Congress Moving To Block Trump Deal With ZTE Over Iran Sanctions Violations
Jun 13 2018 by Desiree Burns
Investors wiped about $3-billion off embattled Chinese telecommunications giant ZTE Corp's market value as it resumed trade on Wednesday after agreeing to pay up to $1.4-billion in penalties to the US government.
The US government said it imposed the ban in April because ZTE violated a 2017 agreement in which the Chinese company admitted to evading sanctions on Iran and North Korea.
Days after the Trump administration agreed to restore Chinese telecom firm ZTE's access to its USA parts suppliers, a bipartisan group moved to block the deal.
Lifting the ban under Trump's deal would result in ZTE still buying from U.S. suppliers, but paying massive fines upwards of $1 billion with United States law enforcement monitoring the company's actions.
Commerce Secretary Wilbur Ross was on Capitol Hill on Monday evening to speak with senators behind closed doors about the details of the ZTE deal, in a meeting that began shortly after the decision to include the amendment blocking the president's deal was announced.
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All members of ZTE's leadership at or above the senior vice president level also must be terminated, along with any executive or officer tied to the wrongdoing.
The U.S. Commerce Department can exercise discretion in granting exceptions. "The new governance structure will pose challenges for the company's management in the future", Zhongtai Securities said in a note. Its Shenzhen stock slid by the daily maximum of 10%.
Hong Kong's benchmark Hang Seng index was down 0.6 per cent by the midday break. Senators on both sides of the aisle criticized Trump for calling on the Commerce Department to reverse its position, with many saying ZTE poses a risk to U.S. national security.
Jeffries said it expected ZTE to pay its penalty in a few days and resume operations next week.
On Tuesday, senators on both sides of the aisle spoke out against Trump's deal, which is believed to have been made to soften a potential trade war in China, following the announcement of steel and aluminium tariffs on the country's exports. "Given their repeated violations of USA law, we can not trust them to respect USA national security, and so it's vital we hold them accountable and pass this amendment".
ZTE employs 70,000 workers in China and is the fourth-largest vendor of mobile phones in the U.S.