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ZTE ejects from Iran as Feds probe spy-tech export claims

Chinese telecoms dragon wants to keep US sweet

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Chinese telecoms kit maker ZTE says it has finally wound up its business dealings in Iran, bar existing customers, as the firm tries to move on following allegations it broke US sanctions by flogging spy technology to the Islamic republic.

Chairman Hou Weigui told Reuters the Shenzhen firm had “basically stopped”.

“We have to continue to service the products we had sold before - we have no choice," he added. "We maintain communication with them to enable locals to carry out maintenance."

China’s second largest maker of telecommunications equipment is now the subject of a criminal investigation by the FBI after reports emerged in March 2012 that it broke US sanctions on Iran by including American products such as AV software and switches on a 900-page “packing list” of items sold to the state-run Telecommunication Co. of Iran (TCI) in 2010.

The Feds are also thought to be looking into allegations that senior officials at ZTE “engaged in an on-going attempt to corruptly obstruct and impede” a Department of Commerce investigation.

There were also allegations that ZTE sold phone and internet surveillance gear to Iran as part of a €98.6m (£82.4m) deal for networking kit.

While not technically illegal for the Chinese firm, this obviously wouldn’t play well for a business seeking to tap Western markets including the US and market itself as a trusted supplier of technology.

For the record, ZTE has claimed it “always respects and complies with international and local laws wherever it operates”, and that it has “restricted its business practices” in Iran since 2011.

Since the reports emerged, Cisco has dropped ZTE as a partner and the Chinese tech giant has blamed its retreat from Iran in part for its first annual loss – a whopping 2.84 billion yuan (£300m) last year.

ZTE also ditched its ZTE Special Equipment (ZTEsec) subsidiary which sells surveillance systems.

There was also a hint of niggle with cross-town rival Huawei in chairman Hou’s remarks.

"We are not in a position to comment on what Huawei and others in the industry are doing. But in any case, they are still involved in the market. But we have stopped,” he told Reuters.

In January 2012 the Shenzhen giant faced similar allegations to ZTE, of supplying monitoring technology to Iran – claims it vehemently denied. The firm said it had also voluntarily restricted its business in the Islamic republic by “no longer seeking new customers and limiting its business activities with existing customers”.

Local rivalries aside, the continuing investigation into allegations of impropriety at ZTE will do nothing to help it convince US lawmakers that its telecoms equipment products do not represent a threat to national security.

Hou admitted as much when he told Reuters the firm would mainly be focusing on the US handset market, going forward.

ZTE told El Reg it had nothing to add to Hou's remarks. ®

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