Rogue Company

New documents link Huawei to front companies in Iran and Syria, and bolster US case against Meng Wanzhou

• Three Chinese had signing rights to bank accounts in Iran for both Huawei and Skycom, a company Huawei controlled
• A Huawei executive has been appointed Skycom’s Iran manager, while Huawei operated in Syria via another company, Canicula

Reuters

Visitors walk past Huawei's booth during Mobile World Congress in Barcelona, Spain, in this 2017 photo.

The US case against the chief financial officer of China’s Huawei Technologies, who was arrested in Canada last month, centres on the company’s ties to two obscure companies.
One is a telecom equipment seller that operated in Tehran; the other is that firm’s owner, a holding company registered in Mauritius.

Meng Wanzhou, chief financial officer of Huawei Technologies, leaves her home under the supervision of a private security guard in Vancouver, Canada, on December 12. 

US authorities allege CFO Meng Wanzhou deceived international banks into clearing transactions with Iran – violating America’s sanctions on the country – by claiming the two companies were independent of Huawei, when in fact Huawei controlled them.
Huawei has maintained the two are independent: equipment seller Skycom Tech Co Ltd and shell company Canicula Holdings Ltd.
But corporate filings and other documents found by Reuters in Iran and Syria show that Huawei, the world’s largest supplier of telecommunications network equipment, is more closely linked to both firms than previously known.
The documents reveal that a high-level Huawei executive has been appointed Skycom’s Iran manager. 

They also show that at least three Chinese-named individuals had signing rights for both Huawei and Skycom bank accounts in Iran.
Reuters also discovered that a Middle Eastern lawyer said Huawei conducted operations in Syria through Canicula.
The previously unreported ties between Huawei and the two companies could bear on the US case against Meng, who is the daughter of Huawei founder Ren Zhengfei, by further undermining Huawei’s claims that Skycom was merely an arms-length business partner.
Huawei retained control of Skycom, using it to sell telecom equipment to Iran and move money out via the international banking system.
As a result of the deception, banks unwittingly cleared hundreds of millions of dollars of transactions that violated economic sanctions Washington had in place at the time against doing business with Iran.
Meng did not respond to a request for comment, and Huawei declined to answer questions for this story. 

Canicula’s offices could not be reached. 

A Justice Department spokesman in Washington declined to comment.
Meng was released on C$10 million (US$7.5 million) bail on December 11 and remains in Vancouver while Washington tries to extradite her. 

In the United States, Meng would face charges in connection with an conspiracy to defraud multiple financial institutions, with a maximum sentence of 30 years for each charge. 

The exact charges have not been made public.

Meng’s arrest on a US warrant has caused an uproar in China. 

It comes at a time of growing trade and military tensions between Washington and Beijing, and amid worries by US intelligence that Huawei’s telecommunications equipment could contain “back doors” for Chinese espionage.
Australia and New Zealand recently banned Huawei from building their next generation of mobile phone networks, and British authorities have also expressed concerns.
Articles published by Reuters in 2012 and 2013 about Huawei, Skycom and Meng figure prominently in the US case against her.
Reuters reported that Skycom had offered to sell at least 1.3 million euros (US$1.5 million) worth of embargoed Hewlett-Packard computer equipment to Iran’s largest mobile-phone operator in 2010.
At least 13 pages of the proposal were marked “Huawei confidential” and carried Huawei’s logo. 

Reuters also reported numerous financial and personnel links between Huawei and Skycom, including that Meng had served on Skycom’s board of directors between February 2008 and April 2009.
Several banks questioned Huawei about the articles, according to court documents filed by Canadian authorities at the request of the US for Meng’s bail hearing in Vancouver last month.
According to the documents, US investigators allege that in responding to the banks, which weren’t named, Meng and other Huawei employees repeatedly lied about the company’s relationship with Skycom and failed to disclose that “Skycom was entirely controlled by Huawei”.
US authorities also allege that at a private meeting with a bank executive, in or about August 2013, Meng said Huawei had sold its shares in Skycom, but didn’t disclose that the buyer was “a company also controlled by Huawei”.
The court documents allege that Huawei told the executive’s bank that the Chinese company had sold its shares in Skycom in 2009 – the same year Meng stepped down from Skycom’s board. 

Skycom’s buyer wasn’t identified in the documents.
But Skycom records filed in Hong Kong, where the company was registered, show that its shares were transferred in November 2007 to Canicula. 

Canicula, which was registered in Mauritius in 2006, continued to hold Skycom shares for about a decade, Skycom records show.

Meng Wanzhou and other Huawei employees repeatedly lied about the company’s relationship with Skycom and failed to disclose that “Skycom was entirely controlled by Huawei”.

A “Summary of Facts” filed by US authorities for Meng’s Canadian bail hearing states: “Documents and email records show that persons listed as ‘Managing Directors’ for Skycom were Huawei employees.” 

None of those individuals were named.
A company record filed by Skycom in Iran that was entered in the Iranian registry in December 2011 states that a Shi Yaohong had been elected as manager of Skycom’s Iran branch for two years. Huawei employs an executive named Shi Yaohong.
According to his LinkedIn profile, Shi was named Huawei’s “President Middle East Region” in June 2012. 

An Emirates News Agency press release identified him in November 2010 as “President of Huawei Etisalat Key Account.” 

