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RFL/RE – The U.S. government has reached a deal to put Chinese telecommunications giant ZTE Corp back in business after penalties imposed over Iran sanctions violations forced the company to shut down operations, U.S. officials and congressional aides said.
President Donald Trump confirmed the deal in a tweet late on May 25. “I closed it down then let it reopen with high level security guarantees, change of management and board,” Trump wrote, adding that the company “must purchase U.S. parts and pay a $1.3 billion fine” under the deal.
Trump earlier in the week suggested that he might fine ZTE up to $1.3 billion and shake up its management while rolling back earlier penalties that crippled the company’s business under a deal with Beijing connected with broader trade negotiations.
The reported deal ran into immediate resistance in Congress, where Democrats and Republicans alike accused Trump of bending to pressure from Beijing to ease up on a company that U.S. intelligence officials have suggested poses a significant risk to U.S. national security.
ZTE was banned in April from buying U.S. technology components for seven years after allegedly breaking an agreement reached over charges that it violated U.S. sanctions by selling banned equipment to Iran and North Korea.
Under the new agreement, after ZTE makes a series of changes in its management, it would be allowed to resume business with U.S. companies, including a key supplier, chipmaker Qualcomm.
ZTE purchases an estimated 25 percent to 30 percent of the components in its mobile phones and network equipment from U.S. suppliers.
The deal, as described by congressional aides and U.S. officials, also requires ZTE to pay a substantial fine and hire U.S. compliance officers tasked with ensuring it adheres to the deal.
The U.S. Commerce Department would then lift an order issued in April preventing ZTE from buying U.S. products. ZTE shut down most of its production after the ruling was announced, and warned it would drive the company bankrupt.
Fox News reported that Trump negotiated the $1.3 billion fine with Chinese President Xi Jinping in a phone call.
ZTE, whose largest shareholder is a Chinese state-owned enterprise, already agreed last year to pay a nearly $900 million penalty and open its books to a U.S. monitor.
The new penalty is to remedy allegations that it broke the previous agreement by illegally shipping U.S. goods to Iran and North Korea. The case against ZTE was started during the administration of former President Barack Obama.
‘Dramatic Retreat’
Responding to news of the deal with ZTE, Republican Senator Marco Rubio tweeted: “Yes they have a deal in mind. It is a great deal…for #ZTE & China. #China crushes U.S. companies with no mercy & they use these telecomm companies to spy & steal from us.”
Rubio, along with Democratic Senators Chuck Schumer and Chris Van Hollen, has said Congress should stop Trump from letting ZTE get back into business.
“If the administration goes through with this reported deal, President Trump would be helping make China great again,” Schumer said on Twitter. “Would be a huge victory for President Xi, and a dramatic retreat by Pres Trump. Both parties in Congress should come together to stop this deal in its tracks.”
U.S. security agencies have raised concerns about ZTE and other Chinese telecommunications firms allegedly using their equipment to gather intelligence in the United States.
The U.S. Department of Defense has stopped selling ZTE’s mobile phones and modems in stores on military bases, citing potential security risks.
Commerce Secretary Wilbur Ross is scheduled to travel to Beijing on June 2 for further trade talks and discussions over China’s aggressive push to challenge U.S. technological dominance.
Beijing has indicated that resolving the situation concerning ZTE — a company that employs more than 70,000 Chinese — could make the talks go more smoothly.
With reporting by AP, Reuters, and AFP
