Will the Saudi Arabia Scandal Impact International Business?
The death of Saudi journalist Jamal Khashoggi sent shockwaves around the world, not least in the business world, where investments, projects and partnerships stalled as the story went from Khashoggi being missing, to the news that he had been murdered – with the Saudi government squarely in the spotlight.
Khashoggi, a prominent journalist and critic of the Saudi government, disappeared last month, after last being seen entering the Saudi consulate in Turkey. Riyadh denied any involvement in his disappearance for weeks, then later claimed that Khashoggi died in a fight inside the consulate with officials. But world leaders spoke out, including Germany’s chancellor Angela Merkel, who publicly rubbished the statement, and called for transparency.
Doubts around Saudi Arabia’s explanation, and the regime’s possible involvement, have sent ripples across the world, and put pressure on the kingdom’s efforts to grow foreign investment over the next 12 years. Some experts have cautioned that the long-term effects remain unclear, and could impact some areas of business and parts of the world than others.
In the immediate aftermath of the story breaking, Saudi stocks dropped significantly – Riyadh’s main stock market index plunged 7% on October 14 out of fear of US sanctions. But there have been wider implications for businesses planning international market expansion involving investment with Saudi Arabia.
Saudi Arabia is a key investor in US tech firms, for example, including investment in SoftBank Vision Fund, which has invested in companies including WeWork and Slack. Future plans could be in jeopardy, and Silicon Valley may shun Vision Fund money now, some experts have said. Uber CEO Dara Khosrowshahi withdrew from speaking at a business conference because of the reports concerning Khashoggi, and Saudi Arabia is a major shareholder of the company. The country has also been in talks with Amazon, Google and Apple – and it remains unsure if any plans will go ahead since they have yet to comment.
Saudi Arabia is attempting to break its dependence on oil, but a major conference held by the country’s Crown Prince Mohammed bin Salman has suffered consequences, with major media partners including CNN, Fox Business and the New York Times, withdrawing from the event. High profile executives and policy-makers, including US Treasury Secretary Steve Mnuchin, Goldman executive Dina Powell, IMF managing director Christine Lagarde, HSBC CEO John Flint and London Stock Exchange CEO David Schwimmer all withdrew as well.
Richard Branson announced he has suspended his involvement in projects to create a tourist destination on the Red Sea, and possible Saudi investment in Virgin’s space businesses. He said that if the world’s suspicions are true, and the regime was involved in Khashoggi’s murder, it will affect the ability of every business in the west to make any deals with the Saudi government.
As time has passed, the likelihood of any countries imposing official sanctions on Saudi Arabia seems to have faded. However, President Trump has criticised the Saudi government’s plan to cut oil production, a possible sign that relations between the two countries remain strained. Instead, the incident has demonstrated the speed with which global trade and international business can be plunged into periods of profound uncertainty, especially when disputes between nations are involved.
In a recent article for Company Bug, the expansion consultancy Galvin International outlined how business could protect themselves against global turmoil, ranging from international disputes to the imposition of sanctions. They stress the importance of a rigorous due diligence process, that can anticipate difficulties and controversies before they arise, and respond rapidly if they do.
It is likely that businesses will be taking this cautious approach to any dealings with Saudi Arabia, although the long term impact remains to be seen.
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