US considered banning Huawei from its financial system: Sources

The plan to ban China's Huawei - the world's second largest smartphone producer after Samsung - from the US financial system could still be revived, said sources. Such a designation can make it virtually impossible for it to complete transactions in
The plan to ban China's Huawei - the world's second largest smartphone producer after Samsung - from the US financial system could still be revived, said sources. Such a designation can make it virtually impossible for it to complete transactions in US dollars. PHOTO: ASSOCIATED PRESS

WASHINGTON • The Trump administration considered banning China's Huawei from the US financial system earlier this year as part of a host of policy options to thwart the blacklisted telecoms equipment giant, according to three people familiar with the matter.

The plan, which was ultimately shelved, called for placing Huawei Technologies - the world's second largest smartphone producer after Samsung - on the Treasury Department's Specially Designated Nationals (SDN) list.

One of the people familiar with the matter, and who favours the move, said it could be revived in the coming months, depending on how things go with Huawei.

The plan was considered by the White House National Security Council, and seen by officials as a nuclear option atop a ladder of policy tools to sanction the company, two of the people said.

Such a designation can make it virtually impossible for a company to complete transactions in US dollars.

Administration officials drafted a memo and held inter-agency meetings on the issue, according to one of the people, showing the extent to which administration officials mulled over deploying the United States' most aggressive sanctioning tool against the Chinese company.

Its use was shelved in favour of other measures, such as placing Huawei on a trade blacklist, which forces some suppliers to obtain a special licence to sell to it.

A Treasury spokesman said the agency "does not comment on investigations or prospective actions, including to confirm whether one exists".

Huawei would have been among the largest companies added to the list, which has included Russia's Rusal - the world's second largest aluminium company - Russian oligarchs, Iranian politicians and Venezuelan drug traffickers.

Ms Annie Fixler, a cyber expert at the Foundation for Defence of Democracies think-tank, said designating the company "would have broad, widespread implications for Huawei across the globe", noting that its business would be "severely impacted" in Europe and in Asia outside of China.

The US government has brought criminal charges against Huawei, alleging theft of trade secrets, bank fraud, violations of US sanctions against Iran, and has sought to convince allies to ban it from 5G networks over spying fears.

But placing the company on the "SDN list" would mean a host of logistical, diplomatic and economic difficulties for the US government.

The designation prohibits American companies or citizens from trading or conducting financial transactions with those listed and freezes assets held in the US.

Adding Huawei would therefore hammer US allies that already rely on the company for their 4G networks, since almost all dollar payments clear through US financial institutions.

Commerce Department Secretary Wilbur Ross told Reuters on Tuesday that Huawei has been encouraging its suppliers to violate US law by telling them to move operations offshore in a bid to avoid US sanctions.

The US government has become frustrated by the limitations of the blacklisting to keep overseas suppliers from selling to the company, the world's largest telecoms equipment supplier, Reuters reported last week.

Mr Ross said those frustrations extended to a push from Huawei to move its supply chain overseas.

Huawei has "been openly advocating companies to move their production offshore to get around the fact that we put Huawei on the list", Mr Ross said.

"Anybody who does move the product out specifically to avoid the sanction... that's a violation of US law. So here you have Huawei encouraging American suppliers to violate the law," he added.

Huawei spokesman Rob Manfredo declined to comment.

REUTERS

A version of this article appeared in the print edition of The Straits Times on December 05, 2019, with the headline 'US considered banning Huawei from its financial system: Sources'. Print Edition | Subscribe