Huawei suspends some Russian operations, reports say, weighs options amid risks of sanctions

According to Forbes Russia, Chinese telecommunications company Huawei Technologies Co is preparing to pull out of Russia by suspending some local employees and suspending new contracts with operators, already under US sanctions.

Huawei has laid off a portion of its staff for a month in April at its Moscow office after suspending all orders in the market, according to a report released last week and citing anonymous sources. The company has cut jobs in the marketing sector, but the report says employees from China still came to the office.

The Shenzhen-based technology company declined to comment.

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The move comes as companies operating in Ukraine continue to struggle to avoid secondary sanctions from the United States and Europe following Russia’s invasion of Ukraine on February 24. Chinese companies.

In addition to the Forbes report, local newspaper Izvestia this month suspended Huawei’s new contracts from the end of March to supply network equipment to Russian operators. According to the report, some of its employees in Moscow have been told to work remotely. Huawei may reconsider its product portfolio in Russia and continue to sell equipment made without US technology, the report said, citing anonymous sources.

Guo Ping, vice president of Huawei, said at the end of March that the company was assessing the risks to its operations in the aftermath of the Russian invasion.

“We have noticed that some countries and regions have issued certain policies, and they are complex and constantly changing. Huawei is still evaluating these policies more carefully,” he said in response to a question on whether Huawei will leave Russia. Risk of additional sanctions.

Many Chinese companies have been caught up in Western sanctions imposed on Russia following its incursion into eastern Russia. Under US export restrictions, the country is prohibited from exporting any technological products manufactured abroad using US machinery, software or maps.

Beijing’s close ties with Moscow prevent the Chinese government from criticizing Russia’s actions or calling it an invasion. It also opposes widespread sanctions on Russia.

As a result, many Chinese companies have firmly adhered to their operations in the country, with secondary sanctions imposed for violating existing ones. A list maintained by a group of Yale University monitors companies’ operations in Russia labels 43 Chinese companies, including Huawei, as “digging”. The list was last updated on April 11.

This is different from the list of hundreds of American and European companies that have ceased operations in Russia or left the country.

Huawei rival Ericsson, a Swedish telecommunications equipment maker, said on Monday it would suspend its Russian business indefinitely and put local employees on paid leave. Ericsson had already stopped selling in Russia in February, following in the footsteps of its Finnish rival Nokia last month.

Huawei has not disclosed the size of its operations in Russia, but it has established some existing business relationships similar to last year.

The Chinese company has signed an agreement with MTS, Russia’s largest mobile operator, to launch commercial 5G services in the country in 2021. According to previous reports on the Chinese company’s website, it is now working with Rostelecom, a US – licensed Russian communications operator, in its digitalisation efforts.

Huawei is a leading vendor of major Russian telecommunications operators such as Chinese technology company MTS, Megafon and Veon, which has made extensive use of Chinese technology company 3G and 4G equipment with other communications technologies, says Yang Kwang, senior analyst at Technology Consulting Strategy. Analysis.

Yang said Huawei’s report moves in Russia do not mean the company will exit the market.

“I think Huawei will continue its wait-and-see strategy. Huawei will not leave Russia before Ericsson does that,” Yang said, adding that Ericsson’s latest report did not indicate a complete exit from the market.

The U.S. government has previously warned that it would impose sanctions on Chinese companies if they were found to be helping Russian allies circumvent sanctions. The Treasury Department’s new sanctions this month were taken as a fresh warning of the effect, especially as Singapore – based telecommunications electronics wholesaler Alexsong Pte Ltd is one of the companies affected by the secondary sanctions. The treasury list includes a total of 21 companies and 13 individuals, including Russia’s largest chip maker, Micron Joint Venture.

Last Friday, the Treasury Department’s Office of Foreign Assets Control (OFAC) exempted telecommunications services from sanctions against Russia and authorized business transactions involving “services, software, hardware or technical incident related to the transfer of information on the Internet.”

“As OFAC sanctions are eased, Huawei will be able to conduct legal sales on the Internet without further problems with the United States,” said Douglas Fuller, an associate professor at Hong Kong’s City University.

Huawei Chief Executive Officer Meng Wanzhou speaks at Huawei’s Annual Reporting Event on March 28, 2022 in Shenzhen. Meng became the center of controversy in Huawei over alleged violations of sanctions in Iran. United States. Photo: Huawei alt = Huawei Chief Executive Officer Meng Wanzhou speaks at Huawei’s Annual Reporting Event on March 28, 2022 in Shenzhen. Meng became the center of controversy in Huawei over alleged violations of sanctions in Iran, where he was detained for nearly three years in Canada. He fought against deportation to the United States. Photo: Huawei>

Huawei’s lucrative smartphone business has been hit hard since the US imposed sanctions on Huawei in 2019, restricting access to technology services by companies such as Google. It then increased controls, which reduced Huawei’s access to advanced chips, shattering its dream of challenging Samsung and Apple as a global smartphone brand.

Huawei’s chief financial officer Meng Wanzhou, the daughter of founder Ren Zhengfei, was placed under house arrest in Vancouver for nearly three years as she struggled with a U.S. judicial extradition request. Meng has been accused of defrauding banks by not disclosing Huawei’s relationship with its business arm in Iran, which is under US sanctions.

Meng, who returned to China after 1,000 days in detention, was promoted to vice president at Huawei earlier this month.

This article first appeared in the South China Morning Post (SCMP), the most official voice report in China and Asia for over a century. For more SCMP stories, explore the SCMP application or visit SCMP’s Facebook page Twitter Pages. Copyright © 2022 South China Morning Post Publishers Ltd. All rights reserved.

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