Etisalat is a major Middle Eastern telecommunications group and a Huawei partner.
Shi, now president of Huawei’s software business unit, hung up the phone when Reuters asked him about his relationship with Skycom.
Many corporate records filed by Skycom in Iran list signatories for its bank accounts in the country. Most of the names are Chinese; at least three of the individuals had signing rights for both Skycom and Huawei bank accounts (one of the names is listed in the Iranian registry with two slightly different spellings but has the same passport number).
US authorities allege in the court documents filed in Canada that Huawei employees were signatories on Skycom bank accounts between 2007 and 2013.
Records in Hong Kong show that Skycom was voluntarily liquidated in June 2017 and that Canicula was paid about US$132,000 as part of the resolution. 

The liquidator, Chan Leung Lee, of BDO Ltd in Hong Kong, declined to comment.
The Financial Services Commission in Mauritius, where Canicula remains registered, declined to release any of its records, saying they were confidential.
Until two years ago, Canicula had an office in Syria, another country that has been subject to US and European Union sanctions. 

In May 2014, a Middle Eastern business website called Aliqtisadi.com published a brief article about the dissolution of a Huawei company in Syria that specialised in automated teller machine (ATM) equipment.
Osama Karawani, an attorney who was identified as the appointed liquidator, wrote a letter asking for a correction, stating that the article had caused “serious damage” to Huawei.
Karawani said the article suggested that Huawei itself had been dissolved, not just the ATM company. In his letter, which was linked to on the Aliqtisadi website, he said Huawei was still in business.
“Huawei was never dissolved,” he wrote; he added that it “has been and is still operating in Syria through several companies which are Huawei Technologies Ltd and Canicula Holdings Ltd.” 

Huawei Technologies is one of Huawei’s main operating companies.
Karawani didn’t respond to emailed questions about Canicula.
US investigators are aware of Canicula’s connection to Syria, according to a person familiar with the probe. 

Canicula had an office in Damascus and operated in Syria on behalf of Huawei, another person said.
That person said Canicula’s customers there included three major telecommunications companies. One is MTN Syria, controlled by South Africa’s MTN Group Ltd, which has mobile-phone operations in both Syria and Iran.
MTN has a joint venture in Iran – MTN Irancell – that is also a Huawei customer. 

MTN advised Huawei on setting up the structure of Skycom’s office in Iran, according to another source familiar with the matter.
“Skycom was just a front” for Huawei, the person said.
An official with MTN said no one at the company was available to comment.
In December 2017, a notice was placed in a Syrian newspaper by “the General Director of the branch of the company Canicula Ltd”. 

He was not named. 

It announced that Canicula had “totally stopped operating” in Syria two months before. No explanation was given.

Axis of Evil

U.S. to list China among worst human trafficking offenders
By Matt Spetalnick | WASHINGTON

The United States plans to place China on its global list of worst offenders in human trafficking and forced labor, said a congressional source and a person familiar with the matter, a step that could aggravate tension with Beijing that has eased under President Donald Trump.
The reprimand of China, Washington's main rival in the Asia-Pacific region, would come despite Trump's budding relationship with Chinese counterpart Xi Jinping and the U.S. president’s efforts to coax Beijing into helping to rein in North Korea’s nuclear and missile programs.
Secretary of State Rex Tillerson has decided to drop China to "Tier 3," the lowest grade, putting it alongside Iran, North Korea and Syria among others, said the sources, who have knowledge of the internal deliberations and spoke on condition of anonymity.
The rating is expected to be announced on Tuesday in an annual report published by the State Department's Office to Monitor and Combat Trafficking in Persons. 

A State Department official declined to comment on the report's contents and said the department "does not discuss details of internal deliberations."
Tier 3 rating can trigger sanctions limiting access to U.S. and international aid, but U.S. presidents frequently waive such action.
While it was unclear what led Tillerson to downgrade China, last year's report criticized the communist government for not doing enough to curb "state-sponsored forced labor" and concluded it did not meet "minimum standards" for fighting trafficking.
The Trump administration has also grown concerned about conditions in China for North Korean labor crews that are contracted through Pyongyang and provide hard currency for the North Korean leadership, which is squeezed for cash by international sanctions, said the congressional source.
In Beijing, foreign ministry spokesman Lu Kang said the government was resolute in its resolve to fight human trafficking and the results were plain to see.
"China resolutely opposes the U.S. side making thoughtless remarks in accordance with its own domestic law about other countries' work in fighting human trafficking," he told a daily news briefing.
Since taking office, Trump has praised Xi for agreeing to work on the North Korea issue during a Florida summit in April and has held back on attacking Chinese trade practices he railed against during the presidential campaign.
But Trump has recently suggested he was running out of patience with China's modest steps to pressure North Korea, which is working to develop a nuclear-tipped missile capable of hitting the United States.
The annual report, covering more than 180 countries and territories, calls itself the world’s most comprehensive resource of governmental anti-human trafficking efforts.
It organizes countries into tiers based on trafficking and forced labor records: Tier 1 for nations that meet minimum U.S. standards; Tier 2 for those making significant efforts to meet those standards; Tier 2 "Watch List" for those that deserve special scrutiny; and Tier 3 for countries that fail to comply with the minimum U.S. standards and are not making significant efforts.
For the past three years, China has been ranked "Tier 2 Watch List".
In Beijing, the Chinese Foreign Ministry did not respond to a request for comment.
In 2015, Reuters reported that experts in the State Department's Office to Monitor and Combat Trafficking in Persons had sought to downgrade China that year to Tier 3 but were overruled by senior diplomats.

