Journalist's Death Stops Western Firms From Doing Business With Saudi Arabia
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Last spring, Saudi Arabia's Crown Prince Mohammed bin Salman toured the United States, meeting with industry leaders, seeking business, and then the death of journalist Jamal Khashoggi inside a Saudi consulate triggered outrage. NPR's Jackie Northam reports on how that killing has turned some, but not all, Western companies away from business with Saudi Arabia.
JACKIE NORTHAM, BYLINE: During his U.S. tour, Crown Prince Mohammed presented Saudi Arabia as a good place to do business. The kingdom was opening its doors, supposedly allowing new freedoms for its people. Hollywood, in particular, gave the crown prince the red-carpet treatment by entertainment moguls seeking to do deals with the kingdom. But that changed when the crown prince was linked with the killing of Jamal Khashoggi.
TATIANA SIEGEL: I would say right now Saudi investment is as radioactive in Hollywood as you can be.
NORTHAM: Tatiana Siegel with The Hollywood Reporter says negotiations between entertainment companies and Saudi Arabia have dried up. For example, Endeavor, a talent agency that Siegel says produces films and TV shows, gave back $400 million that the Saudis invested in the company.
SIEGEL: Ari Emanuel, who is head of Endeavor Content, said, basically, in the wake of all of this bad publicity, we are giving the money back. What's so unusual is Hollywood will take money from anybody, traditionally, and it's sort of, like, suddenly Hollywood does not want any of this money.
NORTHAM: Siegel says sales of movie tickets could be worth a hundred-million-dollars a year for a studio. She says part of the reason for Endeavor returning the money is Jamal Khashoggi was a journalist, and Endeavor has among its clients journalists, such as Chris Matthews and Ronan Farrow. Siegel says most of the major studios also have news divisions and could be scared off from dealing with Saudi Arabia.
SIEGEL: What do you do if you're Disney and you also own ABC News? You're going to have internal pressure from the journalists that you employ to not do business with the Saudis.
NORTHAM: Emily Hawthorne, a Middle East analyst with Stratfor, a global intelligence company, says foreign investors were already rattled after some serious missteps by the crown prince. A year ago, he detained a couple-hundred prominent Saudis at the Ritz-Carlton hotel for three months until they paid to be released. The Saudi government says it netted them more than a hundred-billion dollars in fines. But Hawthorne says the blowback from foreign investors has been fierce.
EMILY HAWTHORNE: We've seen private investors really lose faith in the Saudi market, in part because of a concern over how the rule of law is being practiced in the country. We've seen concern over the security of investments, concern over which Saudi investors you're working with in the kingdom and their ties to the government.
NORTHAM: Khashoggi's death in October had a chilling effect on an important investment conference in Riyadh, dubbed Davos in the Desert. Senior executives of dozens of international companies dropped out of the conference. And the crown prince's jailing of activists across the kingdom has compounded foreign investor concerns.
HAWTHORNE: And I think that that, in and of itself, does introduce some concern for investors because again, they have to make sure that they're on the right side of that one key decision-maker.
NORTHAM: Steffen Hertog, a Middle East expert at the London School of Economics, says sectors such as media, tech and tourism are being hardest hit. But foreign investment in heavy construction, defense manufacturing and oil is still strong. Hertog says the kingdom's economy is doing slightly better this year because of higher oil prices.
STEFFEN HERTOG: They're certainly not facing an imminent fiscal crisis. They've got significant fiscal reserves. They've got significant foreign exchange reserves. So there's quite some room for maneuver for reflating the economy temporarily.
NORTHAM: But Hertog says, over the long term, Saudi Arabia will need more foreign investment if it's to wean itself off a dependency on oil, and that will depend on whether investors see it as a safe place to do business. Jackie Northam, NPR News. Transcript provided by NPR, Copyright NPR.