Huawei Set Challenge by Sanctions on Iran

In recent years, a large number of Asian companies have profited by doing business with the Islamic Republic of Iran. The United States and the European Union have struck back, cutting off access to these companies’ markets by levying sanctions on Iran. As a result, Asian giants such as Huawei Technologies, one of the world’s largest and most powerful telecommunications firms, have finally decided to cut back their Iranian dealings. Those companies that have yet to make the right decision should consider carefully whether doing business with the mullahs is worth the risk.

Huawei is a Chinese multi-national corporation that is soon expected to surpass Sweden’s Ericsson as the largest telecommunications infrastructure supplier in the world. The company has annual revenues of $32 billion and over 110,000 employees, and its products and services are deployed in most of the world’s largest telecom markets. Huawei was also recently ranked 352 out on Fortune magazine’s global 500 list.

Until late last year, Huawei dominated Iran’s telecommunications business and garnered massive revenue from doing so. Unfortunately, there are also reports that it played a role as Iran’s partner in crime as the regime went about tracking, silencing, and killing Iranian opposition figures. In 2009, when Iranians took to the streets to protest President Mahmoud Ahmadinejad’s election, Huawei reportedly installed tracking equipment for all of Iran’s telecommunication providers that allowed the Iranian intelligence services to locate people through their cellphones, thus enabling the regime to pursue, jail, and often kill opposition members.

Of course, this type of technology exists in many countries, and it is widely known that law enforcement professionals in the West, including the United States, use cellphones to track illicit actors. But repressive regimes like Iran use this type of technology not only to go after criminals, but also to quash their political opposition. The U.S. State Department is now investigating Huawei, stating that it “shares the concern of potential export of technology to Iran that is used specifically to disrupt, monitor, or suppress communication.”

For Huawei, doing business in Iran has had a definite downside, costing the company at least some of its access to the U.S. market. In October 2010, the administration, citing “national security concerns,” blockedHuawei from building a wireless network for U.S. emergency workers, including police officers and firefighters. Huawei was also barred from acquiring three U.S. companies and forced to divest its shares of a cloud computing company called 3Leaf.

As a result, in December 2011, Huawei decided to scale back its operations in Iran. Bowing to U.S. pressure, the company chose to “restrict its business development by no longer seeking new customers and limiting its business activities with existing customers.” In other words, it chose the U.S. market over the Iranian market.

Other Chinese companies will face the same decision in the months to come. In 2009, the People’s Republic emerged as Iran’s top economic partner, with trade totaling around $21.2 billion annually. Chinese companies supply Iran with 13 percent of its imports, approximately $7.9 billion per annum. In addition, over 100 Chinese state companies operate in Iran, where they invest heavily in the energy sector. U.S. lawmakers are increasingly trying to force companies doing business in both jurisdictions to make tough choices.

Chinese and other Asian companies doing business with Iran should be on notice that U.S. lawmakers are watching this issue closely, and are beginning to crack down. They may find that getting involved with a state sponsor of terror that routinely kills those who yearn for freedom is just not worth the bang for the yuan.