Canadian authorities said Wednesday that they have arrested the chief financial officer of China's Huawei Technologies at the request of the United States.
Meng Wanzhou is also deputy chairman of Huawei's board and the daughter of the company's founder, People's Liberation Army officer turned entrepreneur Ren Zhengfei.
Canadian Justice Department spokesman Ian McLeod said Meng Wanzhou was detained in Vancouver, British Columbia, on Saturday. He said Meng is sought for extradition by the US.
McLeod said a publication ban had been imposed in the case and he could not provide any further details. The ban was sought by Meng, who has a bail hearing Friday, he said.
The Wall Street Journal reported earlier this year that US authorities are investigating whether Chinese tech giant Huawei violated sanctions on Iran.
International security expert Paul Buchanan says "the diplomatic fallout could be significant."
The former policy analyst for the US Secretary of Defense, Pentagon advisor and Auckland University lecturer turned independent analyst says, "I would be very surprised if China does not forcefully protest what they could consider to be the unlawful detention of one of their nationals - particularly as the US hasn't been forthcoming in providing the reasons."
Buchanan says based on the limited amount of information available so far, the US request arrest and extradition seems to revolve around alleged sanctions-busting rather than espionage.
The US has recently been increasing the heat on Iran and "seems to be willing to risk a serious confrontation with China to make its point," Buchanan says.
Last month, Huawei underline that intelligence services in NZ, the UK and Canada had vetted and cleared its products.
But Buchanan notes that beyond our GCSB's recent move to block Huawei from Spark's 5G mobile network upgrade, reports today indicate British Telecom is now poised to block the Chinese telco maker on MI6 advice, while Canada has cooperated with the US arrest request.
With the Americans and Australians already having a Huawei ban in place, "All of the Five Eyes partners are coming into line," Buchanan says.
Huawei said in a statement to the Herald, "Our corporate CFO Meng Wanzhou was provisionally detained by the Canadian authorities on behalf of the US, which seeks the extradition of Meng to face unspecified charges in the Eastern District of New York [home of interim US Attorney is Richard Donoghue], when she was transferring flights in Canada.
"The company has been provided very little information regarding the charges and is not aware of any wrongdoing by Meng. The company believes the Canadian and US legal systems will ultimately reach a just conclusion.
"Huawei complies with all applicable laws and regulations where it operates, including applicable export control and sanction laws and regulations of the UN, US and EU."
Meng's arrest comes on the heels of a US campaign urging allies to drop Huawei, first reported by the Journal on November 24.
On November 28, the GCSB banned Huawei gear from Spark's 5G mobile network upgrade.
On the espionage question, Buchanan says, "I believe the US intelligence community consensus that the Huawei works hand in glove with Chinese Intelligence."
Huawei NZ deputy chief executive Andrew Bowater has repeatedly said there has never been any evidence tabled of his company being involved in espionage, and emphasised its open-door policy with the GCSB and security agencies in other countries.
Buchanan says it's become the norm for technology companies and telcos to include "back doors" in their products - only that in the West they are more typically used for commercial exploitation as advertisers are given access to data without users' permission (as is allegedly the case with the latest Facebook scandal, revealed this morning).
Buchanan says Western intelligence agencies fear that Huawei will use 5G mobile network to harvest information en masse from public networks - "the sort of bulk data mining and collection that Edward Snowden says is currently carried out by Five Eyes."
He says it's his understanding that older 3G and 4G networks didn't allow the same degree of infiltration. Buchanan says intelligence agencies also don't buy Huawei's pledge not to bid for "core" 5G network business, instead confining itself to the Radio Area Network (RAN) or gear on celltowers. Intelligence has migrated to the edge of the network with 5G, Buchanan says.
In April, China appealed to Washington to avoid damaging business confidence following the Wall Street Journal report that US authorities were investigating whether Huawei violated sanctions on Iran amid spiralling technology tensions.
A foreign ministry spokeswoman, Hua Chunying, said then that China opposes any country imposing unilateral sanctions based on its own law.
Asked about the report that Huawei was under investigation, Hua said in April, "We hope the US will refrain from taking actions that could further undermine investor confidence in the US business environment and harm its domestic economy and normal, open, transparent and win-win international trade."
That same month Washington barred Huawei rival ZTE Corporation from exporting US technology in a separate case over exports to Iran and North Korea
Trump has threatened to raise tariffs on Chinese goods in response to complaints that Beijing improperly pressures foreign companies to hand over technology. That is widely seen as part of a broader effort by Washington to respond to intensifying competition with Chinese technology industries that Trump says benefit from improper subsidies and market barriers.
The US imposed harsher sanctions on Iran earlier this year, as the Trump administration looked to restrict international business with the Iranian government.
As part of the sanctions, the US halted the import of Iranian oil, cutting off a key source of revenue for the nation.
The arrest of Wanzhou adds further pressure on Huawei, which has faced international backlash, with a number of nations banning the use of Huawei gear for 5G rollouts.
Canada, Australia and New Zealand were among the nations to ban the use of Huawei's equipment due to security concerns.
In New Zealand, Huawei has previously helped build mobile networks but this marks a significant shift in policy.
New Zealand is part of the 'Five Eyes' security alliance, which also includes the US, Britain, Canada and Australia.