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China’s ZTE Has Reportedly Struck a Preliminary Rescue Deal With the U.S.

The Chinese telecommunications giant ZTE has reportedly struck a preliminary agreement with the U.S. Commerce Department, so it can move towards getting back into business after a ban on purchasing American components and software.

Reuters is reporting that there is now an “agreement in principle,” although the Commerce Department says “no definitive agreement has been signed by both parties.” The deal apparently includes a massive fine for ZTE’s non-compliance with an earlier settlement over its breaking of Iran sanctions, as well as the replacement of its management team.

Meanwhile, the South China Morning Post reported Wednesday that ZTE has been sending out letters of reprimand to 35 current and former employees who were associated with the sanction-busting, and is even “seeking to claw back bonuses from those who have left the company.”

Those bonuses, ZTE’s failure to reprimand employees previously, and its lies to the Americans about these factors, were what precipitated the denial order that stops the company from being able to make its products. They broke the terms of a March 2017 settlement with U.S. authorities over ZTE’s illegal shipping of telecommunications equipment containing U.S. parts to Iran.

Components from U.S. companies such as Qualcomm, as well as the software of firms like Google, are essential to the manufacturing of ZTE’s phones and other telecommunications equipment.

The Reuters-reported agreement in principle would see the U.S. claim a total fine of up to $1.7 billion from ZTE: the $361 million ZTE already paid at the time of the settlement—plus $1 billion more for its transgressions since then and $400 million in escrow “to cover any future violations.” It would also apparently involve ZTE replacing its board and executive team within 30 days.

In the context of wider trade negotiations with China, U.S. President Donald Trump has surprised many in Congress with his keenness to rescue ZTE and its workers. Reuters’ report of a preliminary deal prompted calls from Senate Democratic leader Chuck Schumer of New York to block the move.

“By letting ZTE off the hook, the president who roared like a lion is governing like a lamb when it comes to China,” Schumer said.