Britain on Tuesday gave the green light to a limited role for Chinese telecoms giant Huawei in the country's 5G network, in a decision that left the United States "disappointed" after it called for a total ban.
Even though London decided that "high risk vendors" would be excluded from Britain's "sensitive" core infrastructure, a US official insisted there was "no safe option for untrusted vendors to control any part of a 5G network", which offers almost instantaneous data transfer.
Washington has banned Huawei from the roll-out of the fifth generation mobile network because of concerns that the firm could be under the control of Beijing, an allegation it strongly denies.
The announcement came as Secretary of State Mike Pompeo prepared to meet British Prime Minister Boris Johnson this week for talks in London likely to focus on Huawei and as Britain looks for a trade deal with Washington after Brexit.
The United States had threatened to limit intelligence-sharing with London in the event of Huawei winning a UK role.
But Foreign Secretary Dominic Raab told parliament: "Nothing in this review affects this country's ability to share highly sensitive intelligence data over highly secured networks.
"GCHQ (Britain's cybersecurity agency) have categorically confirmed that how we construct our 5G and full-fibre public telecoms network has nothing to do with how we share classified data."
Johnson spoke to US President Donald Trump and "underlined the importance of like-minded countries working together to diversify the market and break the dominance of a small number of companies", the British government said.
London's decision -- following a meeting of the National Security Council chaired by Johnson -- came shortly after Brussels said it would also allow Huawei a limited 5G role in the European Union.
Brussels and London are both grappling to find a middle way to balance Huawei's huge dominance in the 5G sector with security concerns, as they look to improve connectivity.
Britain's Digital Secretary Nicky Morgan insisted: "High risk vendors never have been and never will be in our most sensitive networks."
But that failed to convince Washington, where a senior administration official said the United States was "disappointed by the UK's decision".
Meanwhile, research group GlobalData said a limited role for Huawei allowed "the UK to bow in part" to the US.
"A total ban would have required massive amounts of infrastructure to be torn out at eye-watering expense, and would have set the UK's 5G roll-out back by years.
"It was simply never a practical option to ban Huawei completely," it added in a note.
Unlike the United States, Britain has been using Huawei technology in its systems for the past 15 years.
Analysts Fitch warned that the US could look to retaliate.
"The US has been putting a lot of pressure on its allies to ban Huawei, and failure to do so will raise questions about its strategy, as we expect it will look to retaliate, with threats to stop intelligence-sharing already made," Fitch said Tuesday.
London's move excludes Huawei from sensitive UK locations, such as nuclear sites and military bases, while their market share will be capped.
Huawei itself welcomed the news that it would have at least a part in building Britain's 5G networks.
"Huawei is reassured by the UK government's confirmation that we can continue working with our customers to keep the 5G roll-out on track," said Huawei Vice-President Victor Zhang.
Brussels also ruled out banning the company. A top EU official said instead it was "a question of laying down rules".
"They will be strict, they will be demanding and of course we will welcome in Europe all operators who are willing to apply them," the official said.
Huawei is widely viewed as providing the most advanced alternative for super-fast data transfers behind technologies such as self-driving cars and remotely operated factory robots.
Existing providers of limited 5G network infrastructure in Britain include Nokia and Ericsson.
A number of UK mobile phone operators, including EE and Vodafone, currently sell 5G services -- but it is so far available only in a handful of cities, notably London and Birmingham.