Taipei, Taiwan – The world is watching as Washington reportedly edges towards imposing unprecedented sanctions on Chinese state-owned surveillance tech firm Hikvision, a move for which Beijing is reported to be weighing countermeasures.
The sanctions could take United States-China tensions to a new level but are also uncharted waters for countless companies worldwide that use Hikvision’s equipment.
The measures – which were first reported earlier this month by the Financial Times, citing several unnamed sources – would be the first time for a brand of such scope, present in more than 180 countries, to make the Specially Designated Nationals (SDN) list, which is usually reserved for druglords and leaders of violent groups. The most severe version would hold any individual or organisation in the world criminally liable for doing business of any kind with Hikvision.
Hikvision has fallen afoul of US regulators before and is already on several lists that block it from much of the American economy. The planned SDN listing is reportedly due to the Hangzhou-based company facilitating the repression of China’s Uighur minority, which the Biden administration has called a genocide.
“The potential action by the US government, as reported, remains to be verified,” Hikvision spokesman Michael Gutierrez told Al Jazeera. “We believe any such sanction should be based on credible evidence and due process.”
Hikvision’s top clients are geographically, economically, and politically diverse and could respond in markedly different ways. Besides the US, Vietnam, Mexico, the United Kingdom, and Brazil are Hikvision’s top export markets.
“Sanctions through the Magnistky Act would represent a leap into the unknown … not only for Mexican businesses but for those from most countries,” Victor Gonzalez, a Beijing-based Mexican corporate lawyer who counsels Chinese law firm PC Woo & Zhonglun WD on the Latin American region, told Al Jazeera.
“Would the inclusion of Hikvision in the SDN List represent an exception…?” Gonzalez said. “Or would it become the new normal, which would mean we are forced to follow the steps of our most important partner in decoupling from our second-largest supplier globally?”
Jon Bateman, a senior fellow at the Carnegie Endowment for Peace, said Washington’s reported plans are unprecedented.
“I can’t think of another case of a global brand being placed on the SDN list, so it is really hard to know how this will all play out,” Bateman said.
Bateman said considerable “enforcement capacity” would be needed with so many countries involved.
“If I were the Department of Justice, I would first be looking at countries that are less friendly to the United States and where there is evidence of willful violation,” he said, adding that he expects “diplomacy will be the order of the day”.
“We may see countries negotiate for exemptions like when the US sanctioned Iranian oil. These could be specific use-case exemptions or extended wind-down periods.”
Risking US wrath
Among other countries, Mexico has negotiated sanctions workarounds with the US before.
Gonzalez said Mexico’s experience with Huawei, which was also hit with US sanctions, could be illustrative.
Both Mexican and American telecom companies operating in Mexico were able to balance US concerns about Huawei against their connections to the Chinese company by downscaling Huawei’s presence in their networks without removing it altogether.
“The challenge is, as our current Mexican ambassador to China, Jesus Seade, has said, ‘to find ways to keep getting closer to China without distancing ourselves from our main partner’,” Gonzalez said. “But we in Mexico need to be realistic, as he concludes ‘our most important relationship has been, is and will always be with the United States’.”
“Mexico has more to lose from not complying with US sanctions on Chinese companies than from trying to avoid them and risk America’s wrath … the challenge for Mexico is to walk a thin line or strike a balance between its two main partners.”
Vietnam, also accustomed to balancing a giant northern neighbour in China, is Hikvision’s biggest customer. With more than 670,000 Hikvision camera networks estimated to be installed in the country, according to Top10VPN, ditching the Chinese vendor will not happen overnight.
“There are a few alternatives in the Vietnamese market, including domestic ones … but it will take time for the market to shift significantly,” Nguyen Khac Giang, a senior fellow at the Vietnam Institute of Economic and Policy Research in Hanoi, told Al Jazeera.
Giang said he does not believe it would be realistic or necessary to replace all Hikvision equipment, but the sanctions would raise serious questions about buying or using its products in future.
“There is no reason for Vietnam not to comply with the sanctions, particularly given the country’s recent rapprochement with the US,” he said.
“Vietnam has complied with all previous sanctions and I think it will do the same this time. Whether this will affect the relationship with China depends on the extent of the sanctions and how Beijing reacts. But I don’t think it will deteriorate the relationship substantially.”
Though a close US ally, the UK has been “behind the curve compared to key Five Eyes partners” on restricting Chinese tech, leaving the private sector there exposed to a Hikvision fallout, according to Sam Goodman, a former adviser to the Labour Party and co-founder of London-based think-tank New Diplomacy Project.
“The UK government has indicated that it will look at the issue of Hikvision and Dahua’s presence in the public sector supply chain in the upcoming Public Procurement Bill, however, this will not address the private sector,” Goodman told Al Jazeera, referring to the fellow Hangzhou-based video surveillance maker.
Goodman has called for a nationwide plan to remove Hikvision hardware but does not see one as forthcoming given that the country is believed to have more than one million of its cameras in operation.
“It is very unlikely that the government will stump up the kind of money necessary to pay for the removal of these cameras. It therefore will fall to each individual business, department, and public authority to remove the hardware on their own timetable,” he said.
“Many small and medium-sized businesses, including local pubs and corner shops, use Hikvision cameras … I very much doubt they have given much thought as to what the US placing Hikvision on a sanctions list might mean for their relationship with the company.”
Bateman, the Carnegie Endowment for Peace senior fellow, said businesses using Hikvision’s products would face unenviable choices going forward.
“Do you just go to Dahua?” he said. “But then Dahua might be next in line.”
‘Muddy the waters’
Bateman said he does not believe such sweeping sanctions would serve US interests but it would nevertheless be important for Washington to be consistent in communicating why they are happening.
“Though there are a number of potential reasons as to why this is happening now, it could simply signal the Biden administration’s view that US-China relations are a battle between autocracy and democracy,” he said. “Hikvision sanctions may be the easiest to implement and most justifiable measure at this point in time.”
The US government could “throw all possible reasons out there” to convince the international community of the necessity of sanctions, Bateman said, but “this would muddy the waters and open the door to many other Chinese companies being sanctioned”.
Though the potential SDN listing centres on Uighur repression, Hikvision has also been sanctioned by the US on other grounds in the past, including its alleged links to China’s military.
For some countries, this is a more compelling reason to ban its products.
“The bigger concern for Hanoi is, of course, the PLA links,” Giang said. “Vietnam has always been wary of Chinese potential intelligence activities within the country, the recent discovery of Hikvision’s security risk certainly makes the matter worse,” he added, referring to allegations by the US Department of Defense and research by video surveillance research group IPVM.