May 30, 2010 11:06 pm

Ex-Bush official to advise Huawei

Huawei has recruited a prominent former Bush administration official who worked on national security issues, as the Chinese telecoms equipment maker seeks to make inroads in Washington and assuage concerns that it has ties to the Chinese military.

The company has hired as an adviser John Bellinger, a partner at Arnold & Porter, who served as chief attorney at the State Department and advised the National Security Council under George W. Bush.

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Huawei’s move to retain him underlines how aggressively the company is seeking to convince US defence and security officials that it should be allowed to make acquisitions in the US.

Huawei is weighing a bid for a unit of Motorola and wants to gain market share in the US, where it has failed to gain significant traction.

But according to a person familiar with the group, it is only interested in moving ahead with a bid if it can be certain that the deal would not be blocked on national security grounds by the Obama administration.

Huawei was forced to abandon a joint bid for 3 Com in 2008 after it became evident that the Bush administration would block the transaction.

James Lewis, a senior fellow at the Center for Strategic and International Studies, says Huawei continues to face a “steep wall of suspicion” within the US government. Indeed, some experts believe it could take years for the company to make inroads in the US.

Under US law, an inter-agency panel called the Committee on Foreign Investment in the US (CFIUS) may block takeovers of sensitive US assets by foreign companies on national security grounds. Technology and telecoms assets, which are considered critical infrastructure, are especially sensitive. CFIUS reviews are highly classified. The Bush administration was understood to have resisted the deal because 3 Com was a supplier to the defence department.

People familiar with Huawei’s 2008 joint bid for 3 Com, in which it partnered Bain Capital of the US, say the company had not anticipated resistance to the deal.

The decision to seek counsel from Mr Bellinger shows that the company is eager not to repeat its mistakes. It has also increased its presence in Washington by hiring lobbyists at Apco Worldwide.

The Obama administration has so far not confronted any especially controversial foreign transactions, though attorneys who work on such deals in Washington say it is only a matter of time before The White House faces a politically contentious bid by a non-US company.

Although Congress does not have a role on the CFIUS panel, it can stir up political opposition to unpopular transactions, as it did several times during the Bush administration.

In February, a Chinese buyer abandoned a bid for Firstgold, a US gold mining company based in Nevada, after it was told by the Obama administration that the deal would be blocked. The administration reportedly cited concern over Firstgold’s proximity to Nevada’s Fallon Naval Air Station.

Huawei declined to comment. Mr Bellinger declined to comment.

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