Huawei in Russia

Huawei has signed a deal with Russian telecom firm MTS to develop 5G technology in Russia. Why is Russia interested in Huawei and how can it ensure that the deployment of the technology is aligned to Russia’s interest?

Background

Huawei Technologies is a Chinese multinational networking and telecommunications equipment & services company headquartered in Shenzhen, Guangdong. It is the largest telecommunications equipment manufacturer in the world. In 2018, it becomes the world's second-largest smartphone maker, behind Samsung. It sells more phones than Apple.

Huawei’s 74-year-old founder Ren Zhengfei, was a technician for the People’s Liberation Army before founding Huawei in 1987. The Chinese government has invested billions of dollars in Huawei, giving it a competitive advantage in the global marketplace. Under Chinese law, companies must co-operate with the intelligence services. Analysts therefore warned that equipment produced by Huawei could be compromised.

Analysis

China’s Huawei, considered a security threat in the United States signed a deal with Russian telecoms company MTS. The deal will see "the development of 5G technologies and the pilot launch of fifth generation networks in 2019-2020", MTS said in a statement.

The deal was agreed as China's President Xi Jinping began a three-day visit to Russia. The deal is likely to provide some relief to Huawei which has been under intense international scrutiny in recent months.

Under the framework of the agreement, the companies have formed an action programme for the period to end-2020. Introduction of 5G and IoT technologies and solutions on the current infrastructure of MTS, the upgrade of the commercial LTE network of the operator to '5G Ready' and the launch of testing and pilot 5G areas are planned. Huawei also signed a cooperation agreement on 5G development with Russian mobile operator Beeline, controlled by the Veon Group, earlier this May. Beeline plans to begin operating the 5G-ready network in Moscow in 2020. The first stage of the upgrade of the network in the capital city will be completed in September. The investment will amount to RUB 5 billion for that stage. Beeline plans to upgrade all its base stations in the capital city and increase the number of base stations by 60 percent in five years. The programme will be carried out in cooperation with Huawei. Beeline has already modernised its network in the Moscow region in cooperation with this company.

The US has encouraged allies to block Huawei - the world's largest maker of telecoms equipment - from their 5G networks, saying the Chinese government could use its products for surveillance. The US Justice Department has indicted Huawei with 23 counts pertaining to the alleged theft of intellectual property, obstruction of justice and fraud related to its alleged evasion of US sanctions against Iran.

Several companies have already distanced themselves from Huawei, including Google, whose Android system equips the vast majority of smartphones in the world. Huawei's reported potential involvement in Britain's 5G network has proved politically sensitive, and the government of British Prime Minister Theresa May insists no decision has been made on the issue. Huawei has obtained 46 5G commercial contracts in 30 countries around the world. It has also shipped more than 100,000 5G mobile base stations.

After Huawei signed the deal with Russia, China granted commercial 5G licences to Hong Kong-listed carriers China Mobile, China Unicom and China Telecom, as well as China Broadcasting Network according to the Ministry of Industry and Information Technology (MIIT). The award of licences is expected to enable China to move ahead in the global race to deploy telecoms infrastructure that will help power the industrial internet, autonomous driving and smart cities among a range of advanced mobile applications.

Assessment

Our assessment is that Russia has a tremendous reputation in the realm of digital security but may lack similar skills in high end manufacturing of electronic. Moscow hopes to become the first 5G city by 2020 and this will allow Russia to be in the forefront of countries with highest adoption of Artificial Intelligence.

It can be noted that the 5G testing will focus on the four key industries of healthcare, transport, construction and housing utilities. One of the pilot projects will involve ultrasound diagnostics remotely operated via 5G networks. Another project will entail the launching of drones for monitoring construction sites through a high-speed network.

We feel that if Huawei and other Chinese companies can disrupt critical infrastructure as claimed , then presumably non-Chinese suppliers could also do the same to Russia at the request (or demand) of their country’s security agencies. As technology gets increasingly complex, both in software and in hardware, it will be difficult to know for sure whether the equipment is being abused or is open to abuse. The technical standards of 5G are still evolving and there is no universal agreement in any country about the introduction and operation of networks.

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