Chinese Fifth Column: Wolves In Tech Robes

Huawei Is Focus of Widening U.S. Investigation
By Paul Mozur

A Huawei booth at the Mobile World Congress in Barcelona, Spain, in February. The widening inquiry in the United States puts Huawei in an awkward position at a moment when sanctions have taken on new import. 

HONG KONG — As one of the world’s biggest sellers of smartphones and the back-end equipment that makes cellular networks run, Huawei Technologies has become one of the major symbols of China’s global technology ambitions.
But as it continues its rise, its business with some countries has fallen under growing scrutiny from investigators in the United States.
American officials are widening their investigation into whether Huawei broke American trade controls on Cuba, Iran, Sudan and Syria, according to an administrative subpoena sent to Huawei and reviewed by The New York Times. 

The previously unreported subpoena was issued in December by the United States Treasury Department’s Office of Foreign Assets Control, which oversees compliance with a number of American sanctions programs.
The Treasury’s inquiry follows a subpoena sent to Huawei this summer from the United States Department of Commerce, which carries out sanctions and also oversees exports of technology that can have military as well as civilian uses.

As an administrative subpoena, the Treasury document does not indicate that the Chinese company is part of a criminal investigation.
Still, the widening inquiry puts Huawei in an awkward position at a moment when sanctions have taken on new import. 

The Trump administration has been working to push China to cut back its trade, and in turn economic support, for North Korea, amid rising tensions over the North’s nuclear and missile programs. 

The growing investigation also comes after Huawei’s smaller domestic rival, ZTE, in March pleaded guilty to breaking sanctions and was fined $1.19 billion.
It is not clear why the Treasury Department became involved with the Huawei investigation. 

But its subpoena suggests Huawei might violate American embargoes that broadly restrict the export of American goods to countries like Iran and Syria.
“The most likely thing happening here is that Commerce figured out there was more to this than dual-use commodities, and they decided to notify Treasury,” said Matthew Brazil, a former United States commercial officer in Beijing and founder of the Silicon Valley security firm Madeira Consulting.

By its own admission, Huawei has struggled with corporate governance.

In a rare 2015 media appearance, Ren Zhengfei, Huawei’s founder, said that 4,000 to 5,000 employees had admitted to various improprieties as part of a “confess for leniency” program the company set up in 2014.
“The biggest enemy we’ve run into isn’t other people,” he said at the time. 

“It’s ourselves.”
A Treasury spokeswoman declined to comment on whether it was conducting an investigation. 

A Commerce Department spokesman also declined to comment.
Huawei plays an important strategic role for China. 

The company is often a part of Chinese overseas trade delegations and investment deals in emerging markets like South America and Africa. 

As a major spender on research and development, it is also a crucial part of Chinese industrial policies aimed at building up domestic technological capabilities.
It has also turned itself into an increasingly recognized smartphone brand. 

In the fourth quarter of 2016, Huawei was the third-largest smartphone maker in the world, with a global market share of about 10 percent.
The subpoena, which was sent to Huawei’s Texas offices in the Dallas suburb of Plano, called for the company to describe technology and services provided to Cuba, Iran, Sudan and Syria over the past five years. 

It also called for the identity of individuals who played a part in those transactions. 

North Korea, which was named in the Commerce Department subpoena issued last year, was not named in the Treasury Department subpoena.
The scrutiny of Huawei shows the increased importance both the United States and China are putting on the technology industry. 

Earlier this year a Pentagon report distributed at the top levels of the Trump administration indicated Chinese flows of investment into American start-ups were a new cause for concern.
The American authorities have jurisdiction over the trade of companies like Huawei and ZTE when those companies sell equipment made by or featuring components from American companies. 

If Huawei is deemed to have violated American laws, it could have its access to American electronic components cut off. 

Given the company’s size — it is one of the two largest cellular phone equipment makers in the world — that could have an effect on the expansion of mobile networks around the globe.
When the Department of Commerce first announced its investigation into ZTE, it released a document in which ZTE executives mapped out a plan for how to get around American export controls. 

The document said the strategy came from a company that ZTE labeled with the code name F7, which The New York Times reported closely resembled Huawei.
Earlier this month 10 members of Congress sent a letter to the Commerce Department demanding that F7 be publicly identified and fully investigated.
“We strongly support holding F7 accountable should the government conclude that unlawful behavior occurred,” read a part of the letter.

Trump's U-turns

Trump dumps Russia, woos China instead
By Nicole Gaouette

Washington -- Donald Trump has a new best frenemy.
Once upon a time, Trump mused about how well he and Russian President Vladimir Putin would get along. 

Then-candidate Trump said Putin had declared him a "genius," criticized the Obama administration's tensions with Moscow and said it would be better "if we got along."
China, on the other hand, was a currency manipulator, a thief of US jobs that should no longer be allowed to "rape our country." 

If elected, Trump promised to impose heavy tariffs on Beijing and take it to court for shady trade practices.
It turns out that wielding power -- as opposed to criticizing it -- can change your outlook.
This month, during which his administration has stepped up US military action in Syria and Afghanistan as he looks to reassert US power, Trump said that "we're not getting along with Russia at all, we may be at an all-time low." 

