US Conceding Defeat on Huawei, Won’t Make Good on Threat to Stop Intel-Sharing With Europeans

Two weeks ago, I suggested that Huawei had won its battle with Washington, and now that seems to have been confirmed by U.S. officials. “We are going to have to figure out a way in a 5G world that we’re able to manage the risks in a diverse network that includes technology that we can’t trust,” conceded Sue Gordon, the Principal Deputy Director of National Intelligence, at a conference in Texas last week.

The U.S. official was clearly referring to Huawei. And the message was equally clear. The U.S. has failed to spark a global prohibition on the Chinese manufacturer’s 5G equipment, which they claim carries a major security risk given alleged company links to the government in Beijing.

As to how all of this will actually work in practice, without destroying the West’s intelligence sharing arrangements? “We’re just going to have to figure that out,” Gordon said. As reported in the Washington Post, the U.S. is now having to plan for a world where Huawei maintains its dominant position in networking equipment as countries shift to 5G. And, consequently, “you have to presume a dirty network,” Gordon explained. “That’s what we’re going to have to presume about the world.”

East versus West

“America doesn’t represent the world,” Huawei founder Ren Zhengfei had told the BBC in February. Back then, it looked as though the U.S. could prevail in its campaign against the company. But since then the EU has essentially refused to go along with any outright bans, and other countries including Thailand, the UAE and the Philippines have done the same. At the Mobile World Congress in Barcelona, where Huawei ran a masterful PR campaign to turn the spying tables on the U.S. themselves, the company claimed that it had signed new 5G deals with operators around the world.

Since then, the company has published a record set of annual results for 2018, with revue growth of 19.5% to catapult them into the Microsoft and Google bracket with revenue above $100 billion. Although their carrier revenues were flat, with growth now more reliant on glitzy new smartphones, the company claimed afterward that network equipment would return to double-digit growth again for 2019.

Last week, all had not yet seemed lost. On Wednesday, U.S. Secretary of State Mike Pompeo said that he remained “hopeful” that Washington could convince the EU to take a harder line on Huawei. “I think we’ve made progress,” he said, “and I know that we are going to continue to push… When you have telecommunications that are deeply connected to state-owned enterprises connected to China, we don’t see there is a technical mitigation risk that is possible.”

That “hope” was boosted when the U.K. came out publicly to slam Huawei as “bringing significantly increased risk to U.K. operators,” with the country’s spy agency offering only “limited assurance that all risks to U.K. national security from Huawei’s involvement in the UK’s critical networks can be sufficiently mitigated long-term.”

This seemed to directly contradict the consensus forming across the EU to take a broader view, weighing up the potential risks to the very real economic damage of delays to their 5G programs. Two days before the U.K. report was released, the European Union confirmed that their advice would be for countries to ‘proceed with caution’, to conduct their own risk assessments, and then to decide what actions to take. The information would be shared, but countries would decide for themselves.

But it was welcome news in Washington. The U.K. viewpoint is taken seriously, given the country’s cyber expertise and deep understanding of Huawei, which has established a strong presence in the country over many years. “I can’t understand how German telecom providers are so naive about Huawei,” one senior but unnamed German security official was quoted as saying in the Washington Post. “If the Chinese authorities want access, Huawei will have to grant it and that’s a problem.”

Is this really the end?

Huawei has been taunting the U.S. as it makes headway in its battle against them. “The U.S. government has a loser’s attitude. It wants to smear Huawei because it cannot compete against Huawei,” rotating chairman Guo Ping told reporters on Friday, after the company’s results were released. “I hope the U.S. can adjust its attitude.”

Written before the U.K. news hit, Huawei’s Annual Report claimed that the company has “made cybersecurity and privacy protection our top priorities since 2018. Over the past three decades, we have worked closely with our carrier customers to build over 1,500 networks in more than 170 countries and regions. Together, we have connected more than three billion people around the world, and we have maintained a solid track record in security throughout.”

The U.K. did not agree. Its dedicated Huawei oversight body had raised issues last year, and last week claimed that “no material progress has been made on the issues raised in the previous 2018 report.” This despite Huawei claiming to have made fixing its security holes a management priority and pledging $2 billion to make sure that happens.

The BBC reporter who interviewed Ren in February reported that “where I saw [Ren’s] confidence slip, was when I asked him about his links to the Chinese military and the government. He refused to be drawn into a conversation, only to say that these were not facts, simply allegations. Still, some signs of close links between Ren and the government were revealed during the course of our interview. He also confirmed that there is a Communist Party committee in Huawei, but he said this is what all companies – foreign or domestic – operating in China must have in order to abide by the law.”

And so the U.S. will continue to “push” other countries to take a harder line with Huawei, but it has essentially conceded that there will be Huawei equipment deployed in countries where it shares intelligence. Security measures will become the focus instead.

Despite the campaigning, Washington has failed to produce tangible evidence of Huawei’s spying at the behest of Beijing. “We’ve not seen any evidence of backdoors into the network,” said Vodafone’s most senior lawyer in the U.K. “If the Americans have evidence, please put it out on the table.”

For countries weighing up the realities of 5G investments and deployment schedules, the lack of evidence has ultimately proved fatal to the U.S. campaign. Intelligence officials are pragmatists and they manage risk in the real world, far from political rhetoric. “Huawei is on the front foot,” I had suggested earlier in March. “But whether it has fully won its war with Washington will be known in the coming weeks.” If they’re not quite there just yet, they’re certainly now within touching distance.

Source: Forbes