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Inside a former army barracks in March, Germany’s telecoms regulator set a large clock ticking. The country’s multibillion-dollar auction for bandwidth in cutting-edge 5G mobile networks was on. Germany’s three main operators – Deutsche Telekom, Vodafone, and Telefonica – all use equipment from Chinese telecom giant Huawei in their networks. In fact, Huawei has been ensconced in the German telecommunications landscape for decades.
But providing 5G network infrastructure touches a higher level of national security than simple smartphones, which is why the White House announced May 15 that it was barring Huawei from selling its products in the U.S. While Germany is taking a different approach, the tension highlights the challenges the country will face as it tries to balance security with economic competition as it pursues partnerships with Huawei and, by extension, the Chinese government.
“For a long time, the German government and business have operated as if these are two distinct relationships, and they continue to do so,” says Samantha Hoffman, a cyber policy analyst. “Now Germany finds itself in a difficult position where it must deal with the reality that its bilateral trade relationship with China exposes it to national security risk.”
When the White House announced May 15 that it was effectively barring Chinese telecom giant Huawei from selling its products in the United States, it was perhaps the most extreme position taken by a nation against the colossal communications firm.
But the competing interests behind it – national security versus commercial and technological benefit – are being calculated across the West, as countries weigh whether to allow the Chinese firm a role in building their future telecommunications infrastructure.
In Germany, the math came to a very different result – but also highlights the challenges that countries will face as they try to balance security with economic competition as they pursue partnerships with Huawei and, by extension, the Chinese government.
Huawei’s German rise
Inside a former army barracks in March, Germany’s telecoms regulator set a large clock ticking. The country’s multibillion-dollar auction for bandwidth in cutting-edge 5G mobile networks was on.
Germany’s three main operators – Deutsche Telekom, Vodafone, and Telefonica – all use Huawei equipment in their networks. (A fourth company, newcomer 1&1 Drillisch, is also taking place in the auction.)
In fact, Huawei has been ensconced in the German telecommunications landscape for decades. In a story that mirrors China’s metamorphosis into a global power, the company opened its first German office in Eschborn, near Frankfurt, back in 2001.
Four years later it signed its first major contract for DSL technology, and since then it has become a real presence. Revenues in Germany last year were around €2.2 billion ($2.5 billion) and the company now employs 2,500 people. Its Western Europe headquarters has been in Düsseldorf since 2007, and it started selling Huawei-branded smartphones in Germany in 2011.
But providing 5G network infrastructure touches a higher level of national security than simple smartphones. 5G technology will create high-speed links for everything from autonomous vehicles to factories.
German intelligence services argue there are particular risks from the hitherto unseen degree of interconnectedness between 5G and other areas of critical national infrastructure in Germany. It is this concern that prompted the White House action in May. The U.S. argues Huawei is too close to the Chinese government, which could press the company for backdoor access to networks using its technology.
Huawei founder Ren Zhengfei – whose career as a People’s Liberation Army officer is one of the reasons many fear the company is too close to the Beijing government – has responded to Germany’s concerns by saying he would “not do anything to harm mankind.” And Huawei has stressed its role as a good corporate citizen in Germany committed to fulfilling all security criteria that are currently being developed by the government for technology vendors.
“Huawei has established a fruitful working relationship with the Federal Office for Information Security (BSI) and opened a cybersecurity lab in Bonn where cooperation with the BSI on several levels takes place,” says Patrick Berger, Huawei’s head of media affairs for Germany.
‘German economy rises and falls with China’
For Germany, the Huawei problem may indeed be rooted in its integration with China, but not in the espionage risk. Rather, the problem may be that Germany needs China too much.
China was Germany’s most important trading partner for the third consecutive year last year with a total trade volume of €199.3 billion ($225.7 billion). Germany sent exports to China worth €93 billion ($105 billion) in 2018, a rise of 8%.
Germany’s auto firms like Volkswagen and industrial giants have become too dependent on China for economic expansion. Now that it is so deeply invested in its relationship with China, Berlin needs to balance security concerns with trade. As Jörg Krämer of Commerzbank put it: “The German economy rises and falls with China.”
The Chambers of Industry and Commerce estimates some 900,000 jobs in Germany depend on exports to China.
“If technological key competences are lost and if this affects our position in the global economy as a result, this would have dramatic consequences for our way of life, for the state’s ability to act and for its ability to create in almost all areas of politics,” said German Economics Minister Peter Altmaier.
Also, Germany sees the development of 5G technology as crucial to the country’s future as a leading industrial nation.
“If 5G delivers on its promise, it will be the backbone of the ‘internet of things’ infrastructure. This creates dependency,” says a European cybersecurity expert who asked not to be named because of the sensitivity of his research in the sector.
“Thus, I would not worry ‘only’ about espionage, I would worry about the larger dependency on Chinese tech, including availability, but also leverage due to the dependency. Thus, the bigger question is how to manage the increasing dependency on the Chinese trade relationship, and what the long-term game in this is.”
Nonetheless, concerns about Huawei’s inclusion in the development of 5G infrastructure linger, especially in the intelligence community.
Germany’s foreign intelligence service, the Bundesnachrichtendienst (BND), has warned the Chinese government could install electronic “backdoors” in Huawei 5G technology for espionage and surveillance and could even use hidden “kill switches” to disable the 5G infrastructure.
Gerhard Schindler, former director of the BND, said most of the risks were because China was not a democratic state, but a strongly authoritarian regime with security organs that can require any companies, even private ones, to supply information if they want it.
“Anyone who installs this technology is also in a position to monitor them,” Mr. Schindler told German radio.
Samantha Hoffman, an analyst at the International Cyber Policy Centre at the Australian Strategic Policy Institute, warns the German government would be irresponsible to ignore the BND’s advice.
“One issue is that it seems Germany has bought the Chinese Communist Party’s argument that the bilateral trade relationship can be separated from politics, but the party itself doesn’t separate political and economic issues, so why would it do so in the bilateral relationship with Germany?” says Ms. Hoffman, a former visiting academic fellow at the Mercator Institute for China Studies in Berlin.
“For a long time, the German government and business have operated as if these are two distinct relationships, and they continue to do so,” she says. “Now Germany finds itself in a difficult position where it must deal with the reality that its bilateral trade relationship with China exposes it to national security risk.”
“I’m certain that state actors will attempt to compromise 5G networks to enable spying,” says Tom Uren, a senior analyst at the Australian Strategic Policy Institute. “We’ve seen other telecoms networks at times being used for espionage, and there have been state sponsored groups that have compromised internet routers too. In general telecommunications are attractive to state sponsored intelligence because that is where communications take place.”
“Whether Huawei itself will be pressured to assist is a different question, and is entirely up to the Chinese state,” he adds. “I think Huawei has relatively little ability to resist if the Chinese Communist Party asks. After all, it’s written into Chinese law that they must assist.”