US slaps supply ban on ZTE over Iran sanctions breach

The Chinese telecoms manufacturer failed to live up to promises after breaching US sanctions, says US

Booth of Chinese telecom equipment maker ZTE at an expo in Beijing, China. The manufacturer has been slapped with a seven-year ban on sales to the US. Reuters

The United States has slapped a seven-year sales embargo of components to Chinese telecoms manufacturer ZTE Corp for breaking a deal after being caught illegally shipping US goods to Iran.

The Chinese company paid $890 million in fines and penalties after it pleaded guilty last year to conspiring to violate US sanctions. ZTE carried through on a promise to sack four senior employees as part of the deal but failed to discipline 35 others as agreed, reported Reuters.

The move comes amid worsening tensions between the world’s two largest economies and fears of a full-blown trade war after tit-for-tat threats over tariffs. China responded to the supply embargo by saying it was prepared to take action to protect the interests of domestic firms.

ZTE is China’s second largest telecom equipment manufacturer after Huawei Technologies and faces potential ruin with the US supplying more than one quarter of the components for its phones.

ZTE, whose Hong Kong and Shenzhen shares were suspended from trade on Tuesday, said in a statement it was assessing the implications of the US decision and was communicating with "relevant parties".

The company received a second blow on Monday when the UK’s main cyber security agency said it had written to telecoms companies warning about using ZTE’s services. Its technical director said the “national security risks arising from the use of ZTE equipment or services… cannot be mitigated”.

Two senators in the US introduced legislation earlier this year to block the US government from buying or leasing telecommunications equipment from ZTE or Huawei, citing concern the companies would use their access to spy on US officials.