China's ZTE Corp, which recently sold Iran's largest telecommunications firm a powerful surveillance system, later agreed to ship to Iran millions of dollars worth of embargoed US computer equipment, a Reuters report said.

The American components were part of an 8 million euro ($10.5 million) equipment-supply contract, dated June 30, 2011, between ZTE, a Chinese trading firm and a unit of the consortium that controls the Iranian telecom, Telecommunication Co of Iran, according to documents reviewed by Reuters.

ZTE is China's second-largest telecommunications equipment maker.

The documents shed further light on how Iran obtains sophisticated American tech products despite US sanctions on Iran. China is a major conduit. Reuters in March revealed an earlier deal between ZTE and TCI, which centered on non-American surveillance equipment but also included some US tech goods. The latest deal, though smaller in scale, was much more reliant on US products.

Beijing and Moscow have vetoed Western attempts to strengthen sanctions against Iran over its nuclear-development program. ZTE, based in the city of Shenzhen, is publicly traded but its largest shareholder is a Chinese state-owned enterprise.

According to the contract's parts list, the equipment to be delivered from China included IBM servers; switches made by Cisco Systems and Brocade Communications Systems; database software from Oracle Corp and a unit of EMC Corp; Symantec back-up and anti-virus software; and a Juniper Networks firewall. The parts were intended for business-support services, including a ZTE billing system.     

A spokesman for ZTE said last week in an email that "as far as we know" the company had not yet shipped any of the products. Asked if ZTE intended to do so, he emailed a new statement Monday that said: "We have no intention to implement this contract or ship the products."     

He also said ZTE decided "to abandon" the agreement after "we realised that the contract involved some US embargoed products."

The contract had made clear the American provenance of the goods: Its accompanying parts list, signed by ZTE, lists more than 20 different computer products from US companies.
Washington has banned the sale of such goods to Iran for years.

US companies that responded to requests for comment said they were not aware of the Iranian contract; several said they were investigating the matter.

A spokesman for IBM said: "Our agreements with ZTE specifically prohibit ZTE from the transfer of IBM products to Iran.  If any of IBM's business partners are breaching our export compliance agreements, then IBM will take appropriate actions."     

A Brocade spokesman said the company doesn't sell any products to Iran "and we certainly have not shipped these products to" ZTE. A spokesman for Greenplum, the EMC unit, said: "We have no knowledge of the contract described, but are actively researching this matter." A Cisco spokesman said: "We continue to investigate this matter, as any violation of US export controls is a very serious matter."     

According to the US Treasury Dept., a US company would violate sanctions if it shipped products requiring an export license to a third party knowing the goods would end up in Iran.

Reuters reported on March 22 that ZTE had sold Iran's TCI a surveillance system capable of monitoring landline, mobile and internet communications. The system was part of a 98.6 million euro ($128.9 million) contract for networking equipment signed in December 2010.

The article reported that despite a longtime US sales ban on tech products to Iran, ZTE's "Packing List" for the contract, dated July 24, 2011, also included numerous American hardware and software products, although they were not part of the surveillance system. - Reuters