CREATING PRECEDENCE

Meng Zanzhou, the Chief Financial Officer's detention in Canada and probable extradition to the United States for her alleged role in trying to skirt sanctions on Iran has the probability to explode into a diplomatic war. It was the latest in a series of interventions that seek to dent a vibrant business model pursued by Huawei for its alleged links with the Chinese government and therefore, stealing secrets and passing on information.

The company has fast become one causing dependence simply because they provide basic infrastructure in manufacturing telecom networks that no one else can as efficiently or reasonably. Security of Information has caused Huawei to lose lucrative contracts for 5G in Australia and there are fears that without the company the 5G network launches are going to be slowed down. The company has offered to open up its laboratories and manufacturing sites to prove nothing is sinister about their operations but it is an overlay that hasn't exuded confidence. The offer has been balanced with a veiled threat that of taking their business elsewhere if they remained unappreciated. This can have a major impact on the big giants such as Apple that resource most of their product assemblies from China. Apple is expensive in the end product meaning they get a bigger bang for the buck but once input cost rises, as will be the case if Huawei refuses to manufacture for them, they will feel the pinch. Apple has already reported lesser than anticipated profit and they put the blame on Chinese consumption or the lack of it.

Consumers are now more interested in installing conducive apps rather than invest in new phones and Apple is wary of the fact in the midst of the trade war between the US and China, Huawei has built sufficient goodwill to be able to take the bold decision to stand up to the US. Had this been an opposite-scale incident, there's little doubt that there would have been hell to pay as was evident in the recent collapse of the Turkish economy over the detention of a US pastor reportedly involved in political intrigue far beyond his religious activity.

China has maintained its composure though whether that is because there's salt in the accusation or simply because it's a tactical move, is not yet known. Whatever the reason they are unlikely to abandon one of its own-so to say. China is one of the eight countries that are exempt from the US sanctions on import of Iranian fuel and that speaks volumes of the leverage that the Chinese enjoy. Trade talks between the two countries to prevent escalation of the bruising tariff wars are in progress though outcomes have so far been lukewarm to say the least.

That sanctions are broadly breached is nothing new. It has happened with North Korea and there are countries such as a Singapore that have reportedly been involved with skirting North Korean sanctions. That the same applies to Iran isn't surprising in the global economy. The US attempt to force the world to see its way hasn't gone down well with the European Union, India and Japan and though there was a veiled threat against India, it has remained so. Even the US realises that fools step in where angels fear to tread.

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