ZTE Accused of Helping Venezuelan Government

Chinese telecom giant assisted Maduro regime in establishing a Beijing-style control over its citizens, say US senators
December 6, 2018 Updated: December 12, 2018

WASHINGTON—Chinese telecom giant ZTE Corp. may acquire additional U.S. sanctions as the company’s business with the Venezuelan government faces new scrutiny.

Senators Marco Rubio (R-Fla.) and Chris Van Hollen (D-Md.) warned the Trump administration that ZTE was helping China export surveillance tactics to the Nicolás Maduro regime.

The senators sent a letter (pdf) to U.S. Secretaries of State, Treasury, and Commerce, urging an investigation into company’s activities.

In the letter, the senators referred to a recent Reuters report, stating that the Chinese telecom firm assisted the Venezuelan government in establishing control over its citizens. According to the Reuters report, ZTE helped the Maduro regime to build a database that enables the monitoring and tracking of Venezuelan citizens and, since 2016, to centralize video surveillance.

“We are concerned that ZTE, by building this database for the Venezuelan government, may have violated U.S. export controls and sanctions laws, as well as the terms of the Commerce Department’s June 2018 superseding settlement agreement with ZTE,” the senators said in the letter.

ZTE has a history of breaching U.S. government sanctions. In April, the Commerce Department found ZTE had violated a settlement reached in 2017, and blocked the company from buying crucial components and software from American technology companies. ZTE is highly dependent on U.S. suppliers like Qualcomm, Google, and Corning to manufacture its cellphones and telecom equipment.

The ban nearly brought the company to the brink of bankruptcy, prompting a rare intervention by Chinese leader Xi Jinping.

In June, ZTE reached a settlement with U.S. authorities, agreeing to pay a total of $1.4 billion in fines and to overhaul its board of directors and senior management ranks. In exchange, the United States lifted the ban.

“The Venezuelan government hired ZTE to build a database and develop a mobile payment system for a smart ID card,” the lawmakers wrote.

The project was inspired by China’s national identity card program that tracks the social, political, and economic behavior of citizens. It enables the government to monitor everything from a citizen’s personal finances to medical history and voting activity.

The system in Venezuela was built using components from Dell Technologies in the United States, which alarmed the senators.

“ZTE installed data storage units built by Dell Technologies,” the letter stated. “Though Dell’s transaction appears to have been with ZTE in China, we are concerned that ZTE may have violated U.S. export controls by misidentifying the end-user or purpose of the end use.”

ZTE is China’s second-largest telecom equipment maker. The company is publicly traded, but its largest shareholder is still a Chinese state-controlled enterprise.


A spokesperson for the Commerce Department confirmed that they received the senators’ letter.

“The Department of Commerce will remain vigilant against any threat to U.S. national security and continues to diligently implement the settlement agreement with ZTE. We have no further comment at this time,” stated the spokesperson in an email.

As part of the settlement deal in June, ZTE has allowed the U.S. Commerce Department to monitor the company’s behavior.

Both Rubio and Van Hollen have been vocal about ZTE’s potential violations and retaining sanctions on the firm.

“We have not received a response to our letter at this point,” stated a spokesperson for Van Hollen.

Van Hollen co-sponsored a legislation introduced in September called the ZTE Enforcement Review and Oversight (ZERO) Act. The legislation requires the Commerce Department to put ZTE out of business if it violates the current agreement with the United States.

On Dec. 1, as part of a U.S. probe, Canada arrested Meng Wanzhou, the chief financial officer of Huawei, another Chinese telecom company.

The United States was pursuing Meng, the daughter of Huawei’s founder, in a criminal probe related to the violation of sanctions against Iran.

“Huawei and ZTE are two sides of the same coin,” said Van Hollen in a statement, adding that Chinese telecommunications companies represent a “fundamental risk” to U.S. national security.

“While the Commerce Department focused its attention on ZTE, this news highlights that Huawei is also violating U.S. law,” he said.

“We need a comprehensive plan to hold the Chinese and their state-sponsored entities accountable for gross violations of the law and threats to our security.”

Correction: A previous version of this article misstated the day when Meng Wanzhou, the chief financial officer of Huawei, was arrested. Meng was arrested on Dec. 1. The Epoch Times regrets the error.

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