Capitol Report: Corporate America begins to distance itself from Saudi money due to Khashoggi affair

Capitol Report: Corporate America begins to distance itself from Saudi money due to Khashoggi affair

Finance

As the outcry grows over the alleged murder of Washington Post columnist Jamal Khashoggi by Saudi Arabian agents, some U.S. companies are cutting ties with the wealthy Middle Eastern nation — and more could follow suit.

Khashoggi, a Saudi citizen living in Virginia known for criticizing his homeland’s government, was allegedly killed this month in the Middle Eastern country’s consulate in Istanbul, Turkey. The Saudi government has denied any involvement in his disappearance.

The fallout could affect a range of U.S. companies with Saudi links, including defense contractors, banks, energy giants and media companies.

“There will be public pressure on them,” said Randa Slim, a senior fellow at the Middle East Institute, a think tank in Washington, D.C. “In the short term, they might want to take some distance, but in the long term, they’re going to take their cues from the White House.”

President Donald Trump sounded skeptical late Wednesday about blocking arms sales to Saudi Arabia because of the Khashoggi affair. Last year, Trump signed a $110 billion arms deal with the Saudis.

“I think that would be hurting us. We have jobs,” the president said late Wednesday in a Fox News interview. He said it’s “too early” to commit to “what recourse we would take.” On Thursday, Trump played down Khashoggi’s disappearance, saying “this took place in Turkey” and “Khashoggi is not a United States citizen.”

“The White House modus operandi is to sweep this under the rug, or to de-escalate the situation and try to minimize the fallout in the long term,” said Slim, who added that she knew Khashoggi.

Meanwhile, nearly two dozen U.S. senators signed a letter this week triggering an investigation that could result in sanctions against Saudi Arabia. Sen. Rand Paul, a Kentucky Republican, said in a tweet Thursday that Trump “should immediately halt arms sales and military support to Saudi Arabia.” Sen. Bob Corker, a Tennessee Republican and chairman of the Senate Committee Foreign Relations, said arms sales to the country were at risk.

The defense companies ITA, -2.49%  with ties to Saudi Arabia include Raytheon Co. RTN, -2.76%  , which gets 2% of its annual revenue from the country, according to FactSet data. BAE Systems PLC BA., -1.39%  , a U.K. company with U.S. operations, generates 17% of its sales in Saudi Arabia.

The New York Times Co. NYT, +0.77%  said Wednesday that it’s no longer a media sponsor of Saudi Arabia’s Future Investment Initiative conference, also called “Davos in the Desert,” according to multiple published reports. That annual event, in its second year, is scheduled to take place Oct. 23-25 in Riyadh, and other media sponsors such as 21st Century Fox Inc.’s FOXA, +0.29%  Fox Business Network and Comcast Corp.’s CMCSA, -1.75%  CNBC have reportedly said they’re evaluating the circumstances.

The American CEOs slated to speak at Future Investment Initiative include J.P. Morgan Chase & Co.’s JPM, -3.18%  Jamie Dimon, BlackRock Inc.’s BLK, -2.07%  Larry Fink and Uber Technologies Inc.’s Dara Khosrowshahi. J.P. Morgan, BlackRock and Uber didn’t immediately respond to requests for comment.

“That will be the first indicator,” the Middle East Institute’s Slim said of next week’s conference. “If it’s going to be business as usual, with only a few people pulling out, that gives you a roadmap of where this is going.”

The Saudi market is “too big for businesses to lose,” so there will be pushback from the business community to limit that fallout,” Slim also said. She noted Congress is pushing in the other direction, as it “for a long time has had a difficult relationship with the Saudis, starting with 9/11.”

In other company developments following Khashoggi’s disappearance, a Saudi project announced Tuesday that Apple Inc. AAPL, -1.34%  Chief Design Officer Jony Ive was part of its advisory board, but then it revised its news release to remove Ive’s name after Apple said Ive was never part of the project, according to a BuzzFeed News report. Dan Doctoroff, CEO of Alphabet Inc.’s GOOG, -0.57% GOOGL, -0.85%  Sidewalk Labs, and former U.S. energy secretary Ernest Moniz distanced themselves from the project, a futuristic mega-city named Neom, the BuzzFeed report also noted. That’s after they initially were announced as members of that advisory board as well.

The Khashoggi affair “could have profound implications for U.S.-Saudi relations,” said Rob Malley, president and CEO of Crisis Group and a former Obama administration adviser on Mideast Policy, in a tweet late Wednesday.

“Yemen is far costlier & deadlier. But this is personal & more palpable. & media won’t let go,” Malley added, referring to Saudi Arabia’s involvement in a civil war in Yemen.

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