The German chancellor Angela Merkel has dealt a major blow to US efforts to curb the growing presence of Huawei’s telecoms equipment in Western infrastructure.
Merkel told reporters in Berlin on Tuesday that Germany would not exclude any single company from its 5G auction, but that bidders would be subject to certain requirements.
The intervention is likely to exacerbate relations between Germany and the US, which has threatened to withhold intelligence from allies that host Huawei equipment.
The Trump administration has expressed concerns over Chinese cyber security legislation that compels domestic firms to assist with intelligence operations.
The founder of Huawei, Ren Zhengfei, has said he would defy requests which compromise customer privacy, but it is not clear if there is a legal mechanism in place to do so.
The UK is also facing pressure from the US to drop support for Huawei and is currently drawing up plans to mitigate the risk posed by the equipment supplier.
The Cabinet is reportedly split on the issue, with some ministers calling for a total ban on its equipment and others recommending a more nuanced approach.
The National Cyber Security Centre concluded last month that the risks could be managed, but also stated it had not yet seen a “credible plan” for the company to fix flaws in its code.
Huawei has committed to spend $2bn (£1.5bn) on refactoring its code base after a UK oversight board downgraded the level of assurance it could provide for the security of its equipment.
Ultimately, the UK government will have to weigh up the security implications of using Huawei equipment with the potential economic and geopolitical consequences of banning it.
The US is unlikely to withhold intelligence from the UK, given the extent to which it depends on GCHQ for its own security operations. But the UK’s continued procurement of Huawei equipment could threaten a US-UK trade deal after Brexit. Similarly, any trade deal with China is likely to be contingent on Huawei being able to continue selling products to the UK.