Block Huawei at Your Peril, China Threatens Canada – Report

A Chinese official has threatened Canada with "repercussions" if it moves to block Huawei from participating in the rollout of next-generation 5G networks, according to a report in Canadian newspaper The Globe and Mail.

Chinese ambassador Lu Shaye is said to have made the threat during a recent news conference at China's embassy in the Canadian capital of Ottawa.

"I hope Canadian officials and relevant authorities and bodies will make a wise decision on this issue. But if the Canadian government does ban Huawei from participating in the 5G networks... I believe there will be repercussions," he is quoted as saying.

Lu reportedly would not go into details about the nature of these "repercussions," but his warning comes at a low point in China-Canada relations following the arrest on Canadian soil of Meng Wanzhou, Huawei's chief financial officer, last December. (See Huawei Controlled Firm That Sold to Iran – Reuters .)

Meng is awaiting extradition to the US on charges of fraud, having allegedly covered up links between Huawei Technologies Co. Ltd. and Skycom, an equipment vendor that may have sold gear to Iran in breach of US trade sanctions.

China has subsequently arrested two Canadians on grounds of national security, while a third has been sentenced to death for smuggling drugs, according to press reports.

Seemingly unrelated to the case against Meng, Canada appears to have come under pressure from US authorities to block Huawei from selling 5G equipment to service providers including BCE Inc. (Bell Canada) (NYSE/Toronto: BCE), Rogers Communications Inc. (Toronto: RCI) and Telus Corp. (NYSE: TU; Toronto: T).

Huawei's opponents say Chinese authorities could use its network equipment for spying. Several countries have now moved to exclude Huawei from their 5G markets while others are said to be weighing a ban. (See Where Huawei Fears to Tread and Huawei's CEO Denies Back Door Theory – Reports.)

The countries that have imposed restrictions include Australia, New Zealand and the US, which -- along with Canada and the UK -- are members of the so-called "Five Eyes" partnership that shares intelligence on cyber-crime and terrorism. (See How the West Can Hurt Huawei.)

Intelligence and security officials in the UK have recently expressed concern about the use of Huawei equipment. UK telecom incumbent BT, meanwhile, is moving to strip Huawei out of its mobile core and optical networks. (See Huawei Cut Out of BT's Mobile Core, Optical & Edge Plans.)

Although Canadian operators do not appear to have imposed any such restrictions on Huawei, Ibrahim Gedeon, the chief technology officer of Telus, told Light Reading last year the trade war between the US and China made him "apprehensive" about dealing with Huawei. (See Huawei Faces Security Backlash in Australia.)

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Despite his recent jitters, Canadian operators have come to rely heavily on the Chinese vendor. BCE and Telus would face at least $1 billion in costs if they had to remove Huawei from their networks, according to a recent Bloomberg story.

Yet excluding Huawei from the 5G market should not force operators to strip Huawei gear out of their 4G and other networks, unless Canadian authorities decided to support a more comprehensive ban.

US pressure on Canada to block Huawei first became apparent in October last year, when US Senators Marco Rubio and Mark Warner wrote a letter to Canadian Prime Minister Justin Trudeau to warn him that Canada's use of Huawei equipment risked compromising intelligence sharing between the two countries. (See US Senators Urge Canada to Ban Huawei – Report.)

Outside the Five Eyes partnership, Japan and Taiwan have also imposed restrictions on Huawei, while French telecom incumbent Orange has ruled out the use of Huawei's 5G equipment in its domestic market. (See Japan Next in Line to Block Huawei, ZTE.)

According to reports from Germany this week, German security officials are now considering whether to set up security standards that Huawei could not realistically achieve. German telecom incumbent Deutsche Telekom previously indicated it was reassessing its procurement strategy in the light of concerns about the use of Chinese vendors for network equipment. (See Eurobites: Now Germany Gets the Huawei Heebie-Jeebies.)

— Iain Morris, International Editor, Light Reading

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