US sources say special relationship too important to jeopardise over Chinese tech firm

This article is more than 7 months old

This article is more than 7 months old

Boris Johnson appears to have averted a full-blown confrontation with the White House over Huawei, after the government designated the Chinese technology firm a “high-risk vendor” and imposed a cap on its involvement in building the UK’s 5G telecoms network.

The Trump administration had given a series of strongly worded warnings about the security risks in the run-up to the decision, but was preparing to soften its stance after a phone call between the British prime minister and the US president on Tuesday afternoon.

Sources said that while the US remained disappointed with the decision to allow “an untrusted vendor” into the UK market, the security and economic relationship between the two countries was too important to jeopardise in a row over mobile phone technology.

UK and US sources said the two countries would try to work together to further reduce the use of Huawei by British companies, with Downing Street hoping it has been able to persuade the notoriously unpredictable US president not to escalate the issue.

The UK’s national security council (NSC) – a meeting of senior ministers, intelligence figures and service chiefs chaired by Johnson – decided on Tuesday morning that Huawei could supply 5G equipment, but that it would be subject to what the foreign secretary, Dominic Raab, said was “one of the strongest regimes for telecoms security in the world”.

The company’s share of the new market will be capped at 35% for each of Britain’s four mobile phone operators, and it will be banned from core parts of the telecoms network and from sensitive sites, including nuclear and military facilities.

Huawei was formally deemed a “high risk vendor” because its Chinese ownership meant Beijing could in theory force it to carry out surveillance of British citizens in the future.

There is no evidence of deliberate security flaws in the company’s equipment but an official British assessment said: “The Chinese state (and associated actors) have carried out and will continue to carry out cyber-attacks against the UK and our interests.”

Britain’s spy agencies have long argued that any risks from using Huawei can be contained, and that US calls for a total ban are disproportionate. The company has been supplying equipment in the UK since 2003, and is already subject to regular review by an arm of the GCHQ intelligence agency.

Explaining the decision to MPs in the House of Commons, Raab insisted that “we know more about Huawei and the risks it poses than any other country in the world”.

He said “market failure” meant few alternative providers were available. There are only two principal alternatives: Ericsson and Nokia, from Sweden and Finland respectively.

Johnson appears to have stressed this aspect – collaborating on developing alternatives to Huawei – when he talked to Trump by phone on Tuesday afternoon.

A Downing Street spokesperson said: “The prime minister underlined the importance of like-minded countries working together to diversify the market and break the dominance of a small number of companies.”

Johnson also praised the president’s Middle East peace plan announced on Tuesday.

Q&A What is Huawei and why is its role in 5G so controversial? Show Hide Fast-growing Huawei is arguably China’s first global multinational. The Shenzhen-based company makes mobile phones, base stations and the intelligent routers that facilitate communications around the world. But its success increasingly concerns the US, which argues Huawei is ultimately beholden to the Chinese Communist party and has the capability to engage in covert surveillance where its equipment is used. Huawei is by some distance the world’s largest supplier of telecoms equipment with an estimated 28% market share in 2019. It was also the second largest phone maker in 2019, after Samsung and ahead of Apple. But Australia banned Huawei from 5G in 2018, with its spy agencies declaring they were worried the company could shut down power networks and other parts of its infrastructure in a diplomatic crisis. Trump banned US companies from working with Huawei last year and has strenuously lobbied others to follow suit, venting “apoplectic fury” in a phone call to Boris Johnson after the UK agreed to allow the Chinese company into 5G. The company had successfully targeted the UK early on. It has supplied BT since 2003 and gradually expanded to the point where it agreed to create a special unit in Banbury, known as the Cell, where the spy agency GCHQ could review and monitor its software code. Vodafone is another key customer. Britain’s intelligence agencies said in January that any Huawei risk could be managed as long as the company was not allowed to have a monopoly. As a result, Boris Johnson concluded Huawei’s market share should be capped at 35% for forthcoming high-speed 5G networks. In July 2020 the UK position changed, and it was announced that Huawei is to be stripped out of Britain’s 5G phone networks by 2027. Oliver Dowden, the UK culture secretary, also announced that no new Huawei 5G kit can be bought after 31 December 2020 – but said that older 2G, 3G and 4G kit can remain until it is no longer needed. Dan Sabbagh Defence and security editor Photograph: Mark Schiefelbein/AP

Some members of the NSC, including the home secretary, Priti Patel, had expressed concerns about Huawei’s involvement, but government sources insisted there had been a “cacophony of unanimity” at Tuesday’s 80-minute meeting.

Officials feared banning Huawei altogether could have delayed the 5G rollout by two to three years, increased the cost to consumers and harmed economic growth.

The 35% cap will be applied to the 5G and full-fibre network, and the industry will be given three years to comply by ensuring it is not overly dependent on Huawei. It will be enshrined in legislation, which Raab said would be brought forward imminently, and enforced by the regulator Ofcom.

Each of Britain’s four mobile phone operators, O2, Three, Vodafone and EE, which is owned by BT, must comply, with the last two particularly affected because Huawei supplies about 60% of their base stations at present.

Had a limit not been set, British officials said the UK would have become critically dependent on Huawei for 5G, with the company’s market share rising significantly to 60% to 65% in the next three years.

Raab insisted Huawei would not be involved in the infrastructure underlying the communication of classified information. “Intelligence-sharing will not be put at risk, and would not ever be put at risk by this government,” he said.

However, former Conservative cabinet ministers, including Iain Duncan Smith, Penny Mordaunt and David Davis, strongly criticised the decision.

Mordaunt called it “regrettable”, and Davis said: “I do think Huawei should be banned from our networks. The size and complexity of the problem we’re trying to protect ourselves against is enormous.”

The Republican senator Tom Cotton said: “I fear London has freed itself from Brussels only to cede sovereignty to Beijing”, comparing the government’s decision to “allowing the KGB to build its telephone network during the cold war”.

He called for the US to review intelligence-sharing.

The decision comes at a critical moment in the relationship with Trump’s White House, as the prime minister prepares to press for a post-Brexit trade deal, and with the US secretary of state, Mike Pompeo, due to visit London on Wednesday and Thursday.

The government has already irritated Washington by pressing ahead with plans to implement a digital sales tax on global internet firms, but despite that the White House has been reluctant to link the decision to future trade talks.

Victor Zhang, Huawei’s vice-president, welcomed the “evidence-based decision”. The company believes other countries will follow the UK’s lead, and permit Huawei to supply high-speed next generation equipment.

The culture secretary, Nicky Morgan, who answered questions about the policy from her new seat on the frontbench in the House of Lords, said: “This is a UK-specific solution for UK-specific reasons and the decision deals with the challenges we face right now.”