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Poland to hold off blanket ban on Huawei 5G gear due to cost concerns

* Poland unlikely to ban all Huawei kit from 5G - minister

Aim to avoid dramatically raising costs of 5G - minister

* Decision likely in coming weeks - minister tells Reuters

By Anna Koper and Joanna Plucinska

WARSAW, April 16 (Reuters) - Poland is unlikely to exclude all Huawei equipment from its next generation mobile networks, a government minister told Reuters, in part to avoid increased costs for mobile operators.

Huawei, the world's largest maker of mobile network infrastructure equipment, faces intense scrutiny in the West over its relationship with China's government and denies U.S.-led allegations that its 5G equipment could be used for spying.

Polish officials told Reuters in January that the government was prepared to exclude China's Huawei from 5G networks in the wake of the arrest of a Chinese Huawei employee and a former Polish security official on spying allegations.

Karol Okonski, Poland's deputy digital minister in charge of cyber security, said Warsaw is considering raising security standards and setting restrictions for fifth generation, or 5G, networks, with a decision likely in the coming weeks.

"When it comes to new investments, we are quite determined to set clear government expectations when it comes to the security of used equipment," Okonski said.

This would bring Poland in line with the approach of the European Commission, which late last month shunned U.S. calls to ban Huawei from 5G networks, calling instead for tougher rules.

Poland's telecommunications infrastructure relies heavily on Huawei equipment, in part because it offered lower prices than competitors. Operators are also using its gear in 5G trials.

Okonski said Warsaw is talking to operators about potential changes to existing telecom equipment, although the cost of eliminating existing Huawei equipment means the government could allow some of it to remain.

"Poland is not able to finance the replacement of Huawei equipment by the (telecoms) operators," Okonski said.

COST OF BAN

Banning Huawei would increase prices and delay the implementation of new technologies, Poland's biggest mobile operator Play has told Reuters and said it had not seen any evidence of security issues with its equipment.

Other Polish mobile operators, such as T-Mobile Polska, Orange Polska and Polkomtel, also use Huawei gear.

The U.S., one of Poland's closest allies, has for months lobbied Warsaw and other European governments to ban Huawei.

In February, U.S. Vice President Mike Pence and Secretary of State Mike Pompeo stressed the dangers of purchasing from the Chinese firm while in Poland and central Europe.

Robert Strayer, a U.S. State Department official responsible for cybersecurity, told reporters last week that the U.S. was happy with the EU's recommendation on 5G networks, which does not call for an explicit ban on Huawei's equipment.

U.S. officials said Poland needed to ensure the security of telecommunications infrastructure if it were to increase the presence of U.S. troops on Polish soil, pushing Warsaw to institute a Huawei ban, several officials have said.

The government is keen to have more U.S. troops stationed in Poland, in part to deter potential Russian aggression.

In September, Polish President Andrzej Duda asked President Donald Trump for a permanent U.S. military base in Poland and the countries could reach a deal guaranteeing a larger rotating presence of U.S. soldiers on Polish soil in the coming weeks.

Michal Baranowski, director of political think tank the German Marshall Fund in Warsaw, said how the United States responds will depend on whether it is willing to accept what it could view as "an imperfect solution." (Reporting by Anna Koper and Joanna Plucinska in Warsaw, Additional reporting by Sarah Lynch in Washington and Jack Stubbs in London. Editing by Cassell Bryan-Low, Justyna Pawlak and Alexander Smith)