Global business quietly returns to Saudi Arabia
Six months after agents from Saudi Arabia murdered and dismembered the writer Jamal Khashoggi, companies are no longer shying away from the Arab kingdom.
The movie theater giant AMC says it is moving ahead with ambitious expansion plans for dozens of cinemas there. Hundreds of investors thronged this month to place $100 billion in orders for the first international bond sale tied to Saudi Arabia’s statebacked oil company. Google has a major data center in the works.
Many companies contend that they are, in part, helping to open up the deeply conservative society. A screening of Marvel’s “Black Panther” at a repurposed concert hall in early 2018 lifted a 35-year ban on movie theaters, with men and women attending the showing together.
But the math is simple: There is serious money to be made from working with the kingdom that lives off the world’s most profitable company, Aramco. A few weeks ago, Aramco disclosed that it generated $111.1 billion in net income last year. That was more than Apple, Royal Dutch Shell and Exxon Mobil combined.
“It is nothing personal,” J. Robinson West, the managing director of the BCG Center for Energy Impact, a Washingtonbased consulting unit, said about why investors and banks flocked to the bond sale.
To corporations around the world, the October death of Khashoggi, a columnist for The Washington Post who was strangled when he entered the Saudi Consulate in Istanbul, was a controversy to avoid. Business leaders pulled out of a high-profile, governmentsponsored conference in Riyadh, and have since largely kept quiet about their companies’ ties to the kingdom.
But global businesses and Saudi Arabia’s de facto ruler, Crown Prince Mohammed bin Salman, recognize a need for each other.
Saudi Arabia fortunes fall and rise with the price of oil. Increasingly, it wants fresh investment and businesses to support its fast-growing population – 33 million people, most of whom are younger than 30 – and to winnow a nearly 13% unemployment rate.
The promise of Saudi Arabia, which saw oil prices rise by a third this year to about $ 71 a barrel for Brent crude, has been too rich for many big companies to pass up. Google, JPMorgan Chase and the Japanese technology giant SoftBank are among the businesses that have kept Saudi Arabia as a partner.
“We thought long and hard, and concluded that the best course of action was to go forward,” Adam Aron, the chief executive of AMC, said in an interview describing his company’s decision to open at least 40 new theaters there over the next five years.
“It’s the right thing to do for the people of Saudi Arabia,” he said this month. “They have been deprived of going to the movies for decades.”
Google has been working on a Saudi data center, its first in the Middle East and an important hub for its cloud computing services, for more than a year. Revelations about Khashoggi’s killing had not derailed its plans. When asked about its business with the kingdom, Google said that it had signed a memo of understanding with Saudi Aramco in early 2018 “to explore potential establishment of cloud services to serve our customers in the Middle East. There are no further updates to share at this time.”
JPMorgan’s chief executive, Jamie Dimon, canceled an appearance at the Riyadh conference in October, but showed up to pitch Saudi Aramco’s bond deal to investors in New York two weeks ago.
The investment firm Blackstone is still planning to spend money from a $40 billion infrastructure fund, of which $20 billion is meant to come from Saudi coffers, according to a person briefed on the matter who was not authorized to speak publicly about the firm’s investment plans.
And SoftBank, whose nearly $100 billion Vision Fund for technology investments counts the Saudi government as its biggest backer, has had little difficulty crafting deals using Saudi cash. It has participated in 20 investments since the Khashoggi news emerged, according to data from S&P Global Market Intelligence.
Many Western companies were tight-lipped about their continued investment in Saudi Arabia for weeks after Khashoggi disappeared.
But in November, SoftBank’s chief executive, Masayoshi Son, publicly articulated what many corporate titans have quietly used as their justification for working with the kingdom. “As horrible as this event was, we cannot turn our backs on the Saudi people as we work to help them in their continued efforts to reform and modernize their society,” Son told analysts and investors at an earnings presentation in Tokyo.
Still, some companies have decided to back away.
Endeavor, the Hollywood talent agency, returned a $400 million investment from the Saudis earlier this year and severed its relationship with the kingdom’s leaders. The British entrepreneur Richard Branson, who returned from a 2017 visit to the kingdom wowed by Crown Prince Mohammed’s vision, recoiled after Khashoggi’s murder. Branson suspended his directorships in Saudi tourism ventures and cut off conversations with the Public Investment Fund.
In the unlikely event that more Western companies follow suit, the kingdom has a contingency plan: working increasingly with allies in Asia.
Countries including China, South Korea and Thailand have become key customers for the Saudis as the United States reduces its dependence on imported oil because of domestic shale production.
In turn, the Chinese oil giant Sinopec has become a high-profile investor in the kingdom, with a refining joint venture with Aramco and a research and development facility at a science park called Dhahran Techno Valley, in eastern Saudi Arabia.
A projection of King Salman and Crown Prince Mohammed bin Salman appears at a January conference at the Ritz Carlton in Riyadh, Saudi Arabia.