Silicon Valley faces Pressure in light of the Khashoggi Murder

November 12, 2018

For a long time, U.S - Saudi Arabian relations have been challenged on the subject of ethics. The dependence of the U.S. economy on Saudi resources and investments put the U.S. in a sticky situation in light of the assassination of Washington Post journalist Jamal Khashoggi as there aren’t many sanctions that could be imposed without hurting the U.S. economy.

 

When the world discovered Khashoggi’s death, the U.S. stock market took a brief hit as speculation arises that the U.S. might impose sanctions on Saudi Arabia. The U.S. is greatly dependent on the oil resources in Saudi Arabia, and even more so once its sanctions on Iran come into action. The two countries have also signed a large weaponry deal in 2017 worth 350 billion USD over ten years. Given these economic ties, it is unlikely that the U.S. will sever its relations with the kingdom. There’s too much at stake.

 

American business leaders have become the guardian of U.S. values on the world stage in this incident. BlackRock, JP Morgan, and Uber, amongst a list of major corporations, have bowed out of the Future Investment Initiatives conference in the immediate aftermath of the assassination. Their absence contributed to public awareness of the issue but nevertheless, business with Saudi is expected to return to normal.

 

Many U.S. companies who continue business with Saudi Arabia are facing heavy criticism in the media for accepting money from an oppressive regime. Silicon Valley has received floods of funding from Saudi Arabian investors, either directly or through SoftBank’s Vision Fund. According to the Wall Street Journal, Saudi Arabia is “the largest single funding source for U.S. startups”.

 

Some Democrats are pressuring Silicon Valley companies to reevaluate their dealings with Saudi Arabia, but companies show no sign of cutting financial ties with the kingdom. However, in public, they try to keep their distance with the country. Uber, Tesla, and Twitter amongst a pool of companies have declined to comment on the subject matter.

 

Despite the pressure, it is unlikely that companies will sever its ties with Saudi Arabia, and even if they do refuse the investments, the impact will be trivial in comparison to the sacrifices. However, the U.S. could potentially use Saudi’s stake in Silicon Valley as bargaining power to achieve some sort of agreement with the kingdom, although that would require the cooperation of the entire Silicon Valley and support from the government.

 

Change in business is most often consumer-driven. If the consumers are thoroughly appalled by the incident and demands refusal of Saudi investments, there might be enough momentum for companies to decline the funding. Otherwise, businesses would prioritize their own survival and development. Moreover, for there to be an actual impact on Saudi Arabia, it would require not only a few companies to sever the ties but the entire Silicon Valley. Even in that case, Saudi Arabia would simply transfer its funds to other countries, which would not only seriously hurt the U.S. economy but also undermine the objectives of rejecting the funds in the first place, which is to punish to the country for its human rights abuse.

 

It is not to say that businesses don't have the responsibility to defend moral values and human rights, but that in this case, Silicon Valley companies are not in power to incur a considerable change in Saudi Arabia. Even if they do decline all business with the kingdom, the sacrifices are too much for the economy to bear and the impact is too small in comparison to the issues it would cause.

 

In the idealistic situation, instead of rejecting the funding, the U.S. could potentially use Saudi’s investments in the Silicon Valley as a tool to assert some negotiating power over Saudi Arabia. If the kingdom wants to be part of the development, it would need to abide by certain codes of conduct regarding human rights. This would require leaders to initiate the movement, and support from the U.S. government.

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