National Security

Huawei, 70 affiliates placed on U.S. trade blacklist

By David Shepardson, Karen Freifeld

WASHINGTON/NEW YORK -- The U.S. Commerce Department said on Wednesday it is adding Huawei Technologies Co Ltd and 70 affiliates to its so-called “Entity List” -- a move that bans the telecom giant from buying parts and components from U.S. companies without U.S. government approval.
U.S. officials told Reuters the decision would also make it difficult if not impossible for Huawei, the largest telecommunications equipment producer in the world, to sell some products because of its reliance on U.S. suppliers.
Under the order that will take effect in the coming days, Huawei will need a U.S. government license to buy American technology.
Commerce Secretary Wilbur Ross said in a statement President Donald Trump backed the decision that will “prevent American technology from being used by foreign owned entities in ways that potentially undermine U.S. national security or foreign policy interests.”
The dramatic move comes as the Trump administration has aggressively lobbied other countries not to use Huawei equipment in next-generation 5G networks and comes just days after the Trump administration imposed new tariffs on Chinese goods amid an escalating trade war.
The Commerce Department said the move comes after the U.S. Justice Department unsealed an indictment in January of Huawei and some entities that said the company had conspired to provide prohibited financial services to Iran. 

The department said it has a reasonable basis to conclude that Huawei is “engaged in activities that are contrary to U.S. national security or foreign policy interest.”
In March 2016, the Commerce Department added ZTE Corp to the entity list over allegations it organized an elaborate scheme to hide its re-export of U.S. items to sanctioned countries in violation of U.S. law.
The restrictions prevented suppliers from providing ZTE with U.S. equipment, potentially freezing the Huawei rival’s supply chain, but they were short-lived. 

The U.S. suspended the restrictions in a series of temporary reprieves, allowing the company to maintain ties to U.S. suppliers until it agreed to a plea deal a year later.
In August, Trump signed a bill that barred the U.S. government itself from using equipment from Huawei and ZTE.
Senator Ben Sasse, a Republican, said “Huawei’s supply chain depends on contracts with American companies” and he urged the Commerce Department to look “at how we can effectively disrupt our adversary.”

U.S. to press allies to keep Huawei out of 5G in Prague meeting

By Christopher Bing, Jack Stubbs

WASHINGTON/LONDON -- The United States will push its allies at a meeting in Prague next month to adopt shared security and policy measures that will make it more difficult for China’s Huawei to dominate 5G telecommunications networks, according to people familiar with the matter and documents seen by Reuters.
The event and broader U.S. campaign to limit the role of Chinese telecommunications firms in the build out of 5G networks comes as Western governments grapple with the national security implications of moving to 5G, which promises to be at least 100 times faster than the current 4G networks.
The issue is crucial because of 5G’s leading role in internet-connected products ranging from self-driving cars and smart cities to augmented reality and artificial intelligence. 

If the underlying technology for 5G connectivity is vulnerable then it could allow hackers to exploit such products to spy or disrupt them.
The United States has been meeting with allies in recent months to warn them Huawei’s equipment could be used by the Chinese state to spy. 

Officials from more than 30 countries will meet May 2-3 to agree on security principles for next-generation telecoms networks, said Robert Kahofer, chief of cabinet at Czech cybersecurity agency NUKIB.
A U.S. official familiar with the plan said the Prague meeting marks a strategic shift in how the U.S. government plans to urge allies to drop Huawei and other 5G vendors in the future, which pose a risk to national security. 

The official described the approach as “softer.”
A Huawei spokesman did not immediately respond to a request for comment. 

U.S. proposals for the Prague meeting urge governments and operators to consider the legal environment in a vendor’s country, how much state support a company receives, transparency of corporate structure, and trustworthiness of equipment. 

It also calls on partners to prioritize security and work together on investigations into cyberattacks aimed at 5G architecture.
The documents do not mention Huawei, the world’s largest telecoms equipment maker, by name, but U.S. officials said they hoped it would provide the “intellectual framework” needed for other countries to effectively bar Chinese vendors. 

In August, U.S. President Donald Trump signed a bill that barred the U.S. government itself from using Huawei and ZTE Corp equipment.
“The goal is to agree upon a set of shared principles that would ensure the security of next-generation telecommunications networks,” said one of the officials, who spoke on condition of anonymity to discuss private conversations.
The Prague conference has been organized by the Czech foreign ministry with support from NUKIB, said Kahofer. 