He and Xi Jinping, on the other hand, have "a very good chemistry," Trump declared.
The President's reversal on Russia and China is part of a series of policy flip-flops that have seen Trump abandon campaign positions on NATO, Israel, the Iran nuclear agreement and US alliances in Asia.
The shifts, which bring Trump's White House in line with many Obama and George W. Bush administration policies, may not last under this mercurial president, but they reflect some hard facts about America's interests.
"Whatever the aspirations on the campaign trail, they have given way to the realities of what it takes to conduct American foreign policy in a cruel and unforgiving world," said Aaron David Miller, vice president at the Woodrow Wilson International Center for Scholars.
"The way this administration does business is highly unorthodox in so many respects," Miller said, "but the ultimate outcome on so many issues seems now to come around to a pretty conventional approach."
And so it is -- these days -- with Russia and China.
Trump had been eager to improve relations with Moscow and often expressed confidence that his ability to bond with Putin would ease friction between Washington and Moscow over Russia's role in Syria and its annexation of Crimea from Ukraine.
But Syrian President Bashar al-Assad's alleged April 4 chemical weapons attack on his own civilians triggered Trump's outrage, leading him to strike a Syrian airfield with Tomahawk missiles and seeming to mark a change in Trump's outlook on Russia -- which has supported Assad throughout Syria's bloody civil war.
Trump's administration, shadowed by Russia's alleged interference in the US election, had already been shifting its views on Moscow as the former real estate mogul brought more figures into the White House who backed traditional foreign policy positions.
Defense Secretary James Mattis and Secretary of State Rex Tillerson, who had his own foreign policy research and risk analysis staff as CEO of ExxonMobil, along with UN Ambassador Nikki Haley, all sounded a tougher note on Russia than the President did, pointing out the ways that Moscow works to counter US interests around the world.
"They were all sounding much tougher on Russia, much more like the Obama administration, and the outlier was the White House," said Angela Stent, director of the Center for Eurasian, Russian and East European Studies at Georgetown University.
The US missile strike was an exclamation mark establishing that Trump, for the time being at least, has come to see Russia in more conventional US foreign policy terms. 

"You have a much more consolidated policy toward Russia now," Stent said.
Putin told Russian TV in an interview Wednesday that under Trump, the relationship between Washington and Moscow had "worsened."
Even as he took a harsher tone on the longtime US adversary, Trump still seemed to offer some reassurance in a Wednesday appearance with NATO Secretary General Jens Stoltenberg, saying that, "It would be wonderful ... if NATO and our country could get along with Russia." 

On Thursday, Trump tweeted that, "things will work out fine between the U.S.A. and Russia. At the right time everyone will come to their senses & there will be lasting peace!"
But Stent said that actually there is likely to be continued US-Russia tension. 

"All the problems the previous administration had still remain," she said.
"You had these role reversals," according to Miller, a former State Department official, "with China as a bad guy and Putin being courted. But in the face of realities, there's been a switch. Russia basically now occupies the role that China was supposed to occupy in the Trump administration."

The "realities" that Trump faces include North Korean leader Kim Jong Un's accelerating pursuit of nuclear and missile technology. 

Trump sent tweets this week praising Xi for committing to help restrain North Korea, which may be on the verge of a sixth nuclear test. 

Beijing is Pyongyang's closest ally.
On Tuesday, Trump tweeted that he'd told Xi a trade deal with the US would be "far better for them if they solve the North Korea problem." 

On Wednesday, Trump tweeted that he and Xi had had "a very good call" about Pyongyang. 

And Thursday, the president tweeted that he had "great confidence that China will properly deal with North Korea. If they are unable to do so, the U.S., with its allies, will! U.S.A."

Sandy Pho, a senior program associate for the Kissinger Institute on China at the Wilson Center, said that Trump, like many new presidents, has been facing a learning curve on the ways of Beijing.
"You cannot not talk to China. I think that's what he realized. It's too important," said Pho, but she warned Trump is underestimating China's influence over North Korea and its interest in an outcome the US would be happy with.
What Beijing wants in North Korea is stability, not potentially disruptive change. 

"The last thing they want is a flood of North Korean refugees coming over their border," Pho said.
And the only thing Beijing might think was worse, she said, would be a unified and US-allied Korean Peninsula on the border.
If Trump thinks his new posture towards the geopolitical rivals will help him play them off against each other, Stent suggested he think again.
"I think he fundamentally doesn't understand the nature of the Russia-China relationship," she said, describing it as pragmatic. 

The two authoritarian governments support each other on major foreign policy problems, dislike domestic protest and see the US in a similar way.
"Both agree that we need a new world order that takes their interests into account more than it does right now, and both agree it's time to move away from a US-dominated global order," Stent said.

Towards US–China Non-Aggression Pact

China's Split With Russia on Syria Signals Warmer Xi-Trump Ties
By Ting Shi and Jennifer Epstein

China’s abstention from a United Nations resolution condemning the chemical attack in Syria is the most significant sign yet of warmer ties between Xi Jinping and Donald Trump after they met last week.

China, which has since 2011 joined Russia to veto six UN Security Council resolutions on Syria, abstained from a vote Wednesday on a U.S.-led proposal criticizing last week’s chemical weapons attack.

The move left Russia -- Syrian President Bashar al-Assad’s chief ally -- as the only veto-wielding council member to oppose the resolution.
The vote shows that China’s president appears intent to build on the rapport Trump says the two leaders established in their first meeting at the U.S. leader’s Florida resort. 

