Huawei hung up in North Korea telecom controversy

Chinese telecom giant Huawei is under fire for helping North Korea with its commercial wireless telecommunications network, the latest twist in a raging global debate over the firm’s alleged role in espionage and spying.

According to a July 22 exposé in the Washington Post, Huawei has partnered with Panda International Information Technology Co Ltd, a Chinese state-owned firm, for at least eight years to build up the secluded and United Nations-sanctioned nation’s telecom infrastructure.

The news report’s revelations, based on past work orders, contracts and a database of the company’s telecom operations worldwide, comes when Trump seeks to isolate China and Huawei on spying concerns but engage North Korea on denuclearization.

Huawei, through a spokesman, said it has “no business presence” in North Korea, though the company representative did not challenge the authenticity of the documents uncovered and published by the Washington Post. The US Commerce Department did not immediately reply to the report.

It is hardly an explosive revelation that North Koreans have and use mobile phones, considering the first services were introduced nearly two decades ago. One foreign diplomat who recently visited North Korea notes that mobile phones are widely used and highly visible among Pyongyang’s residents.

Previously, foreign companies were instrumental in developing North Korea’s telecom services, although the present status of their involvement is unclear in the highly opaque country.

International sanctions imposed by the UN, United States and the European Union on North Korea mean commercial dealings with the country are risky, and thus are often done via front companies that operate in East Asia and beyond.

Many of those companies are known by international investigators to be adept at dealing with dual-use items and concealing the final destination of the goods that they handle through layers of different transactions and companies.

That may explain why Huawei denied having a business presence in North Korea but did not refute the authenticity of the documents exposed by the Washington Post. Huawei’s and Panda’s involvement in North Korea appears to be focused on providing encryption systems, and ensuring that their introduction does not cause instability in the wider mobile phone system.

The first mobile phone network in North Korea was established by Loxley Pacific, a Thai company, back in November 2002. Loxley was also engaged in establishing internet services, and by 2003 there were more than 20,000 mobile phones in service in North Korea.

The internet connection was meant to be managed by a joint venture company called Star, which took over North Korea’s Internet Assigned Numbers Authority allotted dot-kp domain.

Loxley’s involvement in North Korea became controversial when, in 2003, it tried to serve as a conduit for three power-control devices with potential weapons development applications sent by a front company in Japan destined for Pyongyang. Customs authorities in Hong Kong, where the ship stopped over in transit to Bangkok, acted on a tip-off from the Japanese, seized the devices and returned them to Japan.

The dual-use devices could, for instance, be used to stabilize “normal electricity” as well as the heavy flow of electric current need to fuel uranium-enrichment centrifuges.

A Loxley spokesman at the time insisted that the stabilizers were not destined for North Korea’s nuclear program, but that the country’s authorities had ordered them because “the electricity situation is poor in North Korea…they need stabilizers to avoid hurting their household appliances.” The Japanese, though, were not convinced.

Loxley’s mobile network in North Korea was abruptly shut down after a huge explosion hit a railroad station close to the Chinese border in April 2004, killing and injuring perhaps as many as 3,000 people. A train carrying the then North Korean leader Kim Jong Il, the father of the present supremo Kim Jong Un, had just passed the station when the explosion occurred, and a rumor spread that the explosion was triggered by a signal from a mobile phone.

That was probably not true, and independent sources say that a faulty electric power line was to blame when it broke and fell on a wagon carrying fertilizers. But the incident nevertheless sealed the fate of much of Loxley’s operations in North Korea.

In December 2008, a new foreign partner, the Egyptian company Orascom Telecom Media, emerged on North Korea’s telecom scene. Together with the state-owned Korea Post and Telecommunications Corporation, it established a joint venture known as Koryolink that within seven years had built an operation of more than two million mobile phone users.

According to the North Korea-dedicated website 38 North, there are now an estimated five million mobile phone subscribers in North Korea, split between Koryolink and Kang Sing NET, a wholly state-owned operator.

But services are highly restricted. With just a few exceptions for members of the elite, no mobile phone users can dial out of the country, and no one can dial North Korean numbers from abroad. More significantly, there are no internet services available over mobile phone networks. Only high-ranking officials and some foreigners are allowed the privilege of connectivity.

Limited internet services are provided by the Russian telecom company TransTeleCom and Chinese Unicom, but popular sites such as Facebook, YouTube, and Twitter, as well as most South Korean domains, are blocked.

According to an October 2, 2017 Reuters report, TransTeleCom handles 60% of North Korean internet traffic while Unicom transmits the remaining 40%. North Korea’s internet access is believed to be limited to somewhere between a few hundred to just over 1,000 connections, according to experts and analysts monitoring the situation.

In the early 2000’s, Orascom was also allowed to establish a bank in North Korea, the Orabank, which however was shut down in December 2016 under threat of US sanctions. The Egyptian company later announced in December last year that it had received approval from the UN Security Council to be excluded from a ban on foreign investment in North Korea, as long as it provided only ordinary public telecom service to the country’s citizens.

It’s not apparent that’s what Huawei and Panda are doing in North Korea, however.

“Panda…worked on software for the system…[and it] already had links with North Korea, having run Achim Panda JV Co, a joint-venture personal computer maker, since 2002,” wrote Martyn Williams, a North Korea media and tech specialist, in a 38 North report.

“Panda has also been visited by [Kim Jong Un’s grandfather] Kim Il Sung and Kim Jong Il during their visits to China, so was trusted and held in high regard by the North Korean regime.”

The same can be said for Huawei. Executives from the now trade war-embattled telecom company accompanied Chinese president Xi Jinping when he visited North Korea in June this year.

According to Williams, Huawei has since 2008 been involved in developing a “legal interception gateway”, or LIG, which enables law enforcement officials to monitor communications from targeted phones: “In short, the monitoring arrangements covered just about everything a North Korean might be doing over the Koryolink network.”

An issue in America is to what extent US-supplied technology has been re-exported by Chinese companies to North Korea. According to US policies, Washington is obliged to ban business transactions with any foreign companies found exporting equipment to North Korea.

In February, US lawmakers introduced a bill to reimpose sanctions against Chinese telecom company ZTE after it was caught shipping US-origin goods to both North Korea and Iran. In 2018, Trump briefly sanctioned ZTE but later that year lifted the ban, allowing it to resume business activities with US companies.

In a July 23 statement, Huawei said that it is “fully committed to comply with all applicable laws and regulations in the countries and regions where we operate, including export control and sanction laws and regulations of the UN, US and EU.”

That’s yet to be independently proven. North Korea may be one of the world’s least globalized countries, but it has long produced ballistic missiles and indigenously developed a nuclear arsenal, so it is hardly surprising that it has fairly advanced mobile and digital technologies.

As demonstrated with its weapons systems, North Korea is very adept at reverse engineering foreign technologies and molding them into their own. There is no doubt that Huawei has been involved in North Korea in the past, though the precise nature of its current activities is still a matter of conjecture.

Huawei’s real activities in North Korea would anyway likely be masked through intermediaries and front companies, making the actual ownership of any venture or source of supplies hard to establish conclusively.