The foreign ministry did not respond to requests for comment.
Delegations from all of the European Union’s 28 member states, as well as the European Commission, NATO and around eight other countries including the United States and Australia are expected to attend, Kahofer said.
China and Russia have not been invited, he added, but stressed that the event was not “an anti-Huawei or anti-China conference.” 

Europe has emerged as a key battleground for the future of 5G, with the United States pushing allies and partners to bar Chinese vendors but European governments wary of the trade and economic consequences of angering Beijing.

A senior U.S. cybersecurity official said last week Washington wanted European governments to adopt “risk-based security frameworks”, citing recent moves in Germany to implement stricter security standards for all 5G vendors, and that doing so would effectively rule out using Huawei and ZTE.
“The United States welcomes engagement from partners and allies to discuss ways that we can work together ensuring that our 5G networks are reliable and secure,” said White House National Security Council spokesman Garrett Marquis. 

Officials in Britain, which last month exposed new security flaws in Huawei equipment but says it has found no evidence of Chinese state interference, have also spoken of “raising security across the board” for 5G. 

The European Commission said in March that EU nations would be required to share data on 5G cybersecurity risks and produce measures to tackle them by the end of the year.

Chinese Cyberespionage

Australia Bans Huawei From Building 5G Wireless Network
By Raymond Zhong

BEIJING — Cyberespionage concerns surrounding Huawei have kept the Chinese technology giant out of the United States. 

Now it has cost the company lucractive business in another country: Australia.

The Australian government had barred it and another rogue Chinese company, ZTE, from providing equipment to support the country’s new telecommunications networks. 

Mobile carriers around the world have been preparing to build infrastructure using fifth-generation, or 5G, wireless technology, which promises to enable the ultrafast communications necessary for technologies such as self-driving cars.
On Twitter, Huawei called the decision an “extremely disappointing result for consumers.” 

A ZTE spokeswoman declined to comment.
Huawei, one of the world’s largest makers of telecom gear and smartphones, already sells equipment to major Australian telecom carriers. 

In a statement on Thursday, two Australian ministers indicated that the government would move to exclude certain equipment vendors from the nation’s 5G networks. 

Companies that “are  subject to extrajudicial directions from a foreign government” pose unacceptable security risks, the ministers said.
One of those ministers, Scott Morrison, is challenging Australia’s prime minister, Malcolm Turnbull, for leadership of the country.
Neither Huawei nor ZTE were specifically named in the Australian statement. 

But the two companies’ ties to Beijing have long been cited by United States officials to justify keeping them out of American mobile networks.

Large American wireless carriers have for years shunned both its and ZTE’s equipment.
With such concerns about Chinese technology continuing to spread globally, it seems increasingly unlikely that the tech cold war between China and the United States will be reconciled quickly.
More and more, the two economic powerhouses view the race to develop key technologies, 5G wireless included, in strategic as well as commercial terms. 

Both have stood up for their own national tech champions. 

And they have each sought to kneecap the other’s.
ZTE was nearly driven out of business earlier this year after the United States Department of Commerce barred American firms from selling components to the company. 

The sanctions, imposed as punishment for illegal sales made by ZTE in Iran and North Korea, were later lifted to help defuse tensions between President Trump and Chinese dictator Xi Jinping.
Even Chinese firms’ research partnerships with universities in the United States and Canada have come under scrutiny. 

In June, a group of Washington lawmakers wrote to Betsy DeVos, the education secretary, calling for a review of American universities’ collaborations with Huawei.

Meet the 10 American Quislings

There's a slew of one-time U.S. politicians and officials who have lobbied for China or whose business interests are closely connected to it.
BETHANY ALLEN-EBRAHIMIAN

As China’s wealth has grown, so has its sophistication at currying favor in Washington and among the American elite.
Both the Chinese government and Chinese companies, often with close state ties, have retained lobbying and public-relations firms in the Beltway, in some cases hiring former U.S. officials as personal lobbyists.
Beijing has also learned how to harness its economic might by alternately opening its doors to companies who play by China’s rules, and slamming the door on companies that go against its red lines.
In some cases, this grants Beijing powerful sway over foreign companies with business interests in China.
This has raised concerns that current U.S. government officials may have an eye on their future prospects in China even before leaving office.
While it may seem politics as usual in Washington today, some are alarmed.
“Nobody in the 1980s would have represented the Russian government. And now you find so many lobbying for the Chinese government,” said Frank Wolf, a retired U.S. representative from Virginia who long served as the co-chairman of the Tom Lantos Human Rights Commission.
“I served in Congress for 34 years. I find it shocking.”
Below are some of the more prominent former U.S. politicians and officials whose have lobbied for China or whose business interests are closely connected to it.