His unilateral decision to launch almost 60 cruise missiles on a Syrian airbase in retaliation for the attack has raised concerns in Asia about a similar strike against North Korea, a Chinese ally.
Shi Yinhong, a foreign affairs adviser to China’s cabinet and director of Renmin University’s Center on American Studies in Beijing, called the abstention a gesture of “considerable goodwill” to Trump. China has opposed military action against Assad’s government since Syria’s civil war began, urging a political solution instead.
“It shows Xi desires to have a good relationship with Trump, but it could come at the expense of undermining ties with Russia,” Shi said. 

“It’s a signal of willingness to cooperate more on the international stage, especially on North Korea’s nuclear program.”
Trump’s conversations with Xi played a role in China’s decision to abstain, according to a senior administration official who spoke on the condition of anonymity. 

In a statement explaining the vote, China’s UN ambassador, Liu Jieyi, said that parts of the resolution required revision, without elaborating.
Trump told reporters he’s pushing Xi to pressure North Korea to abandon development of nuclear weapons and missiles capable of striking the U.S., a program that has also alarmed American allies in Japan and South Korea. 

Tensions are mounting amid evidence that North Korea is ready to conduct a sixth nuclear bomb test in defiance of UN sanctions.
“President Xi wants to do the right thing,” Trump said at a White House press conference Wednesday with Nato Secretary General Jens Stoltenberg. 

“I think he wants to help us with North Korea.”

Both the White House and China’s state media have touted the personal bond forged during the roughly 18 hours the two leaders spent together last week, including when Trump’s five-year-old granddaughter demonstrated her Chinese language skills for Xi. 

The senior administration official credited Trump’s grandchildren with having a big impact on the relationship.
Trump’s threats to challenge China on trade, North Korea and Taiwan risked upending the sensitive diplomatic balance between the world’s two largest economies. 

Chinese officials worked for weeks behind-the-scenes to build ties with Trump and his family, before a February phone call between the two leaders in which he reaffirmed long-standing U.S. policy on Taiwan. 

That led to last week’s summit.
In an interview with the Wall Street Journal published earlier Wednesday, Trump said he offered to ease trade pressure on China in exchange for help dealing with its unruly neighbor. 

China helped North Korea fight a U.S.-led coalition to a stalemate in the Korean War and remains the isolated nation’s principal trading partner.

Trade, Security
“You want to make a great deal? Solve the problem in North Korea,” Trump said, noting such a solution would be “worth having” a trade deficit with China. 

In the same interview, he said his administration wouldn’t formally accuse the country of manipulating its currency to gain a trade advantage, retreating from a core campaign promise.
China opposes even limited U.S. military action against its ally and neighbor, which risks dragging both sides into a broader conflict and send refugees clambering toward its border. 

In a call with Trump on Wednesday, Xi reaffirmed China’s belief that talks were the only way to rid the Korean peninsula of nuclear weapons, according to state media.
The U.S. sent an aircraft carrier battle group into the area this week amid speculation that North Korean leader Kim Jong Un might conduct another nuclear test to mark his grandfather’s birthday on Saturday. 

U.S. Secretary of State Rex Tillerson said during an appearance on ABC’s “This Week” that the strike on Syria sent a message to Pyongyang, while adding that the administration had “no objective to change the regime in North Korea.”

Oil Embargo
The Communist Party-affiliated Global Times newspaper has indicated a willingness in the Chinese government to support stronger measures against North Korea. 

The Trump administration is considering tougher economic sanctions, including an embargo on oil supplies to North Korea, flight bans, cargo interception and punishment on Chinese banks doing business with North Korea, Reuters reported Thursday, citing unidentified U.S. officials.
Zhou Qi, the director of Tsinghua University’s National Strategy Institute in Beijing, said it was logical for China to do more to curb Kim’s nuclear program if actions were taken within the UN framework.

Talkative President

Schumer: Trump 'all talk and no action' on China
By Ted Barrett

Senate Democratic Leader Chuck Schumer held a conference call with reporters Tuesday to blast Donald Trump's handling of trade issues with China -- including what he called China's unfair trade practices, currency manipulation, intellectual property theft and more.
"China has taken us to the cleaner when it comes to the economy. China has stolen millions of jobs and trillions of dollars," Schumer said, noting that he had agreed with much of Trump's rhetoric about getting tough on China during the campaign. 

"By any measure, the Chinese government has pulled the rug out from the United States and administrations from both parties haven't been strong enough to fight back."
But Schumer said since Trump took office he has been "all talk and no action" on China.
"He had a golden opportunity to win concessions from Xi Jinping when he visited last week. But unfortunately, Trump has come home empty handed. The two countries have said they will work on a 100-day plan to bring better balance to the trade relationship. That means virtually nothing," Schumer said.
He was asked about Trump's tweet Tuesday linking possible trade deals to China's handling of the nuclear threat from North Korea.
"The Chinese have done nothing on North Korea and I don't they will unless they think America is tough," Schumer said. 

"The tougher we are on trade, the more likely the Chinese are going to do something on North Korea."
"I think what he (Trump) is saying is if they are tough on North Korea, I'll go easier on trade. First, ask the American people if they like that deal, and they won't," said Schumer who indicated he told the President that before Trump met with Xi. 

