Trump administration lifts penalties on Chinese telecom suspected of espionage

The Trump administration has reached a deal with Chinese telecom ZTE to lift economic sanctions on the firm, a move likely to frustrate much of Congress, two sources familiar with the arrangement have confirmed to ABC.

The Commerce Department will lift a seven-year ban on ZTE’s ability to buy American parts, which was imposed after the company violated U.S. sanctions and did business with Iran and North Korea. The U.S. government is also concerned that the state-backed company was using its devices to spy on users.

In a statement, a White House official said, “This is a law enforcement action being handled by Commerce. We are making sure ZTE is held accountable for violating U.S. sanctions, pays a big price, and that we are protecting our security infrastructure and U.S. jobs.”

The effect of the action, however, weakens the existing sanctions on ZTE. The U.S. will instead require the company to pay a fine, install U.S. compliance officers and change board members.

A spokesperson for the Commerce Department did not immediately respond to a request for comment. President Donald Trump has asserted that loosening sanctions on ZTE will strengthen the U.S. hand in broader trade negotiations with China and lead to China purchasing more American goods. Trump had previously tweeted that China was willing to increase agricultural imports from the U.S.

Earlier this week, as President Trump tweeted his intention to execute this agreement, GOP Sen. Marco Rubio warned that the new deal would not be enough to change ZTE’s bad behavior. The U.S. has already fined the company $1.2 billion.

“We're basically saying, we're going to give you the same deal you violated the first time, and by the way you can keep spying,” Rubio told ABC in an interview Tuesday.

Democrats were also quick to condemn the move. House Democratic Leader Nancy Pelosi, D-Calif., issued a statement linking the agreement to contemporaneous reports that China had agreed to fund the construction of a Trump-linked hotel in Indonesia, which White House officials have dismissed as unrelated.

“The President’s ZTE deal is a staggering betrayal of the American people,” Pelosi said. “Although Trump pledged to fight for hard-working Americans, he is now using U.S. government resources to enrich a foreign company – right after the Chinese government reportedly agreed to funnel half a billion dollars into one of his family’s resorts.”

Friday evening, Trump responded in a series of tweets saying "Dems do nothing but complain and obstruct."

Congress has already taken additional steps to block ZTE’s influence in the United States. A measure blocking the military from working with contractors that use ZTE devices and networks will likely soon pass as part of its annual defense authorization bill, and the Pentagon has already banned the sale of ZTE devices on U.S. bases.

House and Senate committees are also working on bills to prohibit the Trump administration from unilaterally lifting the seven-year ban on ZTE’s ability to purchase U.S. supplies. The Senate measure, introduced by Sen. Chris Van Hollen, D-Md., passed the Banking Committee Tuesday by an overwhelming margin.

Congress is also exploring ways to expand the U.S. government’s ability to review foreign transactions through the Committee on Foreign Investment in the United States (CFIUS). The Banking Committee also approved a bill by Sen. John Cornyn, R-Texas., that would do just that.