Risky Business: Huawei’s Iran Business Dealings Catch up With Them

As Company’s CFO is Arrested, its Ties With Iran Come Under Increased Scrutiny 

News last week that Beijing-based Huawei Technologies Co.’s chief financial officer, Meng “Cathy” Wanzhou, was arrested on December 1 for allegedly violating U.S. sanctions against Iran has roiled financial markets and spooked investors because of the potential implications to the U.S.-China trade relationship. According to the Canadian affidavit, Meng convinced companies to continue providing banking services to Huawei despite the fact they were still operating in Iran and flouting sanctions. But the arrest, and Huawei’s hubris in maintaining significant business ties with Tehran, is no surprise to sanctions monitors or the business community. 

According to the Chinese government, Huawei has operated in Iran since 1999, and provides network services, consulting and/or equipment to Iranian telecommunications companies and defense contractors supporting the Islamic Revolutionary Guards Corp. In 2015, Huawei – the world’s largest telecommunications company and second largest smartphone maker – reported that Iran was its largest foreign market. 

This doesn’t make Huawei an outlier in China. To the contrary, China remains one of Iran’s premier trading partners. China’s exports to Iran totaled $16.4 billion in 2016, the latest year for which data is available, while imports totaled $14.8 billion that year. Beijing is also Tehran’s largest energy customer, importing up to 800,000 barrels per day in recent months. But the energy carve-out in current U.S. sanctions does not protect Huawei or its executives, who have been warned repeatedly by UANI about conducting business in Iran over the last seven years. 

Since 2016, UANI has reached out to Huawei CEO Ren Zhengfei on three separate occasions detailing how the Iranian business community is awash with terrorist front companies, its banks are a conduit for terror financing and its leaders are dependent on foreign capital to support everything from human rights abuses to the development of advanced ballistic missiles. UANI specifically warned Huawei of the appalling ethical consequences of providing equipment to Iran’s state-run telecom companies and agencies, which routinely surveil, suppress and help subjugate Iranian journalists, dissidents, protestors as well as other vulnerable ethnic and religious minorities. This has resulted in the imprisonment, torture, and even death of Iranian citizens. 

Every effort by UANI to persuade Mr. Ren of these risks and the attendant increased scrutiny on Huawei has gone unheeded.  Now his colleague and daughter, CFO Meng Wanzhou, faces extradition by Canadian authorities to the U.S. and a potentially lengthy stretch in jail. 

“The arrest of a senior Huawei official for allegedly shipping products of U.S.-origin to Iran and other countries in violation of U.S. export and sanctions laws should cause all American retailers to review and cancel their agreements with the company to stock and sell their products,” said UANI CEO Mark D. Wallace. “It is entirely inappropriate for American companies, especially those with government contracts, to maintain ties to a business that supports the Iranian regime.” 

As the Wall Street Journal notes, now British banks HSBC and Standard Chartered might be embroiled in this mess due to their ties to Huawei. Since the U.S. withdrawal from the Iran Deal, UANI has called for adopting Enhanced Due Diligence (EDD) and Know-Your-Customers-Customer (KYCC) standards, which would precisely avoid this problem of companies inadvertently discovering themselves tied to customers that undermine the sanctions all U.S. businesses must follow. Both UK lenders were apparently assured by Huawei that the Chinese firm was not doing business in Iran through Hong Kong-based Skycom Tech.

Financial institutions are required to perform EDD and monitor high-risk clients which may have Iran ties as a matter of course. But all companies should now look to do the same. Presently, retail giant Amazon maintains a specific page for Huawei products, including smartphones, smartwatches and laptops. Microsoft sells their laptops. Jet.com, a subsidiary of Walmart, sells the company’s devices. Newegg, a leading electronics-focused e-retailer, also sells Huawei products (California-based Newegg is controlled by a Chinese tech company, Hangzhao Liaison Interactive). 

“Amazon would surely avoid ties to a business that sells products to companies aligned with the Kim regime in North Korea. Microsoft, a major U.S. government contractor, would certainly forswear business with companies that have a role in supporting transnational terrorism,” said Wallace. “Engaging with companies like Huawei that openly and brazenly operate in Iran is no different. It’s time to pull their products from the shelves.”