"I told him the tougher you are on one, the more likely you'll get on the other. I won't tell you what he said, but not much."
On Syria, Schumer said the strike to retaliate for Syria's use of chemical weapons was appropriate but that if Trump wants to do more he needs to devise a strategy and present it to Congress. 

He said Democrats are very concerned about getting into a land war in Syria.
"Any further action he should come to Congress. There should be a defined strategy. I, for one, am really, really wary and worried about getting committed to another land war and making the same mistakes we did in Iraq," Schumer said explaining that his caucus would be "very dubious" of that happening.

Dinner-time missile strike leaves China having to reassess Trump

US decision to bomb Syria during meeting with Xi Jinping will have irked China, but it will be more concerned about the future implications
By Tom Phillips in Beijing

For Xi Jinping, it was supposed to be a chance to show himself as the political titan whom Communist party propagandists fete as the “leader of China’s great revival”.
During a two-day visit to Donald Trump’s glamorous Mar-a-Lago estate, Xi would grab headlines as a globe-trotting statesman whose nation could now stand side by side with the world’s leading superpower.
But Trump’s decision to unleash a barrage of cruise missiles against Syria, a decision made just before he sat down to dinner with Xi, has upended those plans and risks derailing an embryonic rapprochement that followed months of tensions between the leaders of the world’s two largest economies.
“China will be upset that strikes occurred in the middle of Xi’s first meeting with Trump – indeed probably while having dinner – where Xi [was supposed to] reinforce his image as a strong Chinese leader on the world stage,” said M Taylor Fravel, an associate professor of political science at the Massachusetts Institute of Technology.

A dinner of steak and carrots, then Trump's cruise missiles struck Syria
Paul Haenle, a veteran US diplomat who advised both George W Bush and Barack Obama on China, agreed that Trump’s move would go down badly with Beijing. 

“But more importantly, I think it says a lot about the US power and preeminent leadership role. It’s hard to imagine any other country in the world making that kind of unilateral strike – certainly not China,” he said.
“I think it underlines the fact that despite Xi’s interest in using this summit to position himself and China as a peer of the US and of Trump’s, China still has a very long way to go in terms of global power and influence. The US is still the world’s preeminent power and it remains the country that shoulders global responsibility, despite Trump’s desire to back away from that kind of international role.”
It was not immediately clear when Trump told Xi, whose government has repeatedly vetoed UN security council resolutions against Bashar al-Assad, about the attack, although a White House official told AFP he had been personally informed about US plans.
In a sign that Beijing was attempting to limit the damage to Xi’s US trip, China’s official news agency announced that Trump had accepted an invitation to visit China. 

“A thousand reasons to make the China-US relationship work; no reason to break it,” Xi reportedly told Trump.
On Friday, Hua Chunying, a spokeswoman for China’s foreign ministry, said Beijing opposed the use of force but stopped short of explicitly condemning the US strikes. 

Asked if the US attack on Syria would overshadow Xi’s meetings with Trump, Hua said China believed people were “paying close attention” to the Mar-a-Lago summit.
But Bonnie Glaser, the director of the China Power Project at the Center for Strategic and International Studies thinktank in Washington, said it was telling that the strikes had coincided with Xi’s arrival in Florida. 

“None of this is planned, in my view,” she said. 

“But I do think it necessarily sends a signal to Xi Jinping that this is a president that means business; that he is not going to sit around and spend an enormous amount of time weighing through things. He is just going to act very decisively.”
Fravel said the decision to attack Syria was unlikely to convince China to turn against Assad. 

“If anything, the strikes will likely bring China and Russia even closer together over Syria, preventing the United States from effectively working through the United Nations,” he said.
However, experts believe it could strengthen Trump’s hand in his dealings with China in two ways.
First, the strikes have given greater credibility to recent US threats to take action to halt North Korea’s nuclear and missile programmes, with or without Chinese support.
After Trump’s failure to follow through on vows to label China a currency manipulator and his decision not to challenge Beijing over Taiwan, “the Chinese narrative has increasingly been that Trump is a paper tiger”, said Haenle.
That assumption would now have to change. 

“He just conducted the first ever US attack against Assad. I think he goes into [Friday’s] discussion with much greater credibility and leverage … The strike has obvious implications for discussions on North Korea,” he said.
Second, Trump’s dramatic move might also make Beijing rethink its alleged militarisation of the South China Sea.
Glaser said many held Barack Obama, reluctant to engage in military action, responsible for allowing China to step up its island-building campaign in the disputed territory. 

There was “a sense that the Obama administration wasn’t willing to follow through on threats and was unwilling to use military force”, she said.
That calculation might also change. 

“It will play into how China will view Trump. I think they will view him with respect,” she said.
But the US president’s decision to undermine Xi’s authority so publicly also carries risks, not least alienating a powerful authoritarian who desperately needs to appear strong before a key political transition in China later this year.
Zhu Feng, an international relations specialist from Nanjing University, attempted to play down the significance of the US attacks. 

He said there was no connection between the strikes and Xi’s stay in Mar-a-Lago and described them as “a matter for the US”.
China’s president is unlikely to agree.

Rogue Companies

U.S. Fines ZTE of China $1.19 Billion for Breaching Sanctions

By PAUL MOZUR and CECILIA KANG

Visitors used ZTE devices during the Mobile World Congress 2017 on Feb. 27 in Barcelona. The company’s settlement with the United States is the latest in a series of skirmishes between the United States and China over technology policy. 

