Chinese telecom giant Huawei has severely curtailed its operations in Russia in an effort to avoid getting hit by further U.S. sanctions, according to Business Insider, based on reporting from Izvestia and Forbes Russia.
Huawei reportedly hasn’t accepted new orders in Russia since March. It operates an office in Moscow and, for the month of April, reportedly told Russian employees to go on mandatory leave. Chinese employees living in Russia were allowed to continue working out of the Moscow office. Huawei also laid off marketing employees that helped field orders from Russian telecom companies, per the Forbes report.
With Huawei limiting orders, Russia will have virtually no options for importing telecommunications equipment. Huawei and ZTE — two of China’s premier telecommunications equipment companies — together provided around 40% to 60% of the equipment that went into Russia’s networks, per Dell’Oro estimates cited by the Financial Times. The Swedish Ericsson and Finnish Nokia provided most of the remaining parts. With announcements earlier this week, Ericsson said it would indefinitely suspend operations in Russia and Nokia said it would exit the Russian market altogether.
Huawei has already experienced some of the heaviest U.S. sanctions, but export licenses have provided an escape valve that the company doesn’t want to lose. The U.S. Commerce Department is able to issue exceptions in the form of export licenses that allow American companies to supply equipment to Huawei. Normally, U.S.-based companies wouldn’t be allowed to do so — Huawei is blacklisted due to national security concerns — but the idea is to allow exceptions when U.S. companies would be harmed more than Huawei. The Wall Street Journal reported in October that the U.S. Commerce Department issued licenses for over $100 billion worth of goods to be sold to Huawei and the China-based semiconductor manufacturer SMIC.
China’s government has made clear that it does not support the U.S. sanctions toward Russia. In March, Foreign Minister Wang Yi stated, “China always opposes the use of sanctions to solve problems, and even more opposes unilateral sanctions that have no basis in international law, which will undermine international rules and bring harm to the people’s livelihood of all countries.”
Reports that Huawei placed Russian employees on leave — rather than laying them off outright — suggest that the company may eventually attempt to resume operations in Russia. An IT systems expert told Forbes Russia that Huawei might try to sidestep the sanctions by supplying equipment that doesn’t have American components. And the sanctions landscape is still evolving, as last week the U.S. Treasury Department issued special authorization for domestic firms to supply telecommunications equipment to Russia.
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