.
On Monday, more than 100 academics and former diplomats issued an open letter calling on China to free the men immediately.
Last week, a Chinese court sentenced to death Robert Lloyd Schellenberg, a Canadian man convicted of drug smuggling, further raising tensions.
On Monday, The Globe and Mail, a newspaper in Toronto, published an article in which David MacNaughton, the Canadian ambassador to the United States, said American officials would proceed with the extradition request.
Chrystia Freeland, the foreign minister of Canada, has said repeatedly that Canadian courts would make decisions based purely on legal considerations and not on politics. 

Ms. Freeland stressed that approach after Trump told Reuters in an interview in December that he could stop the extradition of Meng if China offered sufficient concessions in continuing negotiations aimed at ending a costly trade war between the United States and China that has dragged on since Mr. Trump started it last summer.

Huawei Connection

U.S. Lawmakers Push to Widen Iran Sanctions Probe Beyond China's ZTE

By Saleha Mohsin and Andrew Mayeda

A group of Republican lawmakers is pushing the Trump administration to investigate and unmask a company that may have violated Iran sanctions laws in the same way as Chinese mobile-phone maker ZTE Corp.
ZTE agreed last month to pay as much as $1.2 billion after pleading guilty to shipping U.S.-origin products to Iran in violation of U.S. laws restricting the sale of American technology to the country. In a letter Tuesday, Republican Congressman Robert Pittenger of North Carolina, Alabama’s Mike Rogers and eight other lawmakers, called on Commerce Secretary Wilbur Ross to probe the actions of an "unidentified company" that ZTE has said also evaded U.S. export controls.
The rival is referred to only as “F7” in a ZTE document posted on the Commerce Department’s website. 

The lawmakers in their letter note that news reports have highlighted the similarities between the company described in the documents and Huawei Technologies Co., which is the largest Chinese networking equipment maker followed by ZTE.
“We strongly support holding F7 accountable should the government conclude that unlawful behavior occurred,” according to the letter. 

“We must publicly identify those who break the law so that their activities be taken into account when public procurement activities occur or where critical infrastructure vulnerabilities might arise.”

Smoother Relations
“We do not comment on any law enforcement matters that we may or may not be working on,” Commerce spokesman James Rockas said in an email.
ZTE declined to comment.
A deeper investigation may complicate Donald Trump’s efforts to smooth relations with China after accusing the nation during last year’s election of manipulating its currency and hurting American manufacturers. 

After meeting with Xi Jinping last week, Trump tweeted that it was a “tremendous” meeting.
As Commerce officials last year gathered evidence to add ZTE to its list of restricted companies, the department posted ZTE documents related to the case on its website. 

In a document dated August 2011, ZTE describes how it conducted business in Iran and other sanctioned countries, and cited F7 as a model for such activities.

Fraught Relations
The U.S. relationship with Huawei has been fraught. 

The government has suspicions about whether Huawei has been sending U.S. technology to rogue nations including Syria, Iran, North Korea and Cuba, people familiar with the matter have said. 

The Commerce Department sent an administrative subpoena to the company’s U.S. operations in Plano Texas, Bloomberg reported in June. 

The company said at the time it cooperates with U.S. export control laws.
In 2012, the House Intelligence Committee concluded that Huawei and ZTE represent national security risks. 

Two years earlier, former Commerce Secretary Gary Locke expressed concern about Huawei’s participation in bids for a network upgrade by Sprint Nextel Corp. 

The bids were awarded to companies from France, Sweden and South Korea.
In Tuesday’s letter, the lawmakers said F7 ’s business structure was similar to ZTE in creating a “cut-off” IT company “serving as its agent to sign contractors for projects in embargoed countries.” 

It adds that F7 hired export-control compliance specialists and expanded its export-control liaison offices.
Here are some of the similarities between F7 and Huawei as described in the ZTE document:

• A U.S. government panel blocked F7’s bid to purchase server technology provider 3Leaf Co. due to national security risks. Huawei backed away from a deal to buy California-based 3Leaf due to pressure from the U.S.
• F7 once had a joint venture with Symantec, a California-based digital security company. Huawei had a similar deal with Symantec, which was dismantled.