HONG KONG — As one of China’s few truly international technology companies, ZTE is often held up by Beijing as part of a new generation of firms that is able to compete beyond Chinese borders.
On Tuesday, the United States government made an example of ZTE in a different way.
As part of a settlement for breaking sanctions and selling electronics to Iran and North Korea, ZTE agreed to plead guilty and pay $1.19 billion in fines, the United States Department of Commerce said in an announcement. 

The penalty is the largest criminal fine in a United States sanctions case.
The action is the latest in a series of skirmishes between the United States and China over technology policy. 

It also offered a chance for President Trump’s young administration to make a statement about the seriousness of United States sanctions. 

In addition to ZTE, the Commerce Department is also investigating the company’s larger Chinese rival, Huawei, for violating United States sanctions.
“We are putting the world on notice: The games are over,” said Commerce Secretary Wilbur L. Ross. 

“Those who flout our economic sanctions and export control laws will not go unpunished — they will suffer the harshest of consequences.”
ZTE was found to have breached United States sanctions against Iran by selling American-made goods to the country last March. 

At the time, the Commerce Department said it would force American companies to obtain a special license to sell to ZTE, which makes smartphones and telecommunications infrastructure equipment. The restrictions would have had the potential to cripple ZTE’s supply chain.
The ban, however, was never put in place, and instead the Chinese company was given a series of reprieves.
Still, ZTE, which is China’s second-largest maker of telecom equipment, has not fared well over the past year. 

Its revenue from the expansion of China’s 4G cellular networks has slowed and its smartphone business has faced major competition from new Chinese handset makers, as well as Huawei.
On Tuesday, the Commerce Department said that along with selling prohibited American electronics to build Iran’s telecom networks, ZTE also made 283 shipments of microprocessors, servers and routers to North Korea, violating American embargoes in that country as well.
“ZTE engaged in an elaborate scheme to acquire U.S.-origin items, send the items to Iran and mask its involvement in those exports,” said the acting assistant attorney general, Mary B. McCord. 

“The plea agreement alleges that the highest levels of management within the company approved the scheme.”
She added that ZTE repeatedly lied to and misled federal investigators, its own lawyers and internal investigators.
In a statement, ZTE said that it had strengthened its compliance policies and undergone a shake-up of top leaders; the company named a new chief executive last April.
“ZTE acknowledges the mistakes it made, takes responsibility for them and remains committed to positive change in the company,” said Zhao Xianming, chairman and chief executive of ZTE.
Although China and the United States have occasionally traded barbs over technology policy and cyberattacks, the actions against ZTE by the United States government have not had a major impact on the relationship of the two countries, though Beijing could respond harshly to the new fine.
It is unclear whether the Commerce Department has completed its investigations into Chinese telecom equipment makers.
In a rare step accompanying the announcement last March, the Commerce Department provided two internal ZTE documents.
One, from 2011 and signed by several senior ZTE executives, detailed how the company had “ongoing projects in all five major embargoed countries — Iran, Sudan, North Korea, Syria and Cuba.” 

Another document laid out in a complex flow chart a method for circumventing United States export controls.
Citing an unnamed company as a model for circumventing United States sanctions, that second document seemed to implicate ZTE’s more politically important rival, Huawei.
The New York Times reported last year that the United States government was also investigating whether Huawei broke export controls. 

The Commerce Department subpoenaed Huawei, demanding it turn over all information regarding the export or re-export of American technology to Cuba, Iran, North Korea, Sudan and Syria.
Huawei has said it is committed to complying with laws and regulations where it operates.
Huawei and ZTE are private companies, but they have deep ties to the Chinese government, in part because they supply much of the equipment that makes the country’s telecom backbone function.

Axis of Evil

Michael Flynn, a Top Trump Adviser, Ties China and North Korea to Jihadists
By EDWARD WONG

Retired Lt. Gen. Michael T. Flynn, the choice of President-elect Donald J. Trump for national security adviser, speaking at the Republican National Convention in Cleveland in July.

What if someone were to tell you that China and North Korea are allied with militant Islamists bent on imposing their religious ideology worldwide?
You might not agree. 

After all, China and North Korea are officially secular Communist states, and China has blamed religious extremists for violence in Muslim areas of its Xinjiang region.
But such an alliance is the framework through which retired Lt. Gen. Michael T. Flynn, the pick of President Donald J. Trump for national security adviser, views the two East Asian countries. 

To the list of pro-jihadist anti-Western conspirators, General Flynn adds Russia, Cuba and Venezuela, among others. (Never mind that he has recently had close financial and lobbying relationships with conservative Russian and Turkish interests.)
By appointing General Flynn, Mr. Trump has signaled that he intends to prioritize policy on the Middle East and jihadist groups, though the Obama administration seems to have stressed to Mr. Trump the urgency of dealing with North Korea’s nuclear program. 

General Flynn is an outspoken critic of political Islam and has advocated a global campaign led by the United States against “radical Islam.” 

He once posted on Twitter that “Fear of Muslims is RATIONAL.”
General Flynn is about to take on what many consider the most important foreign policy job in the United States government. 

He is expected to coordinate policy-making agencies, manage competing voices and act as Mr. Trump’s main adviser, and perhaps arbiter, on foreign policy.
General Flynn’s peers in the Army have praised him for his work gathering intelligence in Iraq and Afghanistan. 

