Poland signs agreement with US to shore up 5G security

The US and Poland signed an agreement on 5G security, effectively barring Chinese companies from participating in building 5G networks in one of the largest markets in central Europe.

The agreement was signed by Mateusz Morawiecki, the Polish Prime Minister, and Vice President Mike Pence during his visit to Warsaw in place of President Trump, who stayed behind to deal with the expected landing of Hurricane Dorian. The presidential visit was made to commemorate of the 80th anniversary of Hitler’s invasion of Poland.

The two parties of the agreement pledged to protect “these next generation communications networks from disruption or manipulation and ensuring the privacy and individual liberties of the citizens of the United States, Poland, and other countries is of vital importance.”

When it comes to supplier selection, the agreement says, “we believe that all countries must ensure that only trusted and reliable suppliers participate in our networks to protect them from unauthorised access or interference.” Though it does not name China or Huawei, the criteria listed for “rigorous evaluation” read almost tailor-made for this purpose.

Specifically, suppliers should be evaluated on: whether they are controlled by a foreign government and subject to independent judicial review; whether they have a transparent ownership structure; whether they have a track-record of ethical corporate behaviour; and whether they are “subject to a legal regime that enforces transparent corporate practices”.

Other US officials were more straight-forward. “We recognize 5G networks will only be as strong as their weakest link,” said Marc Short, Pence’s chief staff, in a statement quoted by Associated Press. “We must stand together to prevent the Chinese Communist Party from using subsidiaries like Huawei to gather intelligence while supporting China’s military and state security services – with our technology.”

Poland has been one of the more vocal European countries calling for a ban on Huawei, especially after a Huawei employee was arrested charged for spying. The country’s officials had called for a coordinated NATO-EU action. But with any EU-wide 5G security measures not expected to be in place by October and member states given another year to test the measures, Poland looked to the US for a faster solution. The two countries have strong cultural ties. “Nearly 10 million Americans trace their heritage to Poland”, according to Pence.

The Polish officials had conceded that they lack legal tools to ban Huawei from the country’s private sector. This agreement would deter such an interest from the privately-owned telecom companies.

The agreement would also be a significant step for the US to get Europe, including the UK, on board its battle with China and with Huawei. Pence called it “vital example for the rest of Europe on the broader question of 5G.”

The US or cash? Huawei asks Poland to choose sides

Huawei has put its financially favourable foot forward, suggesting Poland will only get a cash boost if the vendor is allowed to participate in the 5G bonanza.

The role of Huawei in European networks has been under scrutiny for a considerable amount of time, and while it does appear it will be safe in numerous markets, Poland is one which is still hanging in the balance.

According to Reuters, Huawei is prepared to invest roughly $793 million in the country as long as it is allowed to sell equipment to the Polish telcos. While this might be enough to force some politicians into switching on the green-light, Poland is an area where Huawei has found itself in a bit of bother recently.

Back in January, a Chinese employee of Huawei and a Polish national working for Orange were both arrested on spying allegations by Polish security services. Evidence was not produced at the time, though concrete evidence has not been needed to ban Huawei in the US, or in countries such as Australia.

In terms of the US, Poland has had a strong relationship with the country for some time. Polish–US relations were officially established in 1919 and the country has remained one of the most stable allies of the US since. This filters down to the general public also, with Poland one of the most consistently pro-American nations in Europe and the world.

You also have to factor in more direct threats from the US. In February, the combative Secretary of State Mike Pompeo effectively suggested Eastern European nations would have to choose between working with the US or Huawei.

Looking at the Polish economy, a fractured relationship with the US would be difficult. Poland is the 24th largest export economy in the world, with the vast majority of exports heading to nations in Europe. However, the US is the largest single market outside of Europe for Poland, accounting for 2.7% according to Observatory of Economic Complexity, a MIT project.

With the US leaning so heavily on European allies to ban Huawei, seemingly as a means of putting pressure on the Chinese Government, Poland might turn out to be an interesting battle ground. Of course, you have to consider the cash incentive from Huawei.

Poland is effectively the Eastern European home ground of Huawei. The firm employs roughly 900 people in the country and will have a positive impact with its Polish supply chain. With further investments planned in the country, the direct impact of £793 million will keep the Polish Government happy, but there will be considerable knock-ons in other parts of the economy.

Another consideration for Poland will be market competition. Polish telcos will need a suitable amount of competition to ensure investments in network infrastructure is as low as possible. When you consider ARPU on mobile users, the demands become much more evident.

