Chicom business woman arrested in Canada for violations of US sanctions against Iran

David Goldman:

Equity markets fell sharply in Asia after news media reported the arrest in Canada of Huawei’s chief financial officer Meng Wanzhou, pending extradition to the United States on charges of violating US sanctions against Iran.

The news has stunned financial market participants and policy analysts, for two reasons.

First, never before has the United States attempted the extraterritorial rendition of a foreign citizen – Meng is a Chinese national – in connection with sanctions violations. It has imposed travel and banking restrictions, but seeking an arrest warrant for this is entirely without precedent.

Earlier this year, the US government banned exports of US computer chips to the Chinese telecommunications equipment ZTE in retaliation for violations of sanctions against Iran, but sought no arrests.

Second, Meng was arrested on December 1, the day that President Trump and his economic team dined with President Xi Jinping and his advisers at the Group of 20 Summit in Buenos Aires. Trump has every interest in striking a deal with China that would enable him to declare some measure of victory in a trade war, and China has shown every indication that it is willing to make concessions to the United States on intellectual property protection, financial market opening and, at least in rhetoric, on industrial policy, while increasing its imports from the United States.

The question is: Who ordered the arrest, and why?

It is possible that President Trump knew about it and sanctioned the arrest, to be sure. But it is unlikely that the president would escalate the conflict with China with the arrest of a senior executive of China’s flagship high-tech manufacturer on the same day that he sought to de-escalate the trade war.

If Trump did not initiate the arrest, who did? There are two alternative possibilities.

The first is that the order came from administration officials who believe that the United States must provoke a confrontation with Beijing now, before China becomes too powerful to intimidate. Some parts of the permanent bureaucracy and the intelligence community believe that China’s economy is fragile and that an economic war would produce an economic crisis and political instability, perhaps even toppling Xi Jinping.

That view may seem fanciful, but it is argued seriously, for example by some former senior officials of the Trump administration.

The second possibility is that Trump’s enemies in the permanent bureaucracy simply want to prevent the president from negotiating a deal with China that would enhance his image and remove risks to economic growth.
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The US has had a troubled relationship with ATE in the past for actions taken in the US believed to be tied to an espionage operation.  China is demanding the release of Meng, but so far I have seen nothing indicating that the arrest is a deal breaker.  The silence from the US side suggests the arrest could be tied to CIA evidence about his actions.

China has indicated that it will work quickly to implement a new trade deal with Trump in the next 90 days.  At this point, the arrest of Meng is not being tied to the deal.