1. Charles Boustany
Boustany served as the U.S. representative for Louisiana’s 3rd Congressional District until 2017 and co-chaired the U.S.-China working group.
After leaving Congress, he joined the lobbying firm Capitol Counsel.
Boustany has registered as a foreign agent under the Foreign Agents Registration Act, representing the U.S.-China Transpacific Foundation, which is based in Las Vegas and is sponsored by the Chinese government.
According to FARA filings, Capitol Counsel helps the foundation bring delegations of U.S. members of Congress to China to “enhance their understanding on the cultural, economic, political, and social developments of the People’s Republic of China, thus helping strengthen U.S.-China relations.”
The foundation provided Capitol Counsel with an initial fee of $50,000 in late 2017, when the contract began.

2. John Boehner
The former House speaker joined Squire Patton Boggs after he retired from the House in 2015.
The lobbying firm has long represented the Chinese embassy in Washington; Boehner serves “as a strategic adviser to clients in the U.S. and abroad, and will focus on global business development.” Boehner helped lead the effort to grant China most favored trading nation status in the late 1990s.

3. Jon Christenson
Christenson served as a U.S. representative from Nebraska from 1995 to 1999.
Chinese telecom giant ZTE Corp hired him as a lobbyist after he left Congress.
After the FBI investigation into ZTE’s violation of sanctions on Iran became public, Christenson resigned from his position there.

4. David Firestein
Firestein served as a career diplomat from 1992 to 2010.
After leaving government, he joined the East-West Institute, where he spearheaded a series of dialogues between high-ranking political party leaders in the United States and China.
In many of its dialogues, which bring U.S. leaders to China, the East-West Institute has partnered with the China-U.S. Exchange Foundation, which is closely connected to the United Front, a political-influence arm of the Chinese Communist Party; the institute has also partnered with a Chinese organization known to be a front for the People’s Liberation Army’s political-intelligence agency.
Firestein now serves as the director of the University of Texas at Austin’s China Public Policy Center. Firestein proposed forming a partnership between the China Public Policy Center and the China-U.S. Exchange Foundation.
But under pressure from U.S. lawmakers concerned about Chinese influence, UT Austin decided to turn down the proposal this year.

5. Mike Holtzman
Holtzman worked in the executive office of the president as special adviser for public affairs to the U.S. trade ambassador under Bill Clinton, and later served as an adviser to the director of policy planning staff at the State Department under Colin Powell.
Holtzman is now a partner at public-relations firm BLF Worldwide, where he managed the campaign for China’s bid to host the 2008 Olympics.
Holtzman is registered as a foreign agent and represents the China-U.S. Exchange Foundation.
According to FARA filings, in this role he will “provide services for the China-U.S. Exchange Foundation to promote its interests in the U.S., including expanding third-party supporters, generating media placements, arranging visits for delegations to China, and supporting CUSEF activity with the U.S.”

6. Randall Phillips
Phillips spent 28 years in the CIA, finishing his tenure as station chief in Beijing.
But after he left the agency, Phillips took the unusual step of remaining in Beijing and joining the private-investigations firm Mintz Group.
Multiple sources told The Daily Beast that Phillips’ decision to peddle his services in Beijing has raised eyebrows within the agency.

7. Donald (Andy) Purdy Jr.
As a White House staff member in the George W. Bush administration, Purdy helped draft a cybersecurity strategy in 2003 known as the U.S. National Strategy to Secure Cyberspace before moving to the Department of Homeland Security, where he helped craft cybersecurity initiatives and served as the lead cyber- official at DHS and the U.S. government; he later became the chief security officer for Huawei’s U.S. operations.

8. Clark T. Randt Jr.
Randt served as U.S. ambassador to China from 2001 to 2009.
Since 2009, he has served as president of Randt and Co. LLC, which advises companies doing business in China.
He is a special adviser of HOPU Jinghua (Beijing) Investment Consultancy Co., and sits on the advisory boards of numerous organizations with business interests closely tied to China, including Qualcomm, Wynn Resorts, and Valmont Industries.