Orange’s Polish business currently has 9.7 million subscribers, each generating roughly £5.67 a month in revenue. For Play, Poland’s largest MNO, just over 12 million subscribers generate £6.71 a month for data services. For Polish telcos to generate ROI, competition between the network infrastructure vendors is clearly needed; banning Huawei might have some difficult implications to stomach.

Huawei knows this of course and is playing an excellent move. Poland will have to make a decision before too long; persist with its relationship with the US or effectively help Huawei gain traction in Eastern Europe.

Huawei employee arrested in Poland on spying allegations

Huawei’s sales director in Poland, who previously served in the Chinese diplomatic corps, has been arrested by the Polish authorities on spying allegations. Huawei immediately terminated his employment.

More details have been disclosed related to the arrest of Wang Weijing, who also goes by the name Stanislaw Wang. After serving as attaché at the Chinese general consulate in Gdansk, Wang joined Huawei’s Poland office in 2011, first as its PR director then as its sales director responsible for selling to the Polish public sector. Wang was detained on 8 January, on allegations of spying, as was first reported by the Polish public broadcaster TVP.

According to TVP, an Orange employee arrested on the same allegations, identified as Piotr D, had worked at the country’s Internal Security Agency (ISA, or “Agencja Bezpieczeństwa Wewnętrznego (ABW)” in Polish), which carried out the arrests. While at ISA one of his responsibilities was issuing security certificates for equipment used by Poland’s public-sector offices. He left the agency earlier after being accused of corruption but was not formally charged.

The offices of Huawei and Orange were searched respectively following the arrests, though a spokesperson for ISA told Reuters that the allegations against Wang were related to individual actions, not directly linked to Huawei. This is also the line Huawei adopted when it promptly severed the employment relationship with Wang, citing that “in accordance with the terms and conditions of Huawei’s labour contract, we have made this decision because the incident has brought Huawei into disrepute.”

Orange said it did not know if the investigation in Piotr D. was linked to his professional work but would continue to cooperate with the authorities.

Despite the troubles it has run into in markets like the US, New Zealand, Japan, and the UK, Huawei’s business in Eastern Europe has been largely unperturbed. However the latest twist in Poland and the earlier arrest of Meng Wanzhou, Huawei’s CFO, in Canada might put this position under pressure. On Saturday 12 January, Joachim Brudzinski, Poland’s interior minister, called for a EU-NATO joint position with regard to banning Huawei from these markets when speaking on a Polish commercial radio station. “There are concerns about Huawei within NATO as well. It would make most sense to have a joint stance, among EU member states and NATO members,” said Brudzinski.

Then on Sunday 13 January, Karol Okonski, a government official responsible for cyber security, told Reuters that Poland could consider forbidding the public sector from using Huawei products while probing the legal measures to limit Huawei’s access to the private sector. “We do not have the legal means to force private companies or citizens to stop using any IT company’s products. It cannot be ruled out that we will consider legislative changes that would allow such a move,” Okonski said.

Huawei has always denied that it poses security threats, or it spies on behalf of the Chinese government. In a statement it sent out to media after its CFO’s arrest and it sent again after the arrests in Poland, Huawei stressed that it “complies with all applicable laws and regulations in the countries where it operates, and we require every employee to abide by the laws and regulations in the countries where they are based.”

Incidentally, the South China Morning Post reported earlier that, shortly before her arrest in Canada, Meng Wanzhou and Ren Zhengfei, the founder of Huawei and Meng’s father, hosted a town hall meeting for Huawei employees. According to a transcript distributed to Huawei staff and seen by SCMP, both executives discussed extensively on compliance. Cases were divided into “red” and “yellow” lines. By red line, Meng meant the rules where there is “no bargaining and must be strictly complied with”, while by yellow line she referred to cases where strict compliance is not operationally feasible, and the company can build in the costs of flouting the rules as “sunk costs.” She cited labour risks as an example.

“Of course, beyond the yellow and red lines, there may still be another scenario, and that is where the external rules are clear-cut and there’s no contention, but the company is totally unable to comply with in actual operations. In such cases, after a reasonable decision-making process, one may accept the risk of temporary non-compliance,” quoted by SCMP.

Ren also urged his staff to consider both cost and benefit in compliance cases, especially related to laws of the US and EU. SCMP quoted him challenging those present when answering a question: “We must not bind ourselves up just because the US is attacking us. If our hands and feet are bound, then we will not be able to continue producing, then what’s the point of compliance?”