Trump mulled designating Huawei to shut it out of US financial system

The Trump administration considered banning China’s Huawei from the US financial system earlier in 2019 as part of a host of policy options to thwart the blacklisted telecoms equipment giant, according to three people familiar with the matter.

The plan, which was ultimately shelved, called for placing Huawei, the world’s secondlargest smartphone producer, on the US treasury department’s list for specially designated nationals (SDN).

One of the people familiar with the matter, who favours the move, said it could be revived in the coming months depending on how things go with Huawei.

The plan was considered by the White House National Security Council, and seen by officials as a nuclear option atop a ladder of policy tools to sanction the company, two of the people said.

Such a designation can make it virtually impossible for a company to complete transactions in US dollars.

Officials drafted a memo and held interagency meetings on the issue, according to one of the people, showing the extent to which administration officials mulled deploying their most aggressive sanctioning tool against the Chinese firm.

Its use was tabled in favour of other measures, such as placing Huawei on a trade blacklist, which forces some suppliers to obtain a special licence.

Huawei did not respond to a request for comment. A treasury spokesperson said the agency “does not comment on investigations or prospective actions, including to confirm whether one exists”.

Huawei would have been among the largest companies ever added to the list, which has included Russia’s Rusal, the world’s second-largest aluminium company, Russian oligarchs, Iranian politicians and Venezuelan drug traffickers.

Annie Fixler, a cyber expert at the Foundation for Defence of Democracies, said designating the company “would have broad, widespread implications for Huawei across the globe”, noting that its business would be “severely impacted” in Europe and in Asia outside China.

The US has brought criminal charges against Huawei, alleging theft of trade secrets, bank fraud, violations of US sanctions against Iran, and has sought to convince allies to ban it from 5G networks over spying fears.

But placing the company on the “SDN list” would mean a host of logistical, diplomatic and economic difficulties for the US government.

The designation prohibits US firms or citizens from trading or conducting financial transactions with those listed and freezes assets held in the US.

Adding Huawei would therefore hammer US allies that already rely on the company for their 4G networks, since almost all dollar payments clear through US financial institutions.

The treasury could grant licences to exempt US banks involved in those transactions. But it has generally shied away from doing so, concerned that too many exemptions would blunt the strength of the tool, experts said.

Huawei’s sprawling size, with dozens of subsidiaries, would significantly complicate enforcement and carve-out efforts, experts said.

“The larger an entity is, the harder it is for a US administration to foresee and prepare for the major effects, foreign and domestic, that placing it on the SDN list may cause,” said Matthew Tuchband, a former treasury official who added that careful consideration is needed before designating a company the size of Huawei.

Treasury secretary Steve Mnuchin, who is seen by many China hawks in the administration as sympathetic to Beijing, has rarely overseen the use of the tool against China, designating a handful of Chinese people for trafficking in fentanyl and over violations of sanctions against North Korea and Iran.

Nevertheless, some legislators still see designating Huawei as worth considering.

“Given Huawei’s relentless drive to dominate the 5G landscape, it is one of the most urgent national security threats facing the free world,” Republican congressman Michael Gallagher said.

“All options should be on the table in order to impose maximum pressure,” he added.

PLAN COULD BE REVIVED IN COMING MONTHS DEPENDING ON HOW THINGS GO WITH HUAWEI

IT IS ONE OF THE MOST URGENT NATIONAL SECURITY THREATS FACING THE FREE WORLD