How US Sanctions Drove Iran Into Huawei’s Arms

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How US Sanctions Drove Iran Into Huawei’s Arms

U.S. sanctions kicked Ericsson out of Iran. Now the Chinese telecom giant is poised to win the 5G race in the country.

How US Sanctions Drove Iran Into Huawei’s Arms

The logo of Huawei stands on its office building at the research and development center in Dongguan, in China’s Guangdong province, on December 18, 2018.

Credit: AP Photo/Andy Wong

The Chinese high-tech giant Huawei is apparently capitalizing on Beijing’s major 25-year partnership deal with Iran to gain a monopolistic position in the development of the country’s 5G network, replacing its Swedish rival, Ericsson, which left Iran due to American sanctions.

While many developed countries – including the United States, the United Kingdom, Germany, Australia and Canada – have partially started their 5G mobile services, there is an ongoing race among developing countries, especially in the Middle East and North Africa (MENA), to realize their cherished ambitions of delivering effective and efficient public services. In the process, they hope to accelerate economic diversification and promote sustainable growth.

Iran is no exception in this regional race, and has proceeded with its 5G plans despite the U.S. sanctions. In fact, Iran was one of the first countries in the world to successfully conduct a 5G network trial. In September 2017, the country’s second largest mobile operator MTN-Irancell and Ericsson jointly conducted a successful 5G test connection in Tehran, though that did not bring any credit for the country as the initial tests did not lead to a fully operational 5G network.

The Irancell-Ericsson cooperation had been made possible with the lifting of international sanctions against the Islamic Republic thanks to the signing of the 2015 Joint Comprehensive Plan of Action (JCPOA), the nuclear deal between Tehran and world powers. But the honeymoon came to an end when Ericsson was forced to leave Iran after U.S. President Donald Trump withdrew from the JCPOA in May 2018, re-imposed Washington’s sanctions against Iran, and warned European countries against any cooperation with Tehran.

In its 2018 annual report filed with the U.S. Securities and Exchange Commission, the Swedish tech giant confirmed that “since the US withdrawal from the JCPOA, Ericsson is winding down its business and organization [in Iran] significantly.” It says it will continue to “provide the two main mobile carriers, MCCI and MTN Irancell, with support critical for the network to function and to fulfill engagements with these carriers entered into before May 8, 2018.”

Based on the same commitments, Ericsson continued to sell the two Iranian companies communications infrastructure-related services and products in 2019, according to its annual report. The report, however, indicates that Ericsson’s operating income from such sales has sharply decreased from 820 million Swedish krona ($93.4 million) in 2018 to 95 million krona ($10.8 million) in 2019, which evidences the end of the honeymoon period.

Peter Olofsson, a senior communications official at Ericsson, told me that the Swedish company’s “current engagement with customers in Iran [is]… very low.” Olofsson noted that the sanctions on Iran did not include telecommunications. He added, “Our current reduced activity is mainly due to sanctions targeting monetary transactions and the banking sector.”

Now it seems that the company’s withdrawal from the Iranian market – confirmed to me by an Irancell official who didn’t want to be identified – has allowed Ericsson’s Chinese rival, Huawei, to take over. Iran has not yet officially confirmed that it is purchasing 5G equipment from the Chinese firm, but it is almost certain that the world’s largest supplier of telecom equipment has already added Iran to its long list of customers.

In late July, during an unveiling ceremony at its Tehran headquarters, Irancell’s CEO announced that the company buys its 5G equipment from various vendors around the world. He did not mention any names, but did not deny that the company is working with Huawei when asked about it in the press conference.

“Currently, various vendors are producing 5G equipment in the world and our policy is to keep using various vendors in the network, as we did in the past,” Bijan Abbasi said in response to a question about the alleged security concerns over the use of Huawei equipment.

The aforementioned Irancell official later told me that the company has its own security protocols regarding cooperation with foreign companies. Irancell also pays attention to the considerations and protocols of the country’s “security apparatus,” the source added, without giving further details.

