A Canadian prosecutor urged a Vancouver court to deny bail to a Chinese executive at the heart of a case that is shaking up US-China relations and worrying global financial markets.
Meng Wanzhou, the chief financial officer of telecommunications giant Huawei and daughter of its founder, was detained at the request of the US during a layover at the Vancouver airport last Saturday -- the same day that Presidents Donald Trump and Xi Jinping of China agreed over dinner to a 90-day ceasefire in a trade dispute that threatens to disrupt global commerce.
The US alleges that Huawei used a Hong Kong shell company to sell equipment in Iran in violation of US sanctions.
It also says that Meng and Huawei misled American banks about its business dealings in Iran.
The surprise arrest, already denounced by Beijing, raises doubts about whether the trade truce will hold and whether the world's two biggest economies can resolve the complicated issues that divide them.
"I think it will have a distinctively negative effect on the US-China talks," said Philip Levy, senior fellow at the Chicago Council on Global Affairs and an economic adviser in President George W Bush's White House.
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"There's the humiliating way this happened right before the dinner, with Xi unaware. Very hard to save face on this one. And we may see (Chinese retaliation), which will embitter relations." Canadian prosecutor John Gibb-Carsley said in a court hearing Friday that a warrant had been issued for Meng's arrest in New York August 22.
He said Meng, arrested en route to Mexico from Hong Kong, was aware of the investigation and had been avoiding the United States for months, even though her teenage son goes to school in Boston.
Gibb-Carsley alleged that Huawei had done business in Iran through a Hong Kong company called Skycom.
Meng, he said, had misled US banks into thinking that Huawei and Skycom were separate when, in fact, "Skycom was Huawei."
Meng's lawyer, David Martin, argued that it would be unfair to deny her bail just because she "has worked hard and has extraordinary resources."
Huawei, in a brief statement emailed to the AP, said that "we have every confidence that the Canadian and US legal systems will reach the right conclusion."
"This is the culmination of what is likely to be a fairly lengthy investigation."