China’s Private Spy Firm?

The Obama administration and Congress are turning up the pressure on South Korea to turn back from a pending deal with Huawei Technologies, a Chinese firm that the U.S. intelligence community believes is linked to the Chinese military.

Top administration officials have begun quietly talking to Seoul about U.S. national-security concerns over the pending deal, which would see Huawei help build South Korea’s new broadband network. A growing list of influential lawmakers are also raising red flags about a deal that would make some 28,500 U.S. military forces in South Korea dependent on a communications network that might leave them vulnerable to Chinese eavesdropping.

Vice President Joe Biden raised the issue with Prime Minister Jung Hong-won during his trip to South Korea in early December, according to two sources briefed on the meeting. Also, the White House’s National Security staff has tasked the U.S. intelligence community to study the effects of the Huawei-South Korea deal on American security interests.

On Thursday in a statement to The Daily Beast, Sen. John McCain (R-AZ) joined the growing bipartisan chorus opposing the deal and pledged that Congress would act if South Korea went through with the arrangement.

“The Republic of Korea is not just a close U.S. ally; it is a country in which 28,500 Americans in uniform are serving on the front lines and ready to fight in Korea’s defense. The national-security interests of the United States are thus directly affected by the integrity of Korea’s information networks,” McCain said. “Given the serious concerns that our government has with Huawei and its alleged ties to the Chinese government, a Korean decision to give Huawei a major stake in building out the country’s telecommunications infrastructure would go over very badly in the United States and the Congress.”

McCain’s concerns echoed those of two top Democrats, Senate Select Committee on Intelligence Chairwoman Dianne Feinstein (D-CA) and Senate Foreign Relations Committee Chairman Robert Menendez (D-NJ), who asked senior Obama administration officials to review the deal in a letter reported by The Daily Beast last month.

“Maintaining the integrity of telecommunications infrastructure is critical to the operational effectiveness of this important security alliance, and in this context the recent press reports that Huawei has been selected to develop and/or supply the Republic of Korea’s advance LTE telecommunications backbone raise serious questions and potential security concerns,” the senators wrote.

The White House is wary of publicly criticizing the Huawei deal for two reasons. Challenging the deal could be portrayed by Beijing as interfering in Chinese economic and trade freedoms. Also, the Obama administration is mindful that accusing China of using telecom companies for spying could be seen as hypocritical, considering the recent disclosures about the spying activities of America’s National Security Agency.

National Security spokeswoman Caitlin Hayden declined to comment on the administration’s view of the Huawei deal. A senior administration official told The Daily Beast that the administration does have concerns about Huawei, as evidenced by the U.S. Commerce Department’s 2011 decision to exclude Huawei from a project to build a wireless emergency network for first responders, due to U.S. national-security concerns.

“There’s a tension inside the White House about how far do we go with the Chinese and will this be seen as the U.S. playing hardball on commercial issues,” a former U.S. official said.

Despite the lack of public comment, the administration has been working to keep Huawei technology away from sensitive U.S. communications for years; despite that, the company has a robust U.S. presence. The Treasury Department stopped Huawei from acquiring 3Com in 2008 and the White House warned Sprint against using Huawei components in their plan to expand their 4G wireless network last year.

Several U.S. allies have also moved to block Huawei from establishing a foothold in their countries that could be exploited for intelligence-gathering purposes. The new Australian government upheld a ban on Huawei contracts when it came to power last October. British Prime Minister David Cameron last month called for greater oversight by British intelligence officials of Huawei’s presence in his country, following the disclosure that a center set up to monitor Huawei’s security risk in the U.K. was being funded and run by the company itself.

The U.S. intelligence community believes Huawei maintains links to the Chinese government and military. A Pentagon military report last year said Huawei maintains “close ties” to the People’s Liberation Army. Huawei founder and Chairman Ren Zhengfei is a former PLA officer. The company is largely financed by low-interest loans provided by China’s government-run development bank.

Huawei says it is a private company with no links to the PLA and that its networks are no more or less vulnerable to spying than those of any other telecommunications company.

“Knocking one company out of the market—any market— does precisely squat to secure networks and data,” Huawei spokesman William Plummer told The Daily Beast. “There is zero justification for the groundless, tired claims about Huawei and, frankly, those that purport such nonsense should be held accountable for the disruptions in market-based commerce that they are causing and will further cause, including for U.S.-based companies.”

Cybersecurity experts and lawmakers disagree. Some, like House Intelligence Chairman Mike Rogers (R-MI), believe that Huawei components could contain bugs, beacons, or backdoors that could be activated a later time to send information back to China or disrupt U.S. or allied information systems during a crisis.

Other experts say the Huawei components could be clean, but that the Chinese government would be able to pressure Huawei down the road to cooperate with intelligence gathering by providing access to the networks.

“If the Chinese wanted to exploit Huawei to get intelligence on U.S. forces in South Korea, they would be able to do it,” said James Lewis, senior fellow at the Center for Strategic and International Studies. “Huawei could be totally innocent, but if the Chinese PLA wanted to press them to cooperate, they really wouldn’t have a choice.”

The classic way for the PLA to exploit Huawei’s networks would be through the updates and patches that Huawei would send after the system was installed, which might not be monitored by the South Korean operating company, he said.

“The Chinese government has supported Huawei a lot so they have a lot of influence, but that doesn’t mean they’ve exercised it,” said Lewis. “But if you are worried about the PLA, you are going to be worried about buying equipment from China.”

Like us on Facebook - Follow us on Twitter - Sign up for The Cheat Sheet Newsletter