UPDATE 5-Defying Trump, UK's Johnson refuses to ban Huawei from 5G

* UK risks Trump's ire by giving Huawei limited role in 5G

* Washington "disappointed", says risks cannot be mitigated

* China's Huawei welcomes British 5G decision

* UK says intelligence cooperation will be safe
(Recasts headline, adds U.S. and Huawei comments)

By Jack Stubbs and Paul Sandle

LONDON, Jan 28 (Reuters) - Prime Minister Boris Johnson
granted Huawei a limited role in Britain's 5G mobile network on
Tuesday, frustrating a global attempt by the United States to
exclude the Chinese telecoms giant from the West's next
generation communications.

Defying Britain's closest ally in favour of China on the eve
of Brexit, Johnson ruled that "high-risk vendors" such as Huawei
would be allowed into the non-sensitive parts of the 5G
network.

Yet such high-risk companies' involvement will be capped at
35%, they will be excluded from the sensitive core, where data
is processed, and they will be banned from all critical networks
and locations such as nuclear sites and military bases.

Such an explicit rejection of U.S. concerns that Huawei
could be used to steal Western secrets dismayed President Donald
Trump's administration but was welcomed by the Chinese company -
founded in 1987 by a former People's Liberation Army engineer.

"There is no safe option for untrusted vendors to control
any part of a 5G network," a Trump administration official said.

"We look forward to working with the UK on a way forward
that results in the exclusion of untrusted vendor components
from 5G networks."

5G, which will offer much faster data speeds and become the
foundation stone of many industries and networks, is seen as one
of the biggest innovations since the birth of the internet
itself a generation ago.

In what some have compared to the Cold War antagonism with
the Soviet Union, the United States is worried that 5G dominance
is a milestone towards Chinese technological supremacy that
could define the geopolitics of the 21st century.

But as one of the biggest centres for Chinese investment,
trading and banking in Europe, Britain sided with Beijing, in
one of the biggest public breaks with Washington in decades.

"I fear London has freed itself from Brussels only to cede
sovereignty to Beijing," said Senator Tom Cotton, an Arkansas
Republican, adding that there should be a review of intelligence
sharing with Britain.

"Allowing Huawei to build the UK’s 5G networks today is like
allowing the KGB to build its telephone network during the Cold
War. The CCP (Chinese Communist Party) will now have a foothold
to conduct pervasive espionage on British society and has
increased economic and political leverage over the United
Kingdom."

CHINA VS USA

The United States had repeatedly warned London against
allowing Huawei into 5G, arguing that the distinction between
"edge" and "core" will blur as data is processed throughout 5G
networks, making it difficult to contain any security risks.

Huawei, the world's biggest producer of telecoms equipment,
has said the United States wants to frustrate its growth because
no U.S. company could offer the same range of technology at a
competitive price.

"This evidence-based decision will result in a more
advanced, more secure and more cost-effective telecoms
infrastructure that's fit for the future," Huawei's vice
president Victor Zhang told reporters.

"It gives the UK access to the world's leading technology
and ensures a competitive market," Zhang said.

Britain said its decision protected Britain's national
security while delivering world-class connectivity. It said
intelligence-sharing, including with the U.S.-led 'Five Eyes'
intelligence alliance, would not be jeopardized.

INTELLIGENCE

"How we construct our 5G and full fibre public telecoms
networks has nothing to do with how we will share classified
data," Foreign Secretary Dominic Raab told lawmakers after a
meeting of the National Security Council chaired by Johnson.

"Intelligence-sharing will not be put at risk or would ever
be put at risk by this government," Raab said.

British cyber security officials said they had put special
measures in place to mitigate any risks.

"We've never 'trusted' Huawei and the (measures) you can see
… exist because we treat them differently to other vendors,"
Britain National Cyber Security Centre (NCSC), part of the GCHQ
signals intelligence agency, said in a technical post.

The NCSC said the notion that there was no way to separate
core and edge parts of the 5G network "remained untrue".

A British official, speaking on condition of anonymity, said
there had been a market failure and that to exclude Huawei would
have delayed 5G and cost consumers more.

The telecoms industry has warned that banning Huawei would
cost it billions of dollars and delay the 5G roll-out. Huawei's
equipment is already used by Britain's biggest telecoms
companies such as BT and Vodafone, but it has
been largely deployed at the edge of the network.

Sources told Reuters last week that senior British officials
had proposed granting Huawei a limited 5G role, a "calculated
compromise" which could be presented to Washington as a tough
restriction, while accepted by British operators.
(Reporting by Jack Stubbs, Kylie MacLellan, Kate Holton and
Paul Sandle; Writing by Paul Sandle and Guy Faulconbridge;
Editing by Jon Boyle, Alexander Smith and Gareth Jones)