Saudi investment summit loses elites amid killing

Stefania Bianchi
Bloomberg News

It’s an investment summit in the shadow of a killing: stripped of the glitz and glamour of business titans who last year flew in to woo a young prince and be a part of his grand plans to transform his country’s economy.

Hosted by the kingdom’s sovereign wealth fund, the three-day conference that kicks off in Riyadh on Tuesday was meant to showcase the opportunities created by efforts to break the economy’s dependence on oil and unveil billion-dollar contracts. That is, until the killing of government critic Jamal Khashoggi prompted dozens of finance and business leaders to pull out.

Saudi Arabia and Crown Prince Mohammed bin Salman, who posed for selfies with hundreds of delegates at last year’s conference, will be keen to show it’s business as usual. That will be a tall order as world leaders demand more details on how the Washington Post columnist was killed at the kingdom’s consulate in Istanbul, and foreigners sell Saudi stocks in record numbers.

No-shows from the likes of Deutsche Bank AG’s Christian Sewing, JPMorgan Chase & Co.’s Jamie Dimon and BlackRock Inc. Chief Executive Officer Larry Fink will deal a blow to the 33-year-old leader and the kingdom, which has built close ties with Wall Street executives and relies largely on global banks to finance its ambitious plans.

Still, a delegation of Russian CEOs including at least one billionaire still plan to show up in Riyadh this week for the investment gathering. Kirill Dmitriev, the CEO of the state-run Russian Direct Investment Fund and a leading player in President Vladimir Putin’s push to engage Saudi Arabia, has encouraged business leaders in fields ranging from petrochemicals to diamonds to banking to attend.

“There’s more of a shift toward regional and Asian CEOs as the leadership was determined to hold the event at all costs,” said Ayham Kamel, head of Middle East and North Africa at Eurasia Group. “The Saudi leadership can walk away with an event that neither fails or succeeds, but in a few months, the most important impact on the country will still be a dip in international confidence in the economic reform program.”

Headwinds from world leaders skeptical of the Saudi account of Khashoggi’s death picked up on Sunday, with German Chancellor Angela Merkel signaling that exports of military equipment to the kingdom will be suspended while more information is unearthed.

Reflecting tensions in Washington over how to grapple with a top ally’s behavior, President Donald Trump said the Saudi narrative had been marked by “deception and lies,” while saying there was no proof of the prince’s involvement in Khashoggi’s killing. Treasury Secretary Steven Mnuchin, in Jerusalem on Sunday for the first stop of a Middle East swing that will include Riyadh, said it was premature to discuss sanctions, but has canceled his participation in the Saudi investment conference.

For two weeks, Saudi authorities had said Khashoggi, who moved to the U.S. last year for fear of being caught up in the wave of arrests sweeping the kingdom, had left the building. On Saturday, they acknowledged he was accidentally killed inside the building in a rogue operation. That account is dramatically different from that given by Turkish officials, who said privately that a Saudi hit team flew in to kill and then dismember him. According to the New York Times, some members of the group had ties to the Saudi crown prince.

The diplomatic crisis triggered by Khashoggi’s killing has also hurt Saudi Arabia’s plans to attract and retain international stock-market investors, who sold a net $1.1 billion in stocks last week.

Coming-out party

Last year’s so-called Future Investment Initiative – the first of its kind – gathered some of the finance world’s most influential people in a coming-out party of sorts for the kingdom’s Public Investment Fund. The prince announced plans for a $500 billion sci-fi city called Neom and said the country was returning to “moderate” Islam and intended to “eradicate” extremism.

Finance titans such as Blackstone Group LP’s Steve Schwarzman, former HSBC Holdings Plc CEO Stuart Gulliver and BