'Davos in the Desert': Once a sign of Saudi Arabia's clout, the spectacle now highlights its isolation
Saudi Crown Prince Mohammed bin Salman attends the Future Investment Initiative (FII) conference in Riyadh on Oct. 24, 2017. (AFP/Getty Iamges/Fayez Nureldine) October 18 at 4:58 AM
Last year, the government of Saudi Arabia pledged to provide half the cash for a $40 billion fund announced by the multinational asset management firm Blackstone Group for investment in infrastructure projects in the United States.
The eyebrow-raising announcement from Saudi Arabiaâs Public Investment Fund was timed to President Trumpâs trip to the Gulf kingdom in May 2017. As his first foreign trip, the expedition highlighted American ties to the Islamic theocracy, a relationsh ip that runs through Gulf oil wells and the battlefields of Afghanistan, where the United States and Saudi Arabia joined hands during the Cold War.
Cozy relations withstood the Sept. 11 attacks but are being newly tested by the alleged abduction and dismemberment of journalist Jamal Khashoggi by Saudi operatives. The final column by Khashoggi, a Washington Post contributor, was published Wednesday. President Trumpâs hesitance to censure the regime stems, as he acknowledges, from Saudi Arabiaâs wealth, a bulwark against its geopolitical isolation. âThat doesnât help us â" not when it comes to jobs and not when it comes to our companies losing out on work,â Trump said last week of the legislative push for sanctions.
Itâs not just oil and arms that bind Saudi Arabia to the West. The novel ways in which the regime is using its wealth will be put on display next week in Riyadh at the Future Investment Initiative â" if the country can find an audience.
N icknamed âDavos in the Desert,â the conference has lofty aspirations as a magnet for financiers, corporate titans, technology executives, government leaders and media bigwigs. It once boasted a list of attendees that resembled the crowd that converges each year at the Alpine playground for the global elite.
âItâs a big public relations operation,â Luciano Zaccara, a scholar of Gulf politics at Qatar Universityâs Gulf Studies Center, said in an interview. âThe crown prince, Mohammed bin Salman, is trying to put Saudi Arabia on the business and politics map, and to distract attention from his countryâs role in the violence in Yemen.â
The event is organized by the Public Investment Fund, a sovereign wealth fund with a portfolio that includes investments around the world. The fund is a centerpiece of Saudi Vision 2030, a plan championed by the crown prince to diversify the countryâs economy and reduce its dependence on oil. In addition to the Blackstone project, the fund was said to be close to buying shares in Tesla, the car company founded by Elon Musk. In 2016, it invested $3.5 billion in Uber.
The gleaming three-day event makes plain the public influence that Saudi Arabia is able to exert using private investments, especially notable as Trumpâs own previous business ties to the kingdom come under scrutiny.
Last year, at the inaugural conference, there were more than 3,800 attendees, Riyadh said. More than 90 countries were represented, representing a vast share of the global economy.
âOnly dreamers are welcome,â the 33-year-old crown prince told his audience last October.
The aim is to replicate that sense of grandeur next week.
âFII will continue to shape the future of global investment through an immersive three-day program featuring interactive conversations with global leaders, private meetings, curated roundtables, world-class entertainment, unparalleled CEO networking, and deep engagement with global media,â the program promises. The eventâs âpillarsâ are so broad as to lack clear meaning: investing in transformation, technology as opportunity and advancing human potential. Three âsummitsâ will focus on health, technology and urban issues.
One of the big names who was supposed to attend this year was Stephen Schwarzman, Blackstoneâs CEO, who accompanied Trump on his trip last year to the oil-rich kingdom. Schwarzman, whose net worth is estimated at $13.7 billion, celebrated his 70th birthday last year down the road from the presidentâs Mar-a-Lago resort in Florida. Three months later, Blackstoneâs stock rose on news of Saudi Arabiaâs contribution to the infrastructure fund.
Meanwhile, the partnership between the hedge fund and the Saudi state is in harmony with the vision of infrastructure development endorsed by the Trump administration. Earlier this year, the president announced a $200 billion plan that recasts the role of the federal government in upgrades to the nationâs airports, roads, highways and ports, funneling half of the promised cash into incentives for local government and the private sector to get involved.
Saudi Arabiaâs involvement, said H.E. Yasir Al Rumayyan, managing director of the Gulf stateâs investment fund, âreflects our positives views around the ambitious infrastructure initiatives being undertaken in the United States as announced by President Trump, and the strategic opportunity for the Public Investment Fund to achieve long-term returns given historical investment shortfalls.â
Now, Schwarzman, who has been an influential outsider adviser to Trump, particularly on economics and global affairs, is shunning the conference, according to The Washington Post and the Financial Times. His decision reportedly came after weekend talks with other financial chieftains.
He joins an exodus that includes international leaders, such as the International Mo netary Fundâs Christine Lagarde; prominent corporate executives, such as Jamie Dimon of JPMorgan Chase and Bill Ford of Ford Motor Company; entrepreneurs like Steve Case, who founded AOL, and Arianna Huffington, who last year recorded a video for the conference in which she tied personal well-being to the bottom line; and media partners, including CNN, the Financial Times and the New York Times.
âIâm very troubled by the reports to date about Jamal Khashoggi,â Dara Khosrowshahi, the CEO of Uber, said in a statement to CNBC on Friday. âWe are following the situation closely, and unless a substantially different set of fact emerges, I wonât be attending the FII conference in Riyadh.â
The cancellations reflect the furor over the disappearance of the Saudi journalist, who was a permanent resident of the United States. They also put pressure on the regime at a critical juncture in which the American president seems to be taking at face value the word of the crown prince, âwho totally denied any knowledge of what took place in their Turkish Consulate,â as Trump wrote this week on Twitter.
The administrationâs apparently trusting approach puts private companies in a unique position, making the investment conference an unusually significant â" and controversial â" affair, testing the ambitions and influence of Mohammed, hailed by outside admirers as a reformer. Treasury Secretary Steven Mnuchin is expected to decide by Thursday whether to attend. Siemens CEO Joe Kaeser is also undecided, he said this week. And Fox Business is among a dwindling group of media sponsors still supporting the event.
The decision-making process of Seth Bannon, a founding partner at the venture capital firm Fifty Years, sheds light on the competing interests at stake. The young financier wrote on Twitter last week that he planned to go ahead with his appearance at the conference, even as others walked away.
Bannon said t hat he would give the crown prince âthe benefit of the doubt.â He praised the young leader for pushing reforms creating friction with conservative Saudi society, potentially endangering his own âpower and security.â Still, he allowed that, âif heâs shown to be complicit, Iâll admit I misread the man, will back out of the event, & strongly condemn the behavior.â
Furthermore, the investor said, his scheduled discussion was on âa more ethical approach to capitalismâ â" a sorely needed message, he reasoned, for an audience resembling the crowd that gathers in Davos.
A week later, however, Bannon told The Washington Post that he no longer planned to travel to Riyadh. He said he still wanted to support the crown princeâs reforms, but that attending âwould send the message that what was done to Jamal is acceptable.â
âItâs important that business leaders take more stands, especially since Americaâs leadership seems incapable of doing so,â he added.
Zaccara, the assistant professor at Qatar University, said the far-reaching repudiation of the event may be the result of concern for public relations rather than a sense of ethical responsibility.
âItâs a good signal that this is a human rights concern, but I donât think there will be a long-term effect on the actions of the Saudi government,â he said. âSooner or later, business will be business.â
Companies have learned that wading too far into politics can come at a cost, Zaccara said, drawing a parallel to the penalty exacted by Georgia lawmakers this spring when Delta Air Lines cut ties with the National Rifle Association. When corporate interests are on the line, he said, âitâs difficult to see these companies actually putting principles first.â
The observation points to the difference between appearing at a conference hosted by a country and accepting its cash.
In his original defense of the event, Ban non, the Fifty Years founder, noted that the Saudi sovereign wealth fund was not an investor in his firm. By contrast, it has pumped money into Blackstone and Uber, for example, two companies whose chief executives pulled out of the event but said nothing of their financial entanglement with the Saudi regime.
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