Chinese Military-Linked Telecom Firm Shipped U.S. Equipment to Cuba

Commerce probing whether Huawei sale of U.S. gear violated sanctions

September 19, 2014

A Chinese telecommunications company linked to the People’s Liberation Army provided U.S.-origin equipment to Cuba in apparent violation of U.S. economic sanctions on the communist-ruled island.

U.S. officials familiar with intelligence reports said the equipment included U.S.-made modems, routers, and switches for telecommunications networks.

The transfer took place within the past two months and was reported by the U.S. Southern Command, the military command with responsibility for Latin and South America in internal channels, said officials who spoke on condition of anonymity.

One official said the transfer violated U.S. economic sanctions imposed on Cuba and that the transfer is under investigation by the Commerce Department.

No other details could be learned on the U.S. companies or company involved. However, administration officials said it is illegal to export any U.S.-origin telecommunications equipment to Cuba without an export license.

President Obama in 2009 loosened controls on Internet and telecommunications services for Cuba in an effort to promote greater openness. But telecommunications equipment remains banned under the 1964 embargo.

Huawei, a global network equipment manufacturer based in Shenzhen, China, has been identified by the Pentagon in reports to Congress as one of several companies that maintain close ties to the PLA.

Along with two other firms, Huawei, "with their ties to the [Chinese] government and PLA entities, pose potential challenges in the blurring lines between commercial and government/military-associated entities," the 2012 report said.

Huawei also was identified by the U.S. government as posing a cyber espionage risk. A House Permanent Select Committee on Intelligence report in 2012 warned U.S. businesses not to use equipment made by Huawei and another firm, ZTE, over concerns the gear can be used by China’s government to conduct cyber espionage.

China’s Ministry of Commerce announced Aug. 7 that it is increasing trade and investment in Cuba following a visit to the island by trade officials in late July.

A U.S. official said the telecommunications transfer is suspected of being part of the Chinese government’s effort to bolster ties with Cuba.

Huawei and ZTE took part in a trade fair in Cuba in March 2013.

A Southern Command spokesman referred questions to the Department of Commerce, which is in charge of enforcing U.S. export controls.

An official at Commerce’s Bureau of Industry and Security declined to comment and would not confirm that an investigation of the company for the equipment transfer is underway.

If the transfer is confirmed by the Commerce probe, Huawei could face U.S. sanctions for violating the embargo.

The transfer of equipment to Cuba appears similar to another deal involving Huawei and Iran in 2012. Documents obtained by Reuters revealed that Huawei offered to sell Iran’s state-run telecommunications firm $1.7 worth of computer and network equipment made by Hewlett Packard. Huawei denied that it sought to evade U.S. sanctions in the proposed 2010 deal.

The company has offices in 11 U.S. cities and a headquarters in Plano, Texas.

In the early 2000s, the company sought to gain access to the lucrative U.S. telecommunications market. But the company was blocked from concluding several mergers with U.S. firms by the Committee on Foreign Investment in the United States on national security grounds.

The company has denied it is linked to the military and claims it is employee-owned. However, the Chinese government has identified Huawei as one of its most important national businesses.

Huawei spokesman Bill Plummer said he was unaware of the transaction.

"Huawei has not seen nor otherwise heard of any government or other report on such matters and would expect that if such information were truly believed that the company would be notified by the appropriate authorities," Plummer said in a statement.

"Huawei has very strict trade compliance programs and disciplines in place throughout our company to ensure that we are and remain in full compliance with export control and sanctions laws and regulations, such as those of the United Nations, the European Union, and the United States," he added.

R. Evan Ellis, an Army War College professor specializing in Latin affairs, warned in a paper published last year that Chinese telecommunications deals in the region pose a potential strategic threat to the United States.

Huawei began focusing on selling equipment to Caribbean nations, including in Cuba, starting in 2007, he wrote when Chinese companies began modernizing Cuban telecommunications infrastructure. By 2009, Huawei was setting up broadband service on the island, Ellis stated. Huawei also has a large presence in Venezuela—a close Cuban ally—Mexico, and Brazil, as well as most states in the region.

"There is nothing inherently wrong, of course, with the PRC making advances in the telecommunications sector," Ellis wrote. "It is simply a reality that must be acknowledged that the good that such advances generate for the Chinese people and economy also benefits PRC strategic military capabilities that the United States, one day, may have to face."

Other potential threats posed by Chinese telecommunications systems in Latin American include commercial and military spying and denial and disruption of communications in times of war, he said.

"For the Chinese, building telecommunications architectures gives the Chinese designers unique knowledge of the systems, as well as to design in capabilities in[to] either the hardware or software that could be used to collect data traveling over those systems, introduce false information, or degrade or destroy them at the moment of the perpetrator’s choosing," Ellis said. "The vulnerability created is far larger than is generally understood in an era in which everything from cables and switches to servers and routers to modems and the computers they connect to, to the software that runs on them are, to some extent, made by Chinese companies."

The risk applies to military and government users as well as commercial and private networks.

Jennifer Hernandez, a researcher at the Institute for Cuban & Cuban-American Studies at the University of Miami, said Chinese telecommunications transfers to Cuba likely will boost government surveillance on the island.

"China’s transfer of technology to Cuba does not necessarily benefit Cubans," Hernandez wrote in a recent report. "Instead, China seems to be equipping the island’s information technology infrastructure with systems that can potentially spy on Cubans."

Another potential threat is that the Chinese are "also equipping an anti-American leadership with sophisticated communication and network technology capable of cyber espionage 90 miles from our shores," Hernandez said.

Huawei was targeted by National Security Agency electronic cyber espionage technicians, according to documents leaked by former NSA contractor Edward Snowden.

Top-secret briefing slides revealed by Britain’s Guardian show that NSA uses its access to Huawei telecom gear to spy on hard-target countries, such as China, Pakistan, Iran and others, through cyber penetrations of Huawei equipment used in those countries.

"Many of our targets communicate over Huawei produced products. We want to make sure that we know how to exploit these products—we also want to ensure that we retain access to these communication lines, etc.," one NSA slide states.

"There is also concern that Huawei’s widespread infrastructure will provide the PRC with [signals intelligence] capabilities and enable them to perform denial of service type attacks."

The slide quoted a National Intelligence Estimate that said, "the increasing role of international companies and foreign individuals in U.S. information technology supply chains and services will increase the potential for persistent, stealthy subversions."