- - Monday, December 17, 2018

ANALYSIS/OPINION:

On Dec. 1, Meng Wanzhou, the chief financial officer of Chinese tech giant Huawei, was transiting Canada while on her way to Mexico. Authorities there arrested her at the request of the United States and charged her with violating U.S. sanctions on Iran.

Beijing reacted swiftly.

The Chinese Foreign Ministry summoned American Ambassador Terry Brandstad to strongly protest the arrest and demand that the United States arrange the release of Ms. Meng. Meanwhile, the Chinese reportedly detained Michael Kovrig, a former Canadian diplomat.

Officially, Ms. Meng, now out on bail, was arrested for misdeeds allegedly committed a decade ago, not because of any theft of intellectual property by Huawei. In 2008-09, she worked for Skycom, a Hong Kong-based company with strong, albeit unofficial ties to Huawei. Indeed, Skycom may have been a de facto subsidiary of the Chinese firm.

While at Skycom, Ms. Meng reportedly hid details of that relationship in discussions with various banking firms. As important, Skycom reportedly tried to arrange the sale of Hewlett-Packard computers to Iran, in contravention of U.S. export controls.

That’s the official explanation for the arrest. But many believe that Ms. Meng’s detention has less to do with the sanctions issue, and more to do with the ongoing trade dispute between the United States and the People’s Republic of China.

Ms. Meng’s arrest occurred during the G-20 summit, as President Donald Trump and President Xi Jinping were brokering a truce to the burgeoning trade war. News of her detention led stock markets to fall around the world, for fear that this could lead to renewed trade clashes. Almost certainly, Beijing will see this as a case of American hardball negotiations.

But it is not clear that the arrest was driven by anything other than the sanctions evasion issue. After all, it is not as though Mr. Trump has shown any desire for closer relations with Tehran. Indeed, upon taking office, he promptly scrapped the Obama-era Joint Comprehensive Plan of Action (JCPOA) agreement and reinstituted sanctions on Iran. And the transfer of computers to Iran has clearly been consequential, given Tehran’s subsequent effort to hack dams in upstate New York.

Whatever the real impetus for the arrest, the action is likely to have far-reaching impacts, affecting perceptions and relations in Tehran, Paris and Berlin, Pyongyang and Seoul, as well as Beijing.

Iran: If the mullahs in Tehran had any doubt that the United States intends to sustain and tighten the sanctions currently in place against their regime, the decision to detain Ms. Meng has erased it. Given how seriously the sanctions have already devalued the Iranian rial and wreaked longer-term damage on the Iranian economy (damages that have already sparked significant anti-regime protests), this sign of American resolve could further increase pressure on the Iranian government.

European companies: Aside from ex-Obama administration officials such as John Kerry, some of the greatest critics of Mr. Trump’s decision to scrap the JCPOA have been the Europeans. Some have threatened to ignore American sanctions and proceed with new investments and financial commitments to Iran. The arrest of Ms. Meng is a warning that any such move, if it involves any American technology or financial resources, could lead to criminal prosecution.

This does not mean that European companies will suspend all interactions with Iran, but as Washington’s use of International Trade in Arms Regulations has limited foreign access to American technology, Ms. Meng’s arrest will doubtless constrain what companies are willing to provide.

North and South Korea: Ms. Meng’s arrest may reverberate most strongly in Pyongyang and Seoul. Despite the Singapore summit between Mr. Trump and North Korean leader Kim Jong-un, North Korean denuclearization appears to be at a standstill. Consequently, Washington has been unwilling to dilute the “maximum pressure” approach, including ongoing sanctions, until the Pyongyang provides more concrete proof of its willingness to denuclearize.

The United States has also opposed efforts by the South Korean government to weaken its sanctions, reopen the Kaesong industrial complex, or otherwise expand economic ties to the North. The arrest of Ms. Meng is a reminder to both sides of the 38th Parallel of American seriousness when enforcing sanctions.

China: The issue of North Korean sanctions is also likely to be a concern in Beijing. China is the largest source of energy and food for North Korea. North Korean cyber actions would be difficult without access to Chinese connections to the rest of the world. Chinese banks play an essential role in any North Korean economic transaction, legal or illegal. Ms. Meng’s arrest may be seen as a harbinger of a renewed “maximum pressure” policy on North Korea, especially if no movement is forthcoming regarding North Korean denuclearization.

It remains to be seen how the Meng affair is ultimately resolved. But it likely has served a purpose, intended or otherwise, by reinforcing the credibility of American sanctions.

• Dean Cheng is a senior research fellow in The Heritage Foundation’s Asian Studies Center.


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