Big tech's budding relationship with Saudi Arabia in doubt after Khashoggi

This spring, the crown prince of Saudi Arabia met the royalty of Silicon Valley: Tim Cook, Jeff Bezos and Su...

Posted: Oct 19, 2018 1:14 PM
Updated: Oct 19, 2018 1:14 PM

This spring, the crown prince of Saudi Arabia met the royalty of Silicon Valley: Tim Cook, Jeff Bezos and Sundar Pichai.

As part of a broader tour of the United States in March and April, Crown Prince Mohammed bin Salman visited the campuses of top tech companies and posed for pictures alongside the CEOs of Apple, Amazon and Google. A key focus of these meetings, according to multiple statements put out at the time by the Royal Embassy of Saudi Arabia, was to talk up possible future partnerships between the oil-rich country and the world's most valuable public companies.

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There were rumors these tech companies would pursue new data centers and retail opportunities in Saudi Arabia.

Now that budding relationship could be complicated by growing questions about the role of the Saudi government, and bin Salman in particular, in the disappearance and apparent killing of journalist Jamal Khashoggi.

While the tech leaders have stayed relatively quiet on the news so far, that doesn't mean they're not wrestling with the issue.

"Many of them are still the 'new kids on the block' to the Middle East, compared to the energy and defense industries," says Sam Blatteis, a former Google exec and CEO of MENA Catalysts, a government affairs firm that advises technology companies on Middle Eastern issues. The question these companies keeping asking his firm now in the wake of the Khashoggi news: "Tell me how this ends."

The unfolding situation pits Silicon Valley's self-professed idealism against the opportunity to tap into the ample funds of a country betting heavily on tech as part of a bid to diversify its oil-dependent economy.

Three or four years down the road, once the "current drama" has passed, the appeal of doing business with the Arab world's biggest economy, with a youthful population, could be too strong to resist, Blatteis added.

"I wouldn't be surprised if there is still interest from several quarters in tech companies. They get the 'end-game' to develop booming, non-oil growth industries through enabling technology," he said.

Apple and Amazon were both previously reported to be in talks to establish a footprint in the country, with the introduction of an Apple Store and Amazon Web Services, respectively. Amazon currently has a job posting for a "head of public policy" for AWS in Saudi Arabia "to help further advance Amazon as a leading cloud platform provider in the Kingdom of Saudi Arabia."

Alphabet, Google's parent company, was also reportedly in talks with Saudi Arabia's oil giant Aramco to build data centers around the country. Separately, Google confirmed on an earnings call in April that it was expanding its cloud infrastructure to support Saudi Arabia, among other countries.

Representatives for Apple, Amazon and Google declined to comment. However, Google Cloud CEO Diane Greene recently joined a growing list of business executives to pull out of an upcoming Saudi conference.

It's not just these three big tech companies. Numerous tech startups have received funding from Saudi Arabia indirectly, through SoftBank's Vision Fund. The massive $93 billion technology investment fund launched last year with $45 billion of its backing from Saudi Arabia's sovereign wealth fund.

The Vision Fund has pumped money into startups like WeWork, Slack, DoorDash and others. These cash infusions, often totaling hundreds of millions -- if not billions -- can supercharge businesses and significantly delay the need for startups to stage a public offering. The same sovereign wealth fund has also invested directly in companies like Uber.

Last week, Uber CEO Dara Khosrowshahi said he was "very troubled by the reports" about Khashoggi and pulled out of the upcoming conference in Riyadh.

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