9. Matt Salmon
Salmon served as U.S. representative for Arizona’s 5th Congressional District and chaired the Asia and the Pacific Subcommittee on the House Foreign Relations Committee.
He retired from politics in 2016.
He now serves as the vice president for government affairs at Arizona State University, where his position includes “working with the governments of other countries to advance international projects.”
Arizona State is home to a Confucius Institute, a Beijing-funded "educational" enterprise that Salmon has said brings around $200,000 a year to the university.
At an April event in Washington, co-hosted by the Confucius Institute as it faced congressional scrutiny over threats to academic freedom on U.S. campuses, Salmon dismissed rising concerns about China as “McCarthyism” and said that the United States should work “with the only other superpower and not against it.”

10. James D. Wolfensohn
A former president of the World Bank Group, Wolfensohn has served as a member of the international advisory committee of the China Investment Corporation, China’s sovereign wealth fund.

Tech Quisling

U.S. lawmakers want Google to reconsider links to China's Huawei

Reuters

WASHINGTON -- Republican and Democratic U.S. lawmakers asked Alphabet Inc’s Google on Wednesday to reconsider its work with Chinese telecommunications firm Huawei Technologies Co Ltd, which they described as a security threat.
In a letter to Google Chief Executive Sundar Pichai, the lawmakers said Google recently decided not to renew “Project Maven,” an artificial intelligence research partnership with the U.S. Department of Defense.
“While we regret that Google did not want to continue a long and fruitful tradition of collaboration between the military and technology companies, we are even more disappointed that Google apparently is more willing to support the Chinese Communist Party than the U.S. military,” they wrote.
The letter was signed by Republican Senators Tom Cotton and Marco Rubio, Republican Representatives Michael Conaway and Liz Cheney, and Democratic Representative Dutch Ruppersberger.
Google spokeswoman Andrea Faville said the company looked forward to responding.
The letter was the latest in a series of efforts by members of the U.S. Congress to target Huawei, and ZTE Corp, another major Chinese telecommunications equipment company.
They have written bills that would bar government agencies from using the companies’ products and try to overturn Donald Trump’s agreement to end a ban on ZTE.
Earlier this month another senator, Democrat Mark Warner, wrote to Alphabet and other technology companies asking about any data-sharing agreements with Chinese vendors.

Dura lex, sed lex

ZTE main business operations cease due to U.S. ban

By Sijia Jiang

HONG KONG -- ZTE Corp’s main business operations have ceased due to a ban imposed by the U.S. government, but China’s second biggest telecom equipment maker is trying to have the ban modified or reversed, it said on Wednesday.
ZTE was hit by a ban last month from Washington, forbidding U.S. firms from supplying it with components and technology after it was found to have violated U.S. export restrictions by illegally shipping goods to Iran.
“As a result of the Denial Order, the major operating activities of the company have ceased,” ZTE said in the exchange filings late on Wednesday.
“As of now, the company maintains sufficient cash and strictly adheres to its commercial obligations subject in compliance with laws and regulations,” it said.
The U.S. action, first reported by Reuters, could be devastating to ZTE.
As one of the world’s largest telecom equipment makers alongside Huawei, Ericsson and Nokia, ZTE relies on U.S. companies such as Qualcomm and Intel for up to a third of its components.
Analysts have said it will be hard for ZTE to stay competitive even if it could find non-American suppliers.
Taiwanese semiconductor company Mediatek said last week it had received a permit from the Taiwanese government to continue to supply ZTE.
ZTE said it was actively communicating with the U.S. government “in order to facilitate the modification or reversal of the Denial Order by the U.S. government and forge a positive outcome in the development of matters.”
The ban that threatens to cut off ZTE’s supply chain came amid heightened tension over a U.S.-China trade war. 

The Chinese government raised the issue of ZTE last week with a visiting U.S. trade delegation.
ZTE said on Sunday it had submitted a request to the U.S. Commerce Department for the suspension of the ban.
ZTE appears to have suspended its online stores on its own website as well as on Alibaba Group’s e-commerce platform Taobao over the past few days, which display a “page being updated” message with no products to order.
The Chinese firm did not respond to calls and messages from Reuters seeking comment.
Consumer Cellular Inc, a U.S. wireless operator, said ZTE was unable to continue supplying phones after the sanctions, but had asked the company to hold inventory spots open as it worked to resolve the export ban, said Consumer Cellular Chief Executive John Marick in an interview.
Marick said ZTE has not given guidance on whether its phones can continue receiving software updates from Android, and discussions between the companies have been about ensuring ZTE can supply parts and service to honor phone warranties.
A ZTE employee told Reuters that staff had been reporting to work as normal but “with not much to do”. 

