February 18, 2019 / 7:02 AM / a month ago

Breakingviews - UK throws drowning Huawei a European lifeline

A surveillance camera is seen next to a sign of Huawei outside a shopping mall in Beijing, China January 29, 2019. REUTERS/Jason Lee

HONG KONG (Reuters Breakingviews) - Britain has thrown Huawei a European lifeline. The UK’s National Cyber Security Centre has decided it can manage the risks from using the Chinese giant’s kit to build next-generation 5G wireless networks, the Financial Times says. That would make London the first major power to challenge Washington’s campaign against the telecoms equipment-to-smartphone maker. It may not be the last.

The intelligence body’s conclusion, reported late on Sunday, underscores the complexity of ties between Huawei and its heterogenous mix of European markets. More than half of the Chinese group’s 22 commercial contracts for 5G are in Europe, Reuters reported in December. Since 2010, Britain has reviewed potential security hazards using a special facility owned by the Chinese firm but overseen by government and intelligence officials. That has enabled the Shenzhen-based company to emerge as a major supplier for domestic carriers including BT Group and Vodafone. Huawei says it has spent 1.3 billion pounds ($1.65 billion) on investment and procurement in the UK alone over the last five years.

The U.S. offensive against Huawei, though, has tested that approach. Washington argues it presents a cyber espionage danger; earlier this year, the Justice Department indicted the company and its Chief Financial Officer Meng Wanzhou on charges related to alleged violations of U.S. sanctions and theft of trade secrets. Australia and New Zealand have already effectively excluded Chinese kit from their 5G networks. U.S. Secretary of State Mike Pompeo, meanwhile, has explicitly warned American allies in central Europe against using Huawei gear.

Implementing a ban across Europe, though, will be difficult. For one, most of the region’s carriers already use Huawei for an estimated 40 percent of existing 4G equipment. Upgrading those networks with new gear from rivals like Nokia or Ericsson would mean more operational challenges, and cost. And as UK officials have pointed out, no evidence of spying has actually been found, making it difficult to justify a blanket ban. London receives U.S. intelligence under the auspices of the Five Eyes anglophone network. It has nonetheless offered governments in Germany and France a template on how to manage the Huawei risk. If others follow, the telecom behemoth’s European ambitions can be kept afloat.

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