• Chinese telecom giant Huawei scaled back operations in Russia to avoid US sanctions, Russian media reports.
  • Huawei is responsible for building much of Russia's 4G and 5G networks.
  • Russia remains a crucial market for Huawei and Beijing has yet to denounce the Russian invasion.

A major Chinese telecommunications equipment maker is scaling back its operations in Russia to avoid getting hit by US sanctions related to the ongoing war in Ukraine, two Russian-language news outlets reported.

Huawei builds mobile network infrastructure and manufactures consumer devices such as smartphones, laptops, and fitness trackers. Its corporate website for Russia shows that it has one office in Moscow.  

Since the end of March, Huawei has stopped taking on new contracts to supply network equipment to Russian operators, according to an April 1 article from Russian news outlet Izvestia, quoting anonymous sources from Huawei's business partners.

Huawei then asked Russian employees to go on mandatory leave for the month of April, while Chinese employees could continue working from its offices in Russia, Forbes Russia reported on Saturday, citing unnamed sources from companies that work with Huawei. In addition, the Chinese maker also let go of some marketing employees, said the article. "There are no orders, so why should people go to the office?" a source told Forbes.

But these plans to scale back operations may only be temporary, as Huawei wants to see how it can remain in the Russian market while avoiding US sanctions, the two outlets noted.

Huawei declined to comment when contacted by Insider.  

The US and European Union have imposed sweeping sanctions on Russia since the start of its invasion of Ukraine, leading many international companies with a presence in Russia to pull out. 

Among Huawei's competitors in Russia, Swedish maker Ericsson said on Monday that it would suspend its Russian business indefinitely, while Finnish competitor Nokia said on Tuesday that it would be exiting the market.

Meanwhile, Beijing has avoided outwardly denouncing Russia's actions. Instead, it criticized western countries for fuelling the conflict and condemned the sanctions. As a result, Chinese companies are staying put in Russia, with some even sensing new opportunities as Western firms quit en masse.

In response, a US Commerce Department spokesperson threatened Chinese companies with a "complete ban" on both trade and financing if they're found to have bypassed the sanctions on Russia, according to a March 29 transcript released by the US State Department.

Huawei has been the target of several US sanctions since 2019 when the Trump administration deemed the Chinese firm a risk to national security. The restrictions blocked Huawei from accessing US tech components and services, and Huawei's global smartphone shipments fell by more than 40% during the year-end holiday season in 2020. 

As a result, Russia has become an essential market for Huawei. It won contracts to build 4G and 5G networks in Russia. Currently, Huawei and another Chinese company ZTE account for about 40% to 60% of Russia's market for wireless network equipment, according to the Financial Times.

Experts quoted by Forbes Russia and Izvestia said the US Treasury Department's decision last week to lift restrictions on the supply of US telecommunications equipment to Russian entities could offer Huawei a lifeline.

In the meantime, Huawei could be exploring other ways to continue operating in Russia while cutting down its exposure to American sanctions. "It's likely that Huawei is revising its product line to supply Russia with those products that do not use American technology," a Russia-based IT systems expert told Forbes.  

Read the original article on Business Insider

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