Leaving The United States, Huawei Relocates Its Investments & Research To Russia

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Huawei has dramatically ramped up investment in Russia due to US restrictions against the tech giant, CEO Ren Zhengfei has said. “After the United States included us in the Entity List, we transferred our investment in the United States to Russia, increased Russian investment, and have expanded our Russian science team” Ren said in a speech to Chinese universities on Sunday.

The “Entity List” contains more than 100 Chinese companies the Donald Trump administration has deemed a threat to U.S. national security. It is the same list that the U.S. used to introduce sanctions on Russian firms following the annexation of Crimea.

The move has come after the US government began introducing sanctions against Huawei last year, citing alleged technology theft and the use of hard-coded ‘back doors’ enabling Chinese intelligence to spy on foreign users. The company has denied the claims, and said it would welcome any independent security checks of its products. The real reason is believed to be that Huawei’s 5G technologies are superior to US competitors at this time. Banning Huawei prevents the company from achieving a global standard and allows US tech to catch up.

Huawei began to relocate its US operations to Russia after an agreement was signed between China’s President Xi Jinping and his Russian counterpart Vladimir Putin at the 2019 St Petersburg International Economic Forum. We commented on the implications of that meeting in this article here.

Ren’s comments follow remarks made by Sergei Lavrov, Russia’s Foreign Minister last week that Russia remains interested in working with China and Huawei on 5G internet technology, and has no intention of “following the example” of the US, “who simply demand that we don’t cooperate on 5G with China and, in particular, with Huawei.”

The United States Commerce Department tightened restrictions on Huawei’s access to American technology on August 17, adding 38 of Huawei’s affiliates in 21 countries to its economic blacklist (including Huawei Cloud Russia and Huawei OpenLab Moscow), and demanding US allies to join them. The US justified the new restrictions by citing alleged systematic espionage for the “Chinese Communist Party”.

Washington’s spat with Huawei is part of a broader conflict over trade, technology transfer, and geopolitics. The US formally cut off Huawei’s access to US components and technology in May 2019, but was forced to issue exemptions to the restrictions throughout the rest of 2019 and early 2020 amid complaints by US tech companies including Google and Microsoft that the loss of Huawei’s business threatened to deprive them of billions of dollars in earnings.

Huawei currently employs around 900 staff in Russia, an increase of 300 over the past 12 months. It has four research and development (R&D) centres in Russia and plans to hire 1,000 more R&D staff by 2024.

Chris Devonshire-Ellis of Dezan Shira & Associates comments “The US position is likely to mean that competing and non-compatible technologies emerge between China, Russia and large tracts of the Belt & Road Initiative, and between the United States and European Union. Technology will play a part in determining which side will have the upper hand, in moves that could mean the end of globalization and trade as it currently exists today.”

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During these uncertain times, we must stress that our firm does not approve of the Ukraine conflict. We do not entertain business with sanctioned Russian companies or individuals. However, we are well aware of the new emerging supply chains, can advise on strategic analysis and new logistics corridors, and may assist in non-sanctioned areas. We can help, for example, Russian companies develop operations throughout Asia, including banking advisory services, and trade compliance issues, and have done since 1992.

We also provide financial and sanctions compliance services to foreign companies wishing to access Russia. Additionally, we offer market research and advisory services to foreign exporters interested in accessing Russia as the economy looks to replace Western-sourced products. For assistance, please email russia@dezshira.com or visit www.dezshira.com