At the Edge of the World, a New Battleground for the U.S. and China

TORSHAVN, Faroe Islands — The mere existence of the Faroe Islands is a wonder. Tall peaks of snow-patched volcanic rock jut out from the North Atlantic Ocean. Steep cliffs plunge into the deep waters of narrow fjords.

The remote collection of 18 small islands, which sit between Iceland and Norway, is known for a robust puffin population and periodic whale hunts. The semiautonomous Danish territory also has a thriving salmon industry.

Technology is not a common conversation topic among its 50,000 residents. Yet in recent weeks, the Faroe Islands have turned into a new and unlikely battleground in the technological Cold War between the United States and China.

The dispute started because of a contract. The Faroe Islands wanted to build a new ultrafast wireless network with fifth-generation technology, known as 5G. To create that new network, the territory planned to award the job to a technology supplier.

That was when the United States began urging the archipelago nation not to give the contract to a particular company: the Chinese telecommunications giant Huawei. American officials have long said Huawei is beholden to Beijing and poses national security concerns.

Then Chinese officials got involved. A senior Faroe Islands government official was recently caught on tape saying that the Chinese had offered to boost trade between the territory and China — as long as Huawei got the 5G network assignment.

“Commercially, the Faroe Islands cannot be very important to Huawei or anybody else,” Sjurdur Skaale, who represents the territory in the Danish parliament, said over breakfast in the capital of Torshavn this week. “The fact that the Chinese and American embassies are fighting over this as hard they are, there is something else on the table. It is about something else than purely business.”

No location is now too small for the United States and China to focus on as they tussle over the future of technology. The Faroe Islands, whose proximity to the arctic gives it added military importance, joins countries across Europe caught in the middle of the two superpowers over Huawei, the crown jewel of the Chinese tech sector.

For more than a year, American officials have applied pressure on Britain, Germany, Poland and others to follow its lead in banning Huawei from new 5G networks. They argue the company can be used by China’s Communist Party to spy or sabotage critical networks. Huawei has denied that it helps Beijing.

But if the European nations side with Washington, they risk harming their economic ties to China, which has a growing appetite for German cars, French airplanes and British pharmaceuticals.

In the Faroe Islands, Bardur Nielsen, the prime minister, has tried defusing the conflict. In a statement, he said his government “has not been pressured or threatened by foreign authorities in relation to the development of a 5G network in the Faroe Islands.”

Any decision about awarding a contract to Huawei, he said, would be made by the local telecommunications company, Foroya Tele.

Foroya Tele said in a statement that it is testing different technologies. The choice of a 5G network provider, it said, “requires significant considerations given the scale and importance of the investment for the Faroe Islands.”

For the people of the Faroe Islands, the debate over Huawei and 5G is rooted in salmon more than in download speeds.

Salmon is central to the territory’s economy. More than 90 percent of the Faroe Islands’ exports are fish, including salmon, mackerel, herring and cod. In the surrounding waters, thousands of salmon can be seen splashing inside large netted rings, where they are bred for meals in Paris, Moscow, New York — and, increasingly, Beijing.

After 2010, the islands’ salmon exports to China picked up. At the time, the Chinese government had slowed the purchase of the fish from Norway in response to the awarding of the Nobel Peace Prize to Chinese human rights activist Liu Xiaobo in Oslo.

China now makes up about 7 percent of the Faroe Islands’ salmon sales. The Faroese government this year opened an office in Beijing to further expand trade.

In 2014, the islands’ salmon sales to Russia exploded after the European Union limited what fish other countries could export there. Those rules do not apply to the Faroe Islands because it is not a part of the European bloc.

In all, salmon exports from the Faroe Islands are expected to top $550 million this year, up from roughly $190 million a decade ago.

“This is the home place of Atlantic salmon,” Runi Dam, a consultant for local fishing companies, said while standing over giant pens filled with about 15,000 salmon each. “We have the perfect environment.”

Now the salmon business has become entangled in the fight over the 5G wireless network.

Last month, America’s ambassador to Denmark, Carla Sands, went public with warnings against Huawei. In an opinion piece in the local Faroe Islands newspaper, Ms. Sands said there could be “dangerous consequences” if the company was allowed to build the 5G network. When countries let Huawei in, she said, “they agree to work under Chinese communist rules.”

In another interview with Danish media this week, Ms. Sands accused a Huawei executive responsible for the Nordic region of “working for the Chinese communists,” who are “exporting their spying, their corruption and bribery around the world.”

Ms. Sands declined to be interviewed.

At the same time, China’s ambassador to Denmark visited the Faroe Islands at least twice in the past two months.

This month, the Danish national newspaper, Berlingske, published the transcript of an audio recording in which a senior Faroe Islands official is summarizing one of the meetings. Herálvur Joensen, a senior aide in the Faroese government, was caught on tape saying China’s ambassador had threated to block a trade deal — and more fish sales — if Huawei was not used for the 5G network.

“If Foroya Tele signed agreement with Huawei, then all doors would be open for a free-trade agreement with China,” he said in the recording. “If this doesn’t happen, then there won’t be a trade agreement.”

A spokesman for the prime minister said Mr. Joensen had not attended the meeting with the Chinese ambassador and was not available for an interview.

Huawei’s critics jumped on the revelations, saying the leaked recording showed the close links between Huawei and the Chinese government.

China’s ambassador, Feng Tie, wrote in Berlingske that the country did not pressure the Faroe Islands. “It’s my duty to secure that Huawei is treated fair and without discrimination in Denmark,” he said. “It’s not at all in Chinese culture to promote threats. Promoting threats is more known from the U.S.”

Huawei said in a statement it was not involved in any talks between the two governments.

In villages and harbors around the islands, people said they were bewildered about being thrust into a battle between China and the United States.

“It is a lice between two nails,” said Rógvi Olavson, who lives in Torshavn and is a lecturer at the local university. “You’re squeezed by the U.S. on the one hand and China on the other.”

While many residents said the Faroe Islands prefer the United States over China, several expressed anger at American officials for demanding that Huawei be banned. They said the company helped build the existing 4G network, which they use to make phone calls or share photos from some of the more far-flung areas of the islands.

Sissal Kristiansen, who designs sweaters and other clothing from Faroese wool, said she had listened to a recent interview with Ms. Sands.

“It awoke this, ‘Oh bugger off’ feeling in me,” she said. “We make our own decisions.”

Others are wary about harming economic ties with China, which they fear will retaliate if Huawei is not selected for the 5G network. Many locals remember an economic crisis in the 1990s, when about 10 percent of Faroese residents ended up moving abroad.

Today, unemployment on the islands is almost nonexistent — just 183 people were out of work as of Friday, according to government statistics. Like other Nordic countries, health care, education and other social services are free. There is virtually no crime.

“China is not just a nice customer, it is a necessity,” said Martin Breum, an arctic expert who has written about the Faroe Islands. The Faroese, he added, “have nothing else to sell to the rest of the world. They live off their fish.”

Martin Selsoe Sorensen contributed reporting from Copenhagen.