More Pain for Corporations

This week, President Biden attempted to put Saudi Arabia on notice for collaborating with Russia on a dramatic output reduction by the oil cartel OPEC Plus.

CNN quoted him saying, “There will be repercussions for what they’ve done to Russia.” But such harsh remarks do not seem to have dissuaded Jamie Dimon and other corporate executives from attending this month’s Saudi-sponsored business gathering in Riyadh, sometimes known as Davos in the Desert.

Dimon, the CEO of JPMorgan Chase and a featured speaker on the conference’s website, is still scheduled to attend. Steve Schwarzman of the financial firm Blackstone, Ray Dalio of the hedge fund Bridgewater Associates and Michael Arthur, Boeing’s most senior worldwide executive, are all billionaires.

The presence of important business leaders illustrates the limitations of the US attempts to penalise Saudi Arabia for violating the American policy objectives. It is just another instance of multinational corporations trapped in the crosscurrents of the global politics, where they are susceptible to severe criticism.

Apple remains quiet on human rights breaches in China, while generating billions of dollars in sales there. The American legislators have charged financial institutions for sending top executives to Hong Kong next month for a conference featuring Hong Kong’s Chief Executive John Lee. Lee is subject to the US penalties in 2020 for suppressing anti-Beijing opposition.

And when hordes of firms ceased operations in Russia after it invaded Ukraine, some were blamed for not stopping operations soon enough. In contrast, others said their goods were essential to citizens’ survival.

The corporate CEOs do not always get direction from the government authorities, leaving them to achieve commercial goals on their interpretations of an often changing US policy. Former President Donald J Trump tried to strengthen relations with Saudi Arabia. On the campaign road, Biden vowed to make Saudi Arabia an international ‘pariah’.

Nonetheless, he visited the country and fist-bumped its de facto leader, Crown Prince Mohammed bin Salman, to get the Saudis produce more oil.

The role of corporations in the geopolitics has become more complex, as an increasing number of them include social campaigning in their primary goals. The environmental, social and corporate governance, or environmental, social and governance, movements are gaining popularity, implicitly portraying corporations and their CEOs as the moral leaders.

In recent years, Saudi Arabia, in particular, has required corporations’ to strike a tricky balance. The kingdom, the biggest oil producer in the world, is flush with cash — its sovereign wealth fund, the Public Investment Fund, manages more than $600 billion — and has invested it overseas in companies such as Uber and Softbank of Japan.

The sovereign wealth fund supported the formation of LIV Golf, which intends to compete with the PGA Tour, and headed the group that purchased the English soccer team Newcastle United.

And Prince Mohammed has courted foreign corporations to assist in the realisation of the Vision 2030, his ambitious plan to open up Saudi society and lessen its dependence on oil. Prince Mohammed has offered $500 billion for the creation of Neom, a futuristic metropolis in the desert, as part of the campaign.

The government’s complicity in the murder and dismemberment of dissident Jamal Khashoggi in 2018 spurred dozens of corporations and executives, including Dimon and Schwarzman, to withdraw from the Saudi investment conference in 2018.

This time, it seems that Biden’s attempts to brand Saudi Arabia as a Russian friend has failed to make the monarchy a pariah.

According to Raad Alkadiri, managing director of the political risk consultancy, Eurasia Group companies see Washington’s present ire with Riyadh considerably distinct from the outcry over Khashoggi.

The murder of Khashoggi “was a horrific crime by the Saudis and businesses could not ignore it,” Alkadiri said.

Several corporations whose leaders are featured as speakers this month have extensive economic links with Saudi Arabia. JPMorgan was one of the underwriters for Saudi Aramco’s record-breaking IPO.

Saudi Aramco is the state-owned oil behemoth of Saudi Arabia. Saudi Arabia is a cornerstone investor in Blackstone’s multibillion-dollar infrastructure fund.

And Boeing has maintained a 77-year partnership with the Saudis, selling commercial jetliners and military weapons such as jet fighters and Harpoon missiles.

However, corporations whose CEOs are named prominent speakers have not rushed to publicise their participation at the conference.

Joseph Evangelisti, a JPMorgan spokesperson, said that Dimon would be there to meet with the customers and investors. Michael Reid, a spokeswoman for PIMCO, said that the company’s vice chairman John Studzinski would attend but was not currently scheduled as a panelist or speaker.

Boeing presented the presence of its worldwide president, Arthur, as a contribution to the global debate. Paul Lewis, a corporate spokeswoman, said: “This conference brings together business, policy and innovation leaders from across the world to explore the future of foreign investment and the global economy.”

Blackstone, Bridgewater, Goldman Sachs and Sotheby’s refused to comment or had no statement about the presence of their CEOs.

Some did not reply to calls for comment, including Canoo, a manufacturer of electric vehicles and 500 Global, a venture financing firm.

Biden has vowed repercussions for Saudi Arabia’s oil reduction and the Democratic supporters in Congress have demanded punitive measures such as blocking weapons shipments. But he has so far refrained from defining specific sanctions and has not announced any actions.

Saudi officials have stressed that their country is a staunch partner of the United States and have justified the OPEC Plus decision as strictly commercial.

However, Alkadiri of the Eurasia Group said that international corporations must take heed of Washington’s growing scepticism regarding Saudi Arabia.

“What this event has shown is that you don’t have to dig very far in Washington to find anti-Saudi sentiment,” he added. As Saudi objectives diverge farther from the American interests, corporations will feel the pain more and more.

(The writer is an Edtech expert)