But senior officials have criticized him for being a poor manager as director of the Pentagon’s Defense Intelligence Agency. 

After being forced from the job in 2014, he began denouncing the Obama administration in public, saying the White House refused to acknowledge important intelligence on growing jihadist threats and their ideological foundations.
He then wrote a book, with a co-author, on his military career and the need to intensify the campaign against Islamic extremists. 

The book, “The Field of Fight: How We Can Win the Global War Against Radical Islam and Its Allies,” published in July, is one of the few places where General Flynn has discussed his views on China and North Korea. 

The mentions are infrequent, but they give some clue as to how he views the Asian nations.
Here are the most relevant passages. 

In the introduction, General Flynn says one of his goals in writing the book is: “to show you the war being waged against us. 

This administration has forbidden us to describe our enemies properly and clearly: They are Radical Islamists. 

They are not alone, and are allied with countries and groups who, though not religious fanatics, share their hatred of the West, particularly the United States and Israel. 

Those allies include North Korea, Russia, China, Cuba, and Venezuela.”
He tries to further explain that alliance through a vague mention of a common ideology:
“There are many similarities between these dangerous and vicious radicals and the totalitarian movements of the last century. 

No surprise that we are facing an alliance between Radical Islamists and regimes in Havana, Pyongyang, Moscow, and Beijing. 

Both believe that history, and/or Allah, blesses their efforts, and so both want to ensure that this glorious story is carefully told.”
Early in his career, General Flynn served with the 25th Infantry Division in the Asia-Pacific region. He writes: “This opened up my eyes to the type of enemies we saw across a wide swath of the Asia-Pacific rim. 

There were many, and still are.”
General Flynn also gives a bit more detail on how he sees this global alliance:
“The war is on. 

We face a working coalition that extends from North Korea and China to Russia, Iran, Syria, Cuba, Bolivia, Venezuela, and Nicaragua. 

We are under attack, not only from nation-states directly, but also from Al Qaeda, Hezbollah, ISIS, and countless other terrorist groups. (I will discuss later on, the close working relationships between terror groups and organized criminal organizations.) 

Suffice to say, the same sort of cooperation binds together jihadis, Communists, and garden-variety tyrants.
“This alliance surprises a lot of people. 

On the surface, it seems incoherent. 

How, they ask, can a Communist regime like North Korea embrace a radical Islamist regime like Iran?”
General Flynn goes on to discuss reports that North Korea has cooperated with Iran and Syria on nuclear programs and trade. 

He asserts that Iran is the “linchpin” of the global anti-Western network. 

He writes: “The mullahs have already established strategic alliances in our own hemisphere with Cuba and Venezuela, and are working closely with Russia and China; a victory over the ‘Great Satan’ in Iraq will compel the smaller Middle Eastern countries to come to terms with Tehran, and make the region much more inhospitable to us and our friends and allies.”
Finally, General Flynn writes that if the United States loses the global war, one result will be living under “the grim censorship we see in groups such as the Islamic State, Al Qaeda, and the Taliban or from nations like Iran, North Korea, and Cuba.”

John Delury, a scholar of Chinese history and the Koreas at Yonsei University in Seoul, South Korea, shared these thoughts after reading General Flynn’s book:
“General Flynn seems to be all about one thing — fighting ‘radical Islam’ — and that means Asia goes on the back burner. 

Obama was trying to ‘pivot’ from costly wars in the Middle East to economic opportunity in Asia, a strategy that was still in-progress and that Hillary Clinton would have stuck with. 

But Flynn has no concept of the importance of Asia. 

For him, America needs to become single-minded in the top priority — destroying radical Islam, at home and abroad.
“Flynn’s obsession with eliminating radical Islam is likely to color his view of everything else — including key strategic questions facing East Asia like the rise of China, resurgence of Japan and nuclear breakout of North Korea. 

Running the National Security Council is all about juggling priorities, keeping your eye on the ball while maintaining strategic balance. Flynn doesn’t come across as much of a juggler. 

For him, there is only one ball out there.
“If Flynn is able to press his global war on radical Islam, America’s rivals in Asia will seize the opportunity to further their interests. 

China can speed up its march to displace the U.S. as the architect of Asian security. 

North Korea can finish its drive to joining the nuclear club. 

Life will also change for America’s Asian allies, who will no longer be able to count on U.S. commitment to their development and defense. 

And America’s role as a promoter of human rights and liberal values — a contested and problematic mission, albeit a noble one — could become a thing of the past.
“Here’s an example of how Flynn’s global war on radical Islam could have unanticipated side effects on Asian security. 

In his book, Flynn links North Korea to his ‘enemy number one,’ the Islamists, by citing Pyongyang’s military and economic ties to Syria and Iran. 

Well, what if the North Koreans promised an envoy from Trump — who said he’s willing to talk to Kim Jong-un — that they would cut their links to radical Islam and even give the Americans some intel based on their years of cooperation? 

Nonproliferation guarantees, which the North Koreans put out as bait throughout the Obama years, to no effect, could serve as a starting point for resumed U.S.-D.P.R.K. negotiation under a Flynn foreign policy. 

The old dictum stands — my enemy’s enemy is my friend. 

Flynn is crystal clear who the enemy is, radical Islam. 

Anyone who shows eagerness to fight the Islamists buys a seat at Flynn’s national security table.”