The employee, who declined to be named, said business trips had been halted.
Employees at ZTE’s headquarters in the southern Chinese technology hub of Shenzhen were cagey about speaking to reporters after the ban was announced, but some voiced concerns.
One employee said this was the “the biggest challenge” for ZTE since he joined 10 years ago. Another said he hoped the Chinese government would help, saying he was confident Xi Jinping would “sort out this trouble”.
ZTE settled the sanction case with the U.S. government last March after admitting to illegally shipping products with U.S. technology to countries including Iran and paying a record fine of nearly $900 million.
Last month, the U.S. government reactivated the ban after ZTE violated terms of the settlement and made repeated false statements.

Rogue Company

U.S. Probing Huawei for Iran Sanctions Violations
BY KAREN FREIFELD and Eric Auchard

Beijing's eyes and ears

NEW YORK/LONDON -- U.S. prosecutors in New York have been investigating whether Chinese tech company Huawei violated U.S. sanctions in relation to Iran, according to sources familiar with the situation.
Since at least 2016, U.S. authorities have been probing Huawei's alleged shipping of U.S.-origin products to Iran and other countries in violation of U.S. export and sanctions laws, two of the sources said.
News of the Justice Department probe follows a series of U.S. actions aimed at stopping or reducing access by Huawei and Chinese smartphone maker ZTE Corp to the U.S. economy amid allegations the companies could be using their technology to spy on Americans.
The Justice Department probe is being run out of the U.S. attorney's office in Brooklyn, the sources said. 

John Marzulli, a spokesman for the prosecutor's office, would neither confirm nor deny the existence of the investigation. 

The probe was first reported by the Wall Street Journal on Wednesday.
The probe of Huawei is similar to one that China's ZTE Corp says is now threatening its survival. 

The United States last week banned American firms from selling parts and software to ZTE for seven years. 

Washington accused ZTE of violating an agreement on punishing employees after the company illegally shipped U.S. goods to Iran.
ZTE, which sells smartphones in the United States, paid $890 million in fines and penalties, with an additional penalty of $300 million that could be imposed.
U.S. authorities have subpoenaed Huawei seeking information related to export and sanctions violations, two sources said. 

The New York Times last April reported the U.S. Treasury's Office of Foreign Assets Control subpoena, issued in December 2016, following a Commerce Department subpoena that summer.
Both companies also have been under scrutiny by U.S. lawmakers over cybersecurity concerns.
In February, Senator Richard Burr, the Republican chairman of the U.S. Senate Intelligence Committee, cited concerns about the spread of Chinese technologies in the United States, which he called "counterintelligence and information security risks that come prepackaged with the goods and services of certain overseas vendors."
Huawei and ZTE have denied these allegations.
Republican Senators Marco Rubio and Tom Cotton have introduced legislation that would block the U.S. government from buying or leasing telecommunications equipment from Huawei or ZTE, citing concern that the Chinese companies would use their access to spy on U.S. officials.
In 2016, the Commerce Department made documents public that showed ZTE's misconduct and also revealed how a second company, identified only as F7, had successfully evaded U.S. export controls.
In a 2016 letter to the Commerce Department, 10 U.S. lawmakers said F7 was believed to be Huawei, citing media reports.
In April 2017, lawmakers sent another letter to Commerce Secretary Wilbur Ross asking for F7 to be publicly identified and fully investigated.
The U.S. government’s investigation into sanctions violations by ZTE followed reports by Reuters https://reut.rs/2H3p0Vl in 2012 that the company had signed contracts to ship millions of dollars’ worth of hardware and software from some of the best known U.S. technology companies to Iran’s largest telecoms carrier.
Reuters also previously reported on suspicious activity related to Huawei. 

In January 2013, Reuters reported https://www.reuters.com/article/uk-huawei-skycom/exclusive-huawei-cfo-linked-to-firm-that-offered-hp-gear-to-iran-idUKBRE90U0CA20130131 that a Hong Kong-based firm that attempted to sell embargoed Hewlett-Packard computer equipment to Iran's largest mobile-phone operator has much closer ties to China's Huawei Technologies than was previously known.