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Why a Chinese Company Finally Decided to Pull Back from Iran

Mark D. Wallace|President of United Against Nuclear Iran
Tuesday, 20 Dec 2011 | 1:21 PM ET

While the international movement to pressure companies into leaving Iran has had a great deal of success over the past few years, there is one argument that seems to never go away.

Flag of the People's Republic of China
Eriko Koga | The Image Bank | Getty Images
Flag of the People's Republic of China

For years now, Western firms have attempted to justify their business in Iran by claiming that if they were to pull out, their competitors from other countries—notably China—would rush in to fill the vacuum.

The prevailing wisdom is that Chinese companies and lawmakers in Beijing do not lose much sleep over Iran’s illegal nuclear weapons program, its sponsorship of global terrorism, or its egregious human rights record.

Yet now, in a move that could change the entire dynamic on the drive to economically isolate Iran’s regime, one Chinese company has done the unthinkable, and chosen to voluntarily stop pursuing new business activities in Iran.

The company, Huawei Technologies Co., is the world’s second-largest supplier of telecommunications equipment, and until recently has maintained a robust, 1000-employee presence in Iran.

In an unprecedented step, Huawei in a December 9 statement said that “Due to the increasingly complex situation in Iran, Huawei will voluntarily restrict its business development there by no longer seeking new customers and limiting its business activities with existing customers.”

Huawei had a particularly compelling reason to pull back from Iran: there was clear evidence of Iran abusing foreign telecommunications technology to crack down on dissidents and other opponents of the ruling mullahs in Tehran. Many in fact argue that the regime’s manipulation and abuse of mobile technology is all that has kept the Arab Springfrom spreading to Iran.

While telecom companies like Huawei may not intend for Iran to misuse their technology, the products inevitably get used for the regime’s nefarious activities including its ongoing campaign of terror against its own people.

A spokesman for the U.S. State Department applauded Huawei’s decision, adding that the U.S. "calls on all firms to exercise vigilance when doing business with Iran and ensure that any business does not contribute to the Government of Iran's ability to repress its own people."

While Huawei unfortunately did not decide to fully pull out of Iran, one should not underestimate the importance of its move to stop pursuing new contracts. For the first time, a major Chinese business has joined the worldwide movement to isolate Iran, and in so doing, has helped send a message around the world that Iran is off limits to responsible businesses.

Some have interpreted Huawei’s decision as an attempt to curry favor in larger, more important markets such as the United States.

And while there may have been other factors that influenced Huawei’s decision, this was not just a raw calculation based on market share and profit. I speak from personal experience on this point, as my colleagues at United Against Nuclear Iran(UANI) and I participated in weeks of substantive discussions with Huawei representatives, all of whom took seriously the concerns raised about Iran’s nuclear weapons program, its well-known sponsorship of organizations like Hezbollah and Hamas, and, of course, the potential danger that Huawei technology was being used by the Iranian government to oppress its own citizens.

Further, even if Huawei did do this just to placate American lawmakers, that would not be meaningless, but a sign of the effectiveness of sanctions and corporate responsibility campaigns, even when they target the Chinese.

Ultimately, Huawei acknowledged that its business model had to change, and was mindful of how its brand would be perceived in the eyes of the public. In commenting on this new dynamic, one Huawei executive told the press, “As we transform our business and broaden our customer base away from just operators, we need to consider other things and may start taking a slightly different approach.”

Huawei’s decision is already having a ripple effect. Just five days after the company’s announcement, Nokia Siemens Networks announced that it too would gradually reduce existing commitments, effective January 1, 2012.

The Huawei case has disproved the pessimistic thought that it is pointless to engage Chinese companies on issues such as proliferation and human rights. Clearly, a Chinese company IS capable of making a conscientious and responsible decision.

More importantly, this event has completely debunked the argument used by irresponsible Western companies still operating in Iran, that leaving would just result in Chinese companies moving in to fill the void.

Putting pressure on the government of Iran to change course from the dangerous path it has been on now for years is the shared responsibility of governments, companies, and concerned citizens everywhere.

Prior to Huawei’s decision, most considered “everywhere” to apply in practice only to Western countries. That “everywhere” now also includes China is a most welcome development, one that will hopefully be replicated by Huawei’s counterparts in the near future.

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Mark D. Wallace is president of United Against Nuclear Iran. He served as U.S. Ambassador to the United Nations, Representative for U.N. Management and Reform.

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