BERLIN (Dow Jones) -- The Trump administration has told the German government it would limit the intelligence it shares with German security agencies if Berlin allows Huawei Technologies to build Germany's next-generation mobile-internet infrastructure.
In a letter dated Friday and seen by The Wall Street Journal, U.S. Ambassador to Germany Richard A. Grenell wrote to Germany's economics minister that the U.S. wouldn't be able to keep intelligence and other information sharing at their current level if Germany allowed Huawei or other Chinese vendors to participate in building the country's 5G network.
This marks the first time the U.S. has explicitly warned its allies that refusing to ostracize Huawei could have consequences on these countries' security cooperation with Washington. European security agencies have relied heavily on U.S. intelligence in the fight against terrorism for instance.
U.S. officials have urged allies for months to ban Huawei and other Chinese companies from bidding for critical communication infrastructure work because of suspicion that these companies might share data with the Chinese government.
But the German government says it has seen no evidence that Huawei had or could use its equipment to spy on its users and that it should therefore be allowed to bid for the country's upcoming 5G network if it satisfies basic security criteria.
Mr. Grenell's letter notes that secure communications systems are essential for defense and intelligence cooperation, including within the Northern Atlantic Treaty Organization, and that companies such as Huawei and state-controlled ZTE Corp. could compromise the confidentiality of these exchanges.
A senior State Department official stressed that the U.S. would continue sharing intelligence with Germany if Berlin allowed Huawei in its 5G network but not at the same level and not with the same degree of transparency as before.
"The Americans will assume that everything we share with Germany will end up with the Chinese," this official said.
The threat will unsettle Germany's security community, which is a big consumer of intelligence provided by bodies such as the National Security Agency and the Central Intelligence Agency, German and U.S. officials said.
A number of terror plots have been foiled in recent years thanks to U.S. help, according to these officials. In one prominent case, a tip-off from U.S. intelligence helped German authorities prevent a terror attack involving a bomb containing the deadly warfare agent ricin in Cologne last year.
Germany's telecom regulator last week updated the security requirements for suppliers to the country's telecom infrastructure in a move experts said was unlikely to prevent Huawei from participating.
Separately, senior officials involved in the process said that Huawei and others would be required to sign a no-spying agreement, submit their source code for inspection, and allow for oversight of the personnel that would operate and service the 5G network. The full list of requirements for security certification would be published in six to eight weeks, according to a German interior ministry official involved in the process.
But Mr. Grenell in his letter noted that under Chinese legislation, Chinese companies could be compelled to assist their country's vast security apparatus without any democratic checks and balances, and that it would be impossible to mitigate that risk.
He also wrote that code running on 5G equipment would need frequent updates and was so complex that the potential for backdoors and other vulnerabilities could not be ruled out even if Huawei were to let regulators regularly inspect its software.
The letter listed companies that could build Germany's 5G network as Ericsson AB from Sweden, Nokia Corp. of Finland and the South Korean firm Samsung. It didn't mention Cisco Systems Inc., the U.S. company that provides similar technology.
A spokesman for the German Economics Ministry said that the concerns outlined in the letter were not new and that the government had seen no proof of any activity by any vendor that would compromise the security of the country or its allies.
A German security official who had recently met his counterparts at the Department of Homeland Security said that the message he had received from Washington was more nuanced than in Mr. Grenell's letter and that he had not seen any evidence against Huawei. The official also noted that Huawei has taken legal action against the U.S. and said that any German policy would need to be evidence-based and on a safe legal footing.
The key question, the official said, was whether Huawei would allow for the personnel that operates and maintains the network to be vetted or even monitored by German security services. According to the official, such personnel typically consists of Chinese engineers and senior staff.
Patrick Berger, spokesman for Huawei in Germany, declined to comment on the U.S. letter but said it welcomed the new security requirements put forth by the German telecom regulator on Thursday.
Germany is preparing to launch its spectrum auction for its 5G network as soon as next week.
A spokesman for the telecom regulator, Fiete Wolff, said the publishing of the requirements marked the start of a consultation process, during which carriers, vendors, and other stakeholders could make suggestions about how the requirements could be applied.
Deutsche Telekom AG, Germany's leading carrier and a long-standing Huawei customer, said Thursday it welcomed the new proposals but indicated that equipment vendors needed to shoulder more of the liability for infrastructure issues.