Watchdog: U.S. easing sanctions on Chinese firm may signal pass for Iran

An Iran watchdog has said that the Trump administration’s easing of sanctions on a Chinese technology giant that repeatedly violated Iran sanctions may signal that the US’s “maximum pressure” campaign on Tehran has a soft underbelly.

Chinese telecommunications giant the ZTE Corporation (formerly called the Zhongxing Telecommunications Equipment Corporation) last week got an unexpected lifeline from US President Donald Trump in a series of supportive tweets.

Iran Watch said that if Trump’s tweets foreshadow a lenient policy toward ZTE in its trade with the Islamic Republic, then any new push for getting concessions from Iran in the nuclear and terrorism arenas could quickly lose credibility.

The bottom line about Trump’s move regarding ZTE could be that he is giving it lenient treatment about its past and future dealings with Iran, as part of broader US-China trade negotiations.

The NGO said that this could effectively mean that the Trump administration is prioritizing the quelling of trade-war issues with China over the pressuring of Tehran and those doing business with it.

In a report this weekend, Iran Watch noted that on April 15, the US Commerce Department reactivated trade restrictions and reimposed a $300 million fine on ZTE – barring the company from procuring critical US components and effectively suspending its operations.

According to the watchdog’s report, the seeming crackdown followed the discovery that ZTE had continued to mislead investigators both during a probationary period and following a series of March 2017 settlements totaling $1.19 billion between the company and the US.

As part of the settlements, noted the report, ZTE admitted to knowingly violating US sanctions and export control laws from 2010 to 2016, by selling more than 20 million items with sensitive US technology to Iran for $2b. and to making false statements about the trade.

The report said that “ZTE falsely claimed that it had reprimanded employees complicit in the scheme. The company came clean only when pressed, which led the US Commerce Department to conclude that ‘ZTE still cannot be relied upon to make truthful statements,’ and to reactivate the trade restrictions.”

HOWEVER, the report said that “what was initially seen as an enforcement action separate from a broader trade conflict between the US and China shifted following two presidential tweets earlier this week.”

In a tweet on May 13, Trump linked the two issues, saying that he is working with the Chinese president to “give massive Chinese phone company, ZTE, a way to get back into business, fast,” and that the “Commerce Department has been instructed to get it done!” Next, in a May 14 tweet, Trump wrote that the issue “is also reflective of the larger trade deal we are negotiating with China.”

Iran Watch said that the timing of this possible accommodation raises questions.

Coming fewer than two weeks after Trump pulled the US out of the Iran nuclear deal and reimposed sweeping US sanctions, including targeting companies and governments doing business with Iran, the NGO asked, “why would the US administration be willing to ease impactful trade restrictions against a Chinese firm that knowingly and repeatedly violated US sanctions and export controls?” The report asked, “Does this mingling of sanctions enforcement and trade policy indicate that other companies might see similar penalties eased or waived as part of broader trade deals?” In other words, the report said that European countries and others might look to any US folding on Iran in its negotiations with China as a sign that they can also escape Iran-related sanctions if they offer the US some other economic benefit in broader negotiations.

Another example that Iran Watch mentioned was a US criminal investigation into whether another Chinese-company – ZTE competitor Huawei Technologies – has also violated prior US sanctions on Iran.

The report warned that the Huawei investigation may, like ZTE, get caught up in the broader trade dispute between the United States and China.

It strongly recommended that if a similar game played out with Huawei, the US must demand real leadership change at Huawei and the penalizing of all of Huawei’s complicit third parties before freeing it from pressure.

“If the United States proves unwilling to let stand penalties against ZTE, a company that knowingly and repeatedly supplied Iran with sensitive US technology, does it intend to penalize firms engaging in… Iran’s energy sector,” especially when until recently the US supported that trade, asked Iran Watch with a clear tone of doubt.