Chinese Telecoms May Be Spying on Large Numbers of Foreign Customers

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A U.S. Congressional probe is investigating whether China's state-linked firms, which built much of the communications infrastructure in several Asian countries, is using its access for snooping.

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Men talk on mobile phones inside the Sergi Kosgi exhibition center in Ashgabat, Turkmenistan's capital, where Chinese firms built much of the telecom infrastructure / David Tilling

Two Chinese telecommunications giants are under scrutiny by a US congressional committee. The outcome of the probe could have revealing implications for Central Asian states, which have used these companies to modernize their telecom sectors.

US legislators have expressed concern that Huawei and ZTE act as front companies for the Chinese government, and represent a grave "cyber-security threat." The chairman of the House Permanent Select Committee on Intelligence, Michigan Republican Mike Rogers, asserted during a congressional hearing last October that China is engaged in the "brazen and wide-scale theft of intellectual property from foreign commercial competitors."

"Attributing this espionage isn't easy, but talk to any private sector cyber analyst, and they will tell you there is little doubt that this is a massive campaign being conducted by the Chinese government," he added.

ZTE and Huawei strenuously deny collaborating with the Chinese government to steal data. But on November 17, Rogers launched a committee probe into "into the threat posed by Chinese-owned telecommunications companies working in the United States, and the government's response to that threat."

An investigation by EurasiaNet.org focusing on ZTE and Huawei's penetration of the Central Asian telecoms sector shows that the companies, with Chinese government backing, have secured contracts in Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan.

If the US congressional committee's premise for its probe - that Huawei and ZTE provide systems that enable a Chinese-government-backed data theft operation - is correct, then every Central Asian state except Kazakhstan would appear to be in a vulnerable spot. It is also possible that authoritarian-minded governments in the region are using Chinese technology to snoop on their own people. Central Asian states, especially Turkmenistan and Uzbekistan, are routinely listed in watchdog rankings as among the most repressive states in the world.

Huawei and ZTE have been active in Central Asia for more than a decade. In 2001, Kyrgyzstan received $10-million worth of free ZTE equipment in the form of inter-governmental aid and used it to install a telephone station for 10,000 subscribers in Bishkek. In addition, a number of leading Kyrgyz mobile phone and internet providers -- including Sapatcom, Asia-Info, Megacom and Saima Telecom -- use equipment purchased from ZTE or Huawei. And in 2009, Kyrgyztelecom and Huawei signed a contract to increase the bandwith of existing fiber optic lines in Kyrgyzstan.

In Tajikistan, ZTE modernized telephone exchanges across the country, and in 2005 it built a commercial Next Generation Network, a single network for telephone and internet provision, the first of its kind in Central Asia. In December 2006, the China Development Bank (CDB) gave a $70.6-million loan to the Tajik-Chinese mobile operator TK-mobile for new equipment purchased from ZTE. In addition, President Imomoli Rahmon's state visits to China have often included meetings with ZTE or Huawei executives.

ZTE opened an office in Uzbekistan in 2003. It now provides USB-modems and routers to mobile operators, including Ucell, Beeline, MTS and UzMobile. In August 2011, ZTE, in cooperation with Uzbektelecom, opened an electronics manufacturing plant in Navoi. Huawei was hired by Uzbektelecom in 2003 to upgrade telephone networks in the Fergana Valley city of Namangan, and later Tashkent. In 2005, thanks an $8-million loan from China's Ex-Im Bank, Huawei received a contract to upgrade the Uzbektelecom's fixed-line network in six regions. The project was worth $12.5 million and partly financed by Uzbektelecom. In 2006, an additional agreement was signed between Uzbekistan's Aloqabank and CDB, enabling Uzbektelecom to lease equipment worth $18.3 million from Huawei.

Since 2003 Huawei has also obtained a series of strategic contracts in Turkmenistan including one to construct fiber-optic communications lines, and another to modernize telephone networks in Ashgabat and other regional centers. In 2005, the Chinese government provided training grants for Turkmen specialists using Chinese equipment; Huawei's introduction of CDMA technology in Ashgabat in 2005 was funded by grants and interest free loans from the Chinese government.

Raffaello Pantucci, a visiting scholar at the Shanghai Academy of Social Sciences, stressed that the allegations against Huawei and ZTE are almost impossible to prove. He went on to note that the United States is not the only country to have misgivings about Huawei, a firm founded by Ren Zhengfei, a former engineer with the People's Liberation Army.

"China is trying to increase their footprint around the world and they encounter these sort of problems everywhere they go," Pantucci said. "Huawei tried to do a couple of big contracts in the UK and was rejected for the same sort of concerns that the United States has. Elsewhere, India had the same thing, Huawei was trying to bid for lots of contracts to build the telecommunications infrastructure and the Indians said 'absolutely not.' I understood it was the Home Ministry that said no and it was concerned about Chinese espionage."

When Central Asian states first began striking deals with Huawei and ZTE roughly a decade ago, the motive for regional leaders to cooperate with Chinese firms was probably more economic than political. Strapped for cash, Beijing offered them deals that were too good to pass up, Pantucci said. "If someone comes along offers you whole bunch of nice infrastructure relatively cheaply, you'd probably go for it," he added.

Over time, authoritarian-minded Central Asian leaders have come to appreciate cooperation with Chinese telecom firms as a useful means of bolstering their authority, rights advocates assert. Some civil society groups argue that Huawei and others are willing to "assist the Turkmen government in monitoring cell phone and internet use in exchange for lucrative deals."

Such cooperation "would definitely make it easier" for repressive Central Asian governments to spy on their own people, as well as on foreign firms doing business in the region, Pantucci acknowledged.

"How much these fears have legs, I don't know. But I can understand where the concerns come from. Having any foreign company building sensitive infrastructure like that is, of course, going to spark off certain concerns," he said. "I expect with any big company in China there is some level of linkage with the government."

This article originally appeared at EurasiaNet.org, an Atlantic partner site.

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Deirdre Tynan is a Bishkek-based reporter specializing in Central Asian affairs.

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