Huawei’s resurgence hit by fresh French investigations

Huawei’s resurgence hit by fresh French investigations

Just a matter of days ago, it appeared as though Huawei was in good shape for a company which has had to contend with years of US sanctions. Although Huawei did post a drop-off in revenue of some 29% last year, it recently announced record net gains of around $17.8 billion and rewarded its shareholders—in Huawei’s case, its employees—with healthy dividends of $9.65 billion.

The encouraging financial news coincided with the first public appearance of executive Meng Wanzhou – daughter of Huawei founder and CEO Ren Zhengfei – since her return to China following her release from Canadian custody. However, fresh worries have cropped up for the telecoms giant, as French business magazine Challenges recently reported that Huawei’s subsidiary in the country is now firmly in the crosshairs of Parisian prosecutors for alleged financial wrongdoing. That’s a particularly bitter pill for Huawei’s French office to swallow, after it spent years courting the French policymaking elite.

French subsidiary under scrutiny

For years, Huawei’s troubles have been centered in the US, with the White House putting the company under a particular spotlight. The latest headwind, however, comes from France, where it was recently revealed that the Public Prosecutor’s Office of Nanterre has asked prosecutors in the capital to investigate Huawei’s French subsidiary. The investigation follows a January 2021 report from the French Anti-Corruption Agency, which raised suspicions over tax fraud and the misuse of corporate assets.

Indeed, though Paris has not historically shared Washington’s vocal opposition to Huawei, French officials have been wary of the Chinese telecoms giant for years. In 2015, the unprecedented union of five French ministries in 2015 created ‘Cerberus’, which was tasked with scrutinizing Huawei’s dealings in French academia and science. In its wake, the government quietly asked Télécom Paris and the French Atomic Energy Commission (CEA) to cut ties with the company.

Major setback for lobbying efforts

Although they are yet to comment on the recently revealed investigations, Huawei’s French office is likely to be apprehensive about this unwanted attention. That’s understandable, given that the company has spent significant time and resources in recruiting prominent figures from French policymaking. Some of those, such as Henri Soupa and Cleménce Rouquette, left their positions within a year. The former says his exit came about after a crisis of conscience over his association with the company, while the latter refuses to talk about her time on Huawei’s payroll.

Nonetheless, there are plenty of other leading figures in the world of French politics who continue to beat the drum for Huawei. Indeed, it appears as though the French subsidiary spent up to half a million euros on promoting its interests in the country in 2019; that’s around the same amount as the French National Railway Company (SNCF) and more than automotive giants Peugeot. Those funds have been funneled into the pockets of current and former policymakers, in exchange for their ear and access to their sizable spheres of influence.

Other attempts to insinuate themselves into the fabric of French society include the gifting of 240 CCTV cameras (worth a cumulative $2 million) to Valenciennes in 2017; the establishment of a research and development plant in the heart of French sovereignty and decision-making in 2020; and the announcement of Huawei’s first production plant outside of China in Alsace in 2021. While the former initiative ultimately fell through and is now under the remit of Cerberus’ enquiry, the latter two were bold and effective power plays to make the company’s intentions clear.

Is Huawei France putting the company’s European aspirations in limbo?

After pouring so much effort and expense into getting the French government onside, Huawei will surely be aggrieved to hear that their plans may come to naught. For years, the ultimate goal has been a meeting with Emmanuel Macron, preferably replete with a plum photo shoot to add a much-needed veneer of legitimacy to Huawei’s French dealings. Now, it appears as though they may simply be summoned by the country’s prosecution rather than its president.

That’s a marked turnaround in fortunes from just two weeks ago, when it appeared as though the company had pulled off a remarkable feat in wriggling out from under US sanctions to post record profits. But while it may have successfully circumnavigated an embargo on American soil, where will Huawei turn if it comes up against similar hostility in the fulcrum of its European expansion strategy? Of course, it’s still very early days in the investigation and there is certainly the possibility that the French judiciary’s interest in Huawei will fizzle out – but the future of the company on European shores is looking far more ominous than it did a mere fortnight ago.

Image: Kārlis Dambrāns, Flickr, Creative Commons License 2.0.

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