U.S. Reaches Agreement to Release Huawei Executive in Case That Strained Ties With China

WASHINGTON — The Justice Department reached an agreement on Friday clearing the way for a senior executive of Huawei Technologies, the Chinese telecommunications giant, to return to China after admitting some wrongdoing in a sanctions violation case, removing one major irritant between the two superpowers.

The resolution of the criminal charges against the executive, Meng Wanzhou, the daughter of Huawei’s founder, came in the midst of a downward spiral in military, technological and trade competition between Washington and Beijing.

In China, Ms. Meng is considered a member of the new Chinese royalty — technology executives who have used their power to expand China’s influence across the globe. In Washington, she became a symbol of the Cold War-like atmosphere in relations between Beijing and Washington.

The end of the three-year-old case suggested that the Biden administration and the government of President Xi Jinping could come to some kind of accommodation in a major dispute that included allegations of hostage-taking on both sides. Yet it came on a day that President Biden was meeting for the first time at the White House with the leaders of three Indo-Pacific democracies — Australia, Japan and India — in another of his efforts to build loose alliances that can counter China’s growing influence.

Ms. Meng spent the past nearly three years out on bail of about $8 million at hertwoluxurious homes in Vancouver, detained by Canadian authorities as the United States sought her extradition in a fraud case related to Huawei’s sale of telecommunications equipment to Iran. The transaction appeared intended to avoid U.S.-led sanctions on Tehran. Yet the case seemed to be about so much else: The U.S. effort to block Huawei’s, and China’s, domination of 5G communication networks, and lingering resentments over Huawei having initially stolen much of its technology from a major American competitor.

The agreement, laid out in a court appearance in Brooklyn, left unanswered one major question: The fate of two Canadians who have been held by China since shortly after Ms. Meng was detained, and who appeared to be held as hostages to the resolution of Ms. Meng’s case.

While there is an expectation that they may now be released, no side agreement was explicitly included in the dropping of the charges. As a matter of face-saving diplomacy, it would likely be weeks, maybe months, before the two men are returned.

Yet the end of the case did not end the battle over Huawei, where Ms. Meng serves as the chief financial officer. The Justice Department’s criminal case against the company is ongoing, despite Ms. Meng’s agreement. In fact, prosecutors may try to use her admissions of wrongdoing as evidence against Huawei — including statements that she deliberately misled bank executives in a way that allowed the company to evade sanctions.

But that is only part of the struggle over Huawei, which has become a symbol of the depth of the competition between two global superpowers, and their mutual determination to turn all their tools of national power toward winning a growing technological struggle. The Trump administration began an effort to threaten or persuade allies not to buy Huawei gear, arguing that it would give Beijing even more power to intercept data around the world — and maybe to shut down networks in times of conflict.

Since Mr. Biden took office, the United States has denied the company some, but not all, of the types of key chips needed for its equipment — leading the company on a drive for self-sufficiency. And there is evidence that, by starving the company, it has begun to sharply curtail Huawei’s profitability and much of its influence.

For its part, the Chinese government has underwritten the cost of installing Huawei gear, in an effort to dominate networks from Latin America to the Middle East.

Ms. Meng came to personify that effort. Her determination to wire up Tehran, at a time in which the West was seeking to contain Iran’s nuclear program, attracted protests among American officials. For that reason, some China hard-liners objected on Friday to news that the charges were being dropped.

“It sends the wrong message to Chinese business executives around the world that it’s permissible to engage in fraudulent transactions with Iran and North Korea,” said Michael Pillsbury, a scholar at the Hudson Institute who was a top China adviser to former President Donald J. Trump. “I fear that another part of the message has been that the Biden team approved selling Huawei some types of chips and technology, which will also undercut the message that Huawei should not be involved in 5G telecommunications systems of our friends and allies.”

Huawei mustered a furious effort in Washington and in Canada to get Ms. Meng released. But she refused to plead guilty to bank and wire fraud charges stemming from Huawei’s deal in Iran. Months later, she agreed to a deferred prosecution agreement, which will ultimately lead to dropping all the charges against her.

The case began when Canadian authorities arrested Ms. Meng, 49, in December 2018, at the request of the United States. She owns two imposing homes in Vancouver, and was allowed to stay in them with an ankle bracelet to track her whereabouts. She eventually settled at her gated, seven-bedroom mansion in the city’s exclusive Shaughnessy neighborhood, where she received painting lessons and private massages.

She instantly became one of the world’s most famous detainees — especially because she is the daughter of Huawei’s famous founder and chief executive, Ren Zhengfei, a former People’s Liberation Army officer who turned his small telecommunications firm into a national champion.

In January 2019, the Justice Department indicted Huawei and Ms. Meng. While the charges focused on bank and wire fraud, in announcing the indictment, the Justice Department alleged that Huawei employees, including Ms. Meng, lied to bank officials when asked about whether Huawei was unlawfully engaged in business with Iran, knowing that U.S. sanctions on Tehran would prevent the banks from financing the sale.

The charges were narrow, but they underscored efforts, going back to the Obama administration, to directly link Huawei with the Chinese government. For a decade, American officials have suspected that the company worked to advance Beijing’s economic and political ambitions while undermining American interests. But they have never been able to truly prove that link, even after the National Security Agency pierced Huawei’s servers in a failed effort to do so.

Now the release of Ms. Meng could play into the fate of the two Canadians imprisoned in China.

China detained the former diplomat Michael Kovrig and the businessman Michael Spavor soon after Ms. Meng’s arrest, in what has been widely viewed in Canada as hostage diplomacy. China has denied they were connected. Last month, a court in northeastern China, where Mr. Spavor has lived, sentenced him to 11 years in prison after declaring him guilty of spying.

If the two men are released, it could provide a lift to Prime Minister Justin Trudeau of Canada, who was re-elected this week with a minority government after calling an unpopular snap election. Mr. Trudeau’s inability to secure their freedom has cast a shadow over his premiership.

Perhaps coincidentally, on the same day as Ms. Meng’s appearance in Brooklyn, Chinese police in the tropical island province of Hainan detained the top two executives of HNA Group, a Chinese conglomerate that controls an airline and logistics businesses. One of the executives, Tan Xiangdong, appears to be a U.S. citizen, according to personal information about him that HNA provided in a filing to Hong Kong regulators in 2019 that included a U.S. passport number.

Throughout her extradition hearing in Canada, Ms. Meng’s defense team professed her innocence. They argued that Mr. Trump had politicized her case and that her rights had been breached when she was arrested in Vancouver. At one point, Mr. Trump did suggest he might send Ms. Meng back to China if he got a good enough trade deal — undercutting the Justice Department’s efforts in arguing that the prosecution was about the rule of law, not negotiating leverage.

Ms. Meng appeared by videoconference for the hearing on Friday in federal court. She smiled and nodded in response to a reading of charges.

Prosecutors said that under the deferred prosecution agreement, the Justice Department would withdraw its extradition request to the Canadian authorities, clearing the way for her release provided that she adhered to the agreement’s terms. They said that the charges would be dropped on Dec. 1, 2022.

In an interview, Michelle Lebin, a member of Ms. Meng’s defense team, said she was very pleased that “Ms. Meng is free to go home and be with her family.”

David E. Sanger and Katie Benner reported from Washington, and Dan Bilefsky from Montreal. Alan Rappeport contributed reporting from Washington, and Michael Forsythe from New York.