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22nd of October 2018

Economy



Khashoggi case drives growing exodus from Saudi business ventures

Sir Richard Branson, World Bank president Jim Yong Kim and Uber chief Dara Khosrowshahi are among a growing number of executives to distance themselves from Saudi Arabia’s business ventures amid outrage over the disappearance of Saudi journalist Jamal Khashoggi.

Sir Richard has halted discussions with Saudi Arabia’s sovereign wealth fund about a planned $1bn investment in Virgin’s space companies, while Mr Kim and Mr Khosrowshahi led a lengthening list of international figures pulling out of a high-profile Saudi conference later this month.

Saudi officials maintain that Mr Khashoggi went missing after leaving the Saudi consulate in Istanbul, but Turkish officials are investigating whether he was killed in the building. Foreign governments are stepping up their demands for answers about what happened to the journalist.

Several speakers and sponsors have pulled out of the Future Investment Initiative conference in Riyadh, which was organised by the Saudi Public Investment Fund and is closely associated with Crown Prince Mohammed bin Salman.

A World Bank official said on Friday: “President Kim has previously informed the Saudi authorities that he will not be attending the Future Investment Initiative.” Mr Kim had been listed as a “confirmed speaker” on the FII’s website until Friday, when the page of speakers disappeared from the site. The World Bank would not comment on whether Mr Kim had decided to withdraw from the event before or after Mr Khashoggi’s disappearance on October 2.

Andy Rubin, the Silicon Valley entrepreneur best known for creating the Android smartphone operating system, has also withdrawn from the conference, along with Viacom’s Robert Bakish and Steve Case, former head of AOL.

On Friday afternoon in London, Herman Narula, the founder of UK-based virtual worlds start-up Improbable, which raised $500m from SoftBank last year, joined the tech exodus. “In light of recent events, we will no longer be attending the Future Investment Initiative,” an Improbable spokesperson said.

The Financial Times, which had been a media partner of the FII, said on Friday: “The Financial Times will not be partnering with the FII conference in Riyadh while the disappearance of journalist Jamal Khashoggi remains unexplained.” Bloomberg, CNBC and The New York Times also said they would no longer be media partners.

The growing exodus raises the question as to whether the event, dubbed “Davos in the Desert”, can still go ahead.

Patrick Soon-Shiong, the owner of the Los Angeles Times, and The Economist’s editor-in-chief, Zanny Minton Beddoes, are no longer participating. Arianna Huffington, the entrepreneur, media mogul and Uber board member, has also pulled out of the conference, having previously served on its advisory board.

I’m very troubled by the reports to date about Jamal Khashoggi. We are following the situation closely

The situation is particularly delicate for Uber, which has raised billions of dollars from both the PIF and SoftBank, whose Vision Fund counts the Saudi sovereign wealth fund as its biggest investor. Yasir Al Rumayyan, the PIF’s managing director, sits alongside Ms Huffington on Uber’s board.

Mr Khosrowshahi said he was “very troubled by the reports to date” about Mr Khashoggi. “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,” he said.

Sir Richard told the Financial Times in a statement that he had been “delighted” to accept two directorships involving tourism projects around the Red Sea because of his “high hopes” for Saudi Arabia’s government under Crown Prince Mohammed bin Salman.

But reports that Mr Khashoggi may have been murdered or abducted in Turkey “if proved true, would clearly change the ability of any of us in the west to do business with the Saudi government”, he said.

President Donald Trump said on Thursday that the US was investigating Mr Khashoggi’s disappearance but repeated that he did not favour suspending arms sales in retaliation. “What happened is a terrible thing, assuming that happened. Maybe we’ll be pleasantly surprised but somehow I doubt it,” he said.

Mr Trump told reporters that he did not favour sanctions because Saudi Arabia was “spending $110bn on military equipment and on things that create jobs . . . for this country”. He said, “I don’t like stopping massive amounts of money that’s being poured into our country.”

On Friday, Steven Mnuchin, US Treasury secretary, said on CNBC: “I am planning on going [to FII] at this point. If more information comes out and changes, we can look at that.”

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Many bankers and business leaders listed as FII speakers — including Jamie Dimon of JPMorgan Chase — are still expected to attend the conference. Of several companies that responded to requests for comment on whether their executives were reviewing their plans, none said they planned to pull out.

Others, including BlackRock’s Larry Fink, were monitoring the situation, spokespeople said.

Many of the speakers, such as Stephen Schwarzman of Blackstone, have large business interests with the PIF. Masayoshi Son, the SoftBank founder in whose Vision Fund the PIF has invested $45bn, is still expected to attend. Representatives of other PIF or Vision Fund portfolio companies, such as Magic Leap, Lucid Motors, Arm, Plenty and Noon are also still listed as speakers.

Last year’s conference, which lured the global elite of business and finance, was a roaring success. Financiers arrived mainly to make contacts and court cash from the PIF, the country’s main global and domestic investment vehicle, but were enthralled by the crown prince’s rallying call for a return to moderate and tolerant Islam.

Goodwill about the prince’s economic reform vision evaporated weeks later when he imprisoned hundreds of businessmen, royals and ministers in the same Ritz-Carlton hotel complex that hosts the FII. Most were released after settling with the government, which has said it hopes to raise $100bn from the crackdown on corruption.

Reporting by Andrew Edgecliffe-Johnson in New York, Simeon Kerr in Dubai, Tim Bradshaw and Henry Mance in London, James Politi in Bali and Shannon Bond and Richard Waters in San Francisco

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