Silicon Valley tested by Saudi crisis

Silicon Valley tested by Saudi crisis
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Saudi Arabia’s alleged involvement in the disappearance and possible murder of a dissident Washington Post columnist is putting Silicon Valley in a difficult position, with potentially billions in business deals at stake.

The diplomatic crisis is putting a new spotlight on the Saudi kingdom’s massive presence in the U.S. tech sector.

The Saudi sovereign wealth fund owns stakes in a number of startups, including a substantial share of Uber, and industry giants have been courting the royal family, hoping to get a foothold in the country.

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According to a new Wall Street Journal estimate, Saudi Arabia, through its Public Investment Fund (PIF), is the single largest source of venture capital for U.S. startups, including many prominent companies.

The fund owns a $3.5 billion stake in Uber, nearly 5 percent of Tesla and has contributed $45 billion towards SoftBank’s $92 billion Vision Fund, aimed at investing in U.S. tech companies. The Saudi fund has also invested in startups like the virtual reality company Magic Leap, the dog-walking app Wag and WeWork.

When Saudi Crown Prince Mohammed bin Salman, the 33-year-old who has consolidated power within the country and directs the fund, visited the U.S. earlier this year, he was feted by celebrities, politicians and business leaders, including the CEOs of Google, Facebook, Apple and Amazon. 

But now the diplomatic crisis over journalist Jamal Khashoggi, who went missing from the Saudi consulate in Istanbul two weeks ago, threatens to strain those business ties.

Turkish authorities suspect that Khashoggi was murdered and dismembered inside the Saudi Consulate in Istanbul. The Saudi government has officially denied the allegations.

Critics say the controversy highlights the problems with the tech sector’s cozy relationship with an autocratic nation with a dismal record on human rights and press freedoms.

Many U.S. businesses and media outlets have been rethinking their relationship with Saudi Arabia, pulling out of a conference, the Future Investment Initiative (FII), hosted by the Saudi fund later this month in droves.

Even Uber, which counts the PIF’s managing director as a member of its board, has expressed concern about Khashoggi’s disappearance.

“I’m very troubled by the reports to date about Jamal Khashoggi,” Uber CEO Dara Khosrowshahi said in a statement. “We are following the situation closely, and unless a substantially different set of facts emerges, I won’t be attending the FII conference in Riyadh.”

But generally, tech companies are taking a cautious approach as the controversy plays out.

A spokesperson for Uber declined to comment beyond that statement about the company’s relationship with Saudi Arabia.

Google announced on Monday that Diane Greene, the CEO of its cloud computing division, was dropping out of the conference. But a company spokesperson refused to say what had prompted the decision.

Google’s potential projects in the country highlight the high stakes for the industry.

Google’s parent company, Alphabet, is vying to build data centers in Saudi Arabia, a largely untapped market for tech companies. Building data centers in the region would allow for increased digital capacity for internet users and businesses hoping to grow their online presence in markets outside the U.S. And the Saudi government has taken care to specifically court the tech industry, which they see as crucial to diversifying their economy beyond oil exports.

Neither Google nor Alphabet responded to inquiries from The Hill about their relationship with Saudi Arabia.

Another company that wants to build cloud storage facilities in the kingdom is Amazon. Earlier this year, The Wall Street Journal reported that Amazon and Saudi Arabia were in talks over a $100 billion deal to build three data centers. It’s unclear how far those negotiations have progressed.

Amazon CEO Jeff Bezos, who also owns The Washington Post, was one of the many American business executives that Crown Prince Mohammed met with during his trip to the U.S. in the spring. 

The Post and its editorial board has put their full weight behind uncovering what happened to Khashoggi in recent weeks. 

 “The government of Saudi Arabia owes the Khashoggi family and the world a full and honest explanation of everything that happened to him, and we support the requests from Jamal’s family and the United Nations for an independent internal investigation,” Fred Ryan, the CEO and publisher of The Washington Post, said in a statement Tuesday.

“Until we have a full account and full accountability, it cannot be business as usual with the Saudi Government.”

An Amazon spokeswoman, though, did not respond when asked if the company intends to move forward with its expansion plans in Saudi Arabia or if Bezos has been in contact with the crown prince. 

The industry is already starting to face some political pressure to distance itself from the kingdom. 

Many lawmakers from both sides of the aisle have already opened the door to punishing Saudi Arabia if it is found to have been involved in Khashoggi’s disappearance. 

Rep. Ro KhannaRohit (Ro) KhannaOvernight Defense — Presented by Raytheon — Mattis defends border deployment during visit to troops | Bolton aide exits WH after clash with first lady | House blocks Yemen war resolution | Report warns of erosion in US military superiority House Dems split on how to tackle climate change House blocks resolution to end US military support in Yemen war MORE (D-Calif.), whose district includes Silicon Valley, specifically called out the tech sector for taking money from Saudi Arabia given its record of human rights abuses.

“The tech community needs to be very clear that they’re not going to take Saudi money and Saudi investment,” Khanna said in a recent interview with Democracy Now. 

“And this has to be not just Congress stopping arms sales, but the United States technology and investment community cutting off ties with the Saudis.”