Cisco drops ZTE after claims of sanction-busting Iran sales
Ruckus over reselling to the wrong people
Cisco has confirmed that is has ended all sales agreements with ZTE, reportedly in response to an internal investigation into whether the Chinese firm was selling American hardware to Iran in defiance of sanctions.
According to Reuters, an investigation by Cisco determined that its hardware was being shipped to Iran illegally by ZTE, and the networking giant subsequently cut all relations with its former partner. In a recent interview, Cisco's CEO said that any embargo-busting would not be tolerated and would be dealt with "very firmly."
In a masterpiece of brevity, the only comment Cisco would provide The Register is that "Cisco has no current relationship with ZTE."
In March, Reuters reported that ZTE had sold Cisco-supplied networking and computer hardware to the Telecommunications Company of Iran (TCI) to help build a $131 surveillance system that could monitor mobile, landline, and online communications within the Middle Eastern theocracy. Technology from HP, Microsoft, Symantec, Dell, and Oracle is thought to have been included.
The report was followed by investigations by US House of Representatives permanent select committee on intelligence and the FBI. According to an FBI affidavit, Ashley Yablon, general counsel of ZTE USA, said he saw senior ZTE executives discussing shredding documents and changing documentation relating to the charges.
The affidavit says ZTE set up two companies to facilitate the deal: 8 Star Beijing, which would buy the hardware, and ZTE Parsian to seal the deal and complete the Iranian installation. Yablon said that documents he had seen also mentioned kit from Qualcomm, Juniper, and IBM being included in the shipment orders.
ZTE is now telling the FBI that it cannot provide some documents to the investigation, saying that to do so would break local laws in the Middle Kingdom, and that it has hired respected US legal firm DLA Piper to defend it against any allegations. Yablon has been placed on administrative leave.
"ZTE is highly concerned with the matter and is communicating with Cisco," ZTE spokesman David Dai Shu told Reuters. "At the same time, ZTE is actively cooperating with the U.S. government about the probe to Iran. We believe it will be properly addressed."
It's turning into the Monday from hell for ZTE. As the Cisco news leaked, the US House of Representatives permanent select committee on intelligence issued a report stating that both it and fellow Chinese firm Huawei should be banned from selling equipment in the US for fears that it could be used for spying. ®
So here is ZTE trying to break into the US market and they said this to a congressional panel:
""The committee’s central question has been: would ZTE grant China’s government access to ZTE telecom infrastructure equipment for a cyber attack?" he explained. "Let me answer emphatically: no! China’s government has never made such a request. We expect the Chinese government never to make such a request of ZTE. If such a request were made, ZTE would be bound by US law.""
So ZTE said they would be bound by US law but when push came to shove, US law didn't trump what ZTE viewed as a conflict elsewhere. So what is it ZTE, going to follow US law or not? You can't have it both ways. Maybe a court needs to demand the documents get turned over and when the US ZTE executives say no, toss them in jail until the documents are turned over. The ZTE executives have two options at that point.
1) Comply and face the consequences.
2) Don't comply and end-up facing similar consequences.
Do they really think ZTE will back them? Nope, ZTE will go running back to China and have China protect them; US executives will be sacrificed in the process.
"build a $131 surveillance system that..."
What are they using? A rack of Raspberry Pis?
Rednecks or phone call
Does it have to be one or the other? It's likely more banal. Large US companies that sell to Uncle Sam in the billions know where their bread is buttered.The action was preemptive. It's very unlikely that Cisco was in any way complicit, but who wants to risk an investigation and the resulting political fallout and the potential impact on gubermint contracts?
As to ZTE, what a bunch of muppets. If they had an eye on the American market, it is height of stupidity to deal with Iran over some paltry 130 mil. This actually makes this whole ZTE/Huawei US market push more interesting. The only way it makes sense for ZTE to deal with Iran, much less fraudulently resell gear of its US partner is if knew it would not be in the US market. I wonder if it's just a pretense to starting a trade war. Having transitioned a significant portion of their economy to internal consumption, China may think they have less to lose than US. Or maybe they're just testing the waters - just like they are around Senkaku.