Axis of Evil

Will Trump's Next Iran Sanctions Target China's Banks?
By Gordon G. Chang

There are several banks in China and elsewhere, including Southeast Asia and Singapore, that are currently housing North Korean funds that are under sanction, but nothing has been done.

Friday, the U.S. Treasury’s Office of Foreign Assets Control sanctioned individuals and companies in three networks for “procuring technology and/or materials to support Iran’s ballistic missile program.”
The measures are partly in reaction to Iran’s January 29 test of an intermediate-range missile.
One of the three networks, headed by Iranian businessman Abdollah Asgharzadeh, contains Chinese individuals and their companies.
CNN reports that the Trump administration is planning at least another round of Iran sanctions. 

Those measures could—and should—hit Chinese banks. 

Unplugging Chinese financial institutions will shock global markets, but measures that leave them untouched will be ineffective.
Asgharzadeh, according to Treasury, has had dealings since 2013 with three “China-based brokers,” Richard Yue, Jack Qin, and Carol Zhou. 

Yue works with Cosailing Business Trading Company, which provides, among other things, financial services to Asgharzadeh. 

Qin uses Ningbo New Century Import and Export Company to ship goods to the Iranian.
The sanctions imposed Friday on the three individuals and the two companies were initiated by the Obama administration and reflect decades-old attitudes about the best method of stopping Chinese proliferation. 

There are, however, two principal problems with these measures, which were designed to gently warn but not to inflict severe cost.
First, the most recent sanctions, like those in the past, were imposed on small fry. 

China’s small-fry individuals and entities for decades have been selling equipment, components, materials, and technology to Iran for its ballistic missile and nuclear weapons programs.
Beijing maintains one of the world’s most sophisticated monitoring systems of people inside its borders, so it either knows of the activities of proliferators on its soil or decides not to know. 

Either way, it is at the very least complicit in proliferant activity. 

“China is the biggest international force in what the U.S. government calls ‘export diversion’ or knowingly shipping equipment to a country that cannot legally purchase that equipment for itself,” notes U.S. News & World Report, summarizing Christopher Swift, a former official in the Office of Foreign Assets Control.
Some months Beijing may use an entity in Ningbo. 

In others, it might employ an enterprise in Dandong. 

The main culprit is not in one of these far-flung cities but in the heart of the country, Beijing.
Treasury has taken the view that sanctions on low-level actors will send a message to the Chinese capital, but by now American officials should know Beijing never takes the hint. 

If Washington wants to stop the trade in missiles and weapons of mass destruction, it will have to make an impact. 

It can make an impact by imposing costs across the board, on all entities owned by the Chinese central government and, more to the point, the Communist Party.
Second, Obama, like Bush before him, was hesitant to sanction Chinese financial institutions, even though he must have known they were intimately involved in proliferation. 

For instance, both Cosailing Business Trading and Ningbo New Century Import and Export have to be using Chinese banks. 

CNN reports that “a U.S. official said the individuals who came under sanction on Friday have ‘touch points’ in the U.S. financial system.”
And so did the entities and individuals named on September 26. 

That day, the Office of Foreign Assets Control sanctioned Ma Xiaohong, three co-workers, and her company, Dandong Hongxiang Industrial Development Co., for ties to North Korea.
Treasury’s notice contains no explanation, but Korea sanctions expert Joshua Stanton has told me that the sole reason for the measures was the providing of assistance to Korea Kwangson Banking Corp., itself sanctioned, to launder money.
Furthermore, on the same day the Justice Department announced the unsealing of money laundering indictments of the same four individuals and Hongxiang. 

Justice also initiated a civil forfeiture action to recover funds in 25 Chinese bank accounts.
Washington, unfortunately, imposed no punitive measures on the banks in question. 

As the Wall Street Journal noted in a September 29 editorial, the Obama administration, with its failure to go after the banks, signaled they “are untouchable.” 

Beijing maintains strict control over its financial system through the ownership of all major banks and most of the others as well, and it has the means to know of all payments in and out of the country. In addition, the Chinese central government intercepts and closely monitors communications, both internal and foreign. 

There is only one conclusion: Beijing has been complicit in illicit money transfers.
So how does the new Trump administration stop the Iranian missile program? 

It should start with the source.
Tehran may have an Iranian name for the missile launched on January 29—it calls the launcher a Khorramshahr and American officials say it was a Shahab—but it was almost certainly North Korean in origin, as Pentagon sources believe. 

The missile was either shipped from the North or, more likely, made in Iran from North Korean plans. 

The North’s version of the missile is known as the Musudan. 

Iran has been getting most of what it needs to launch intermediate- and long-range missiles from North Korea.
How then does Trump stop North Korea? 

“The best move and the long-term move would be to enforce sanctions already in effect,” Bruce Bechtol of Angelo State University told me. 

“This means going after banks that launder North Korean money. There are several banks in China and elsewhere, including Southeast Asia and Singapore, that are currently housing North Korean funds that are under sanction, but nothing has been done.”
As Bechtol, the author of North Korea and Regional Security in the Kim Jong-un Era, notes, this “will not only squeeze North Korea but it will also force China to more actively enforce sanctions or risk having nations from all over the world taking their funds out of banks located in China.”
Thursday, Trump in connection with Iran said “nothing is off the table.” 

The first option on his table should be sanctions on Chinese financial institutions handling the illicit trade of two rogues with lots of missiles and plenty of hostility, North Korea and Iran.

Axis of Evil

The Hidden Message for China in Trump’s Iran Sanctions

By Paul D. Shinkman

The U.S. Treasury Department building on Pennsylvania Avenue in Washington, D.C. 

New sanctions the Treasury Department announced Friday, which the Trump administration framed as its first salvo in putting Iran "on notice," also served as a subtle message to a world power whose influence the president has pledged to undermine, experts say.
Included in the list of 13 new targeted individuals and 12 trading, pharmaceutical and engineering companies is at least one Chinese citizen and two organizations based in China.
"This may be a shot across China's bow as well," says Gary Samore, Barack Obama's former coordinator for arms control and weapons of mass destruction, now with Harvard University's Belfer Center, "which would be consistent with President Trump's stated hostility toward China."
New sanctions like the ones unveiled on Friday commonly include citizens and entities from multiple countries. 

Chinese actors would serve as a logical target for undermining Iran's ballistic missile tests due to a documented history of disguising and shipping equipment to Iran that bolsters its missile program and which under current international restrictions Tehran cannot acquire on its own.
But there are many other entities and nations the new president could have approved to target in his first weeks in office.
"There is something to the fact there were probably other targets that were teed up, and the administration is making it clear they were going to designate additional targets," says Matt Levitt, a former senior counterterrorism and intelligence official at the Treasury Department. 

"The fact that they chose this is telling: We're not going after China, but we're going to go where the events take us, and we're not being dissuaded to take actions against Iran or others tolerant of [its] ballistic missile program."
White House spokesman Sean Spicer confirmed this week that the sanctions were first compiled under the Obama administration. 

Instituting sanctions requires significant time to prepare and vet, and that this latest list – including the Chinese additions – was likely compiled well before the current administration took office, says Levitt, now with The Washington Institute for Near East Policy.
Trump's choice of targeting Iran specifically represents a slight escalation compared to the Obama administration, which in the wake of establishing the deal limiting Tehran's nuclear ambition prefered to target Iranian proxies and allies like Hezbollah or Syria rather than Iran itself.
The potency of these new sanctions themselves do not represent a marked increase in U.S. effort to undermine malicious foreign actors, says Christopher Swift, a former official in the Treasury Department's Office of Foreign Assets Control who now teaches national security studies at Georgetown University and the University of Virginia's Center for National Security Law. 

But, he says, it does send a subtle signal to China.
"Someone's turned up the volume by one notch. It is an incremental and a logical extension," Swift says.
China is the biggest international force in what the U.S. government calls "export diversion" or knowingly shipping equipment to a country that cannot legally purchase that equipment for itself, Swift says.
Trump has indicated he plans to start a trade war with China to curtail its regional influence, for the treasury secretary to label it a currency manipulator and for the U.S. trade representative to "bring trade cases" against it, according to his economic policy posted to WhiteHouse.gov. 

One of his first official acts after winning the presidency included speaking with the Taiwanese president by phone, which China said was a cause for "serious concern."