The U.S. government says Huawei’s 5G equipment is a security risk, claiming that it could be used by China for spying. Much of its concern is based on the fact that the tech giant’s founder, Ren Zhengfei, is not only a member of China’s Communist Party, but also spent nine years as an officer in the People’s Liberation Army.

Due to security concerns and a possible impact on its relations with Washington, the United Kingdom decided to remove the Chinese telecom giant from its 5G mobile networks in July. Many Germans are also opposed to the Chinese company’s involvement in their own country’s networks. However, Chancellor Angela Merkel has resisted a full ban on Huawei, holding the line against security hawks.

While Germans and Britons might be concerned about the use of Huawei equipment for fear that it may assist the Chinese intelligence agency in collecting information from European citizens, the Iranian people are in a worse situation. Online, many have expressed worries about China’s growing influence in their country – especially its long-term deal with the Iranian government – which could give Beijing massive control over the lives of Iranians if finalized.

“The UK parliament just announced [that] the country’s telecom companies have been obliged to remove all [of] their Chinese 5G equipment over the risk of Chinese surveillance of Britain’s data in seven years’ time. This is while Iran has promised to launch [a] 5G network [in cooperation with China],” one Iranian netizen tweeted recently, appending the hashtag “#Chinese_Turkmenchay.” This hashtag raises doubts about Iran-China cooperation on 5G by comparing the deal to the notorious 1828 Treaty of Turkmenchay between Persia and czarist Russia.

The Iranian government has been accused of “selling” parts of the country to China by signing a 25-year “strategic partnership” deal, a leaked version of which was recently obtained by the New York Times. Once the agreement is signed by the two sides, Beijing will invest a total of $400 billion in the banking, transport and development sectors in Iran.

According to the 18-page Persian-language draft, telecommunications is one of the main components of the strategic deal. The document states that Tehran and Beijing are expected to launch “joint projects for development and reinforcement of [Iran’s] information and communications infrastructure,” including “development of [a] 5G network.”

In exchange for all its investments, Beijing reportedly will receive heavily discounted Iranian oil over the next 25 years. The Chinese are also expected to gain considerable influence over the Persian Gulf ports and islands of Iran. That explains why some Iranians compare the draft accord to the Treaty of Turkmenchay, which forced the Persians to relinquish control of territory in the South Caucasus.

Reza Hashemi, a Sydney-based Iranian expert on computer systems, has also criticized the imminent launch of a 5G network in Iran. “The whole world now knows [that] Huawei is a security company engaged in spying activities controlled by China, which has been removed by industrial countries despite certain technical advantages….” He then cited the economic problems the Iranian government is currently facing, and questioned the real purpose behind bringing Chinese 5G technology to Iran.

The 25-year deal is part of Chinese President Xi Jinping’s ambitious Belt and Road Initiative, which aims to increase Beijing’s economic and strategic presence across Eurasia. According to the New York Times, the pact is expected to “vastly extend China’s influence in the Middle East, throwing Iran an economic lifeline and creating new flash points with the United States.”

A deal with Huawei to set up Iran’s nationwide 5G network – which seems imminent considering its inclusion in the “short-term executive measures” stipulated in the draft version of the deal – would heavily contribute to Xi’s objectives, even though the tech giant’s founder Ren Zhengfei claims that the company has never given data to the Chinese government and would not allow the government access to the data.

“Huawei and me personally have never received any request from any government to provide improper information,” Ren said last year. “When it comes to cybersecurity and privacy protection, we are committed to [siding] with our customers. We will never harm any nation or any individual.”

Tehran has denied accusations that it is “selling” Iran, but China’s strong control over the Iranian people’s access to the Internet is just as worrying as the alleged sale of the country’s soil. The mostly young and highly-educated population of Iran has long been concerned about suffering from censorship and filtering, but what rubs salt into their chronic wound is that the sanctions imposed by the U.S. – a self-proclaimed “advocate of the Iranian nation’s rights” – are now shooing away European companies and pushing Iran into China’s arms.

Reza Khaasteh is a Tehran-based journalist.