Cisco Systems, Inc.(NASDAQ:CSCO) has restrained a 7-year sales partnership with ZTE Corp. after an internal probe into allegations that the Chinese telecommunications equipment maker broke sanctions by selling Cisco networking kit to Iran.
The investigation followed stories reported by the Reuters news agency in March and April. The stories had documented how Shenzhen company ZTE had sold computer equipment from Cisco and other US-based firms that are banned from exporting to Iran to TCI, the largest telecoms company in the country.
ZTE also agreed previous year to ship millions of dollars that are worth extra US tech products, entailing Cisco switches used to route data and phone traffic, to a part of the syndicate controlled by the government that directs the Iranian telecoms company.
The stories have sparked internal investigations by the firms that are involved and probes executed by the US Commerce Department, a congressional committee and also the Federal Bureau of Investigation.
General Counsel of ZTE at its subsidiary based in Texas has accused that the parent firm has plotted a cover up that includes possibly torn documents, after the first Reuters story broke out. The FBI has an ongoing criminal probe into the accusations.
The move came hours after the intelligence committee of the US House of Representatives mentioned in a report that ZTE and its fellow Chinese telecoms equipment maker, Huawei Technologies must be kept out of the US market as prospective Chinese state influence on them poses a security hazard.
A ZTE spokesman, David Dai Shu said over Cisco’s decision to severe ties that ZTE is highly concerned with the affair and is discussing with Cisco. Meanwhile, ZTE is also actively co-operating with the US government about the investigation over Iran.
A ZTE spokesman in the UK has confirmed that the firm cannot offer Cisco equipment anymore.