Huawei Breached US Sanctions by Selling Gear to North Korea – Report

Huawei has been accused of selling equipment to North Korea in breach of Washington sanctions.

Drawing on internal Huawei documents leaked by former staff, the Washington Post says the Chinese company supplied North Korean operator Koryolink for at least eight years up to 2016.

Especially troubling for Huawei is that it partnered with a Chinese state-owned firm, Panda International Information Technology, which has been under Commerce Department sanctions since 2014.

Any company supplying Panda with equipment in which US components account for at least 10% of the total would be in violation of the ban.

Huawei said in an emailed statement that it "has no business presence" in North Korea and is committed to complying with "all export control and sanctions laws and regulations of the UN, US and EU."

Last year, the US administration under President Donald Trump slapped heavy penalties on ZTE, another Chinese equipment maker, for similar sanctions breaches.

After being fined $892 million for trading with Iran, ZTE was banned from buying US components when the Commerce Department concluded it had made false statements regarding its treatment of executives involved in the Iran transactions. The ban was lifted after three months.

But the precedent will make it hard for US authorities to ignore the North Korean revelations involving Huawei.

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Huawei has been a target of US Congress and security agencies for a decade on grounds that its China government and military links make it a security threat. There have also been allegations -- never proved -- that it installs vulnerabilities in its network equipment.

It was placed on a Commerce Department "Entity List" on May 15, preventing it from buying equipment from US suppliers.

While Huawei claims it has not been affected by the ban, and has been aided by US firms skirting the rules, the blacklisting threatens the company's long-term competitiveness, especially in the handset sector.

Huawei's hopes of being removed from the list rose during the G20 event last month when President Trump raised the possibility of a deal, apparently as a bargaining chip in the US-China trade talks and because of the impact felt by US suppliers.

While the trade talks have stalled, the US government is bound to investigate any possible breaches of North Korean sanctions.

Asked by reporters Monday about the issue, Trump seemed unaware of it but said: "We'll have to find out."

Huawei's North Korean customer, Koryolink, is 75%-owned by Egypt's Orascom TMT, with remaining shares held by Korea Post and Telecommunications Co. (KPTC).

According to website 38 North, which has also seen the Huawei internal documents, Koryolink was set up in 2008, at which time Huawei and Panda began supplying equipment.

38 North says Huawei helped KPTC and Orascom create "one of the most restrictive cellular environments in the world," serving three different categories of users with different access privileges and capable of eavesdropping on users through Huawei-built gateways.

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— Robert Clark, contributing editor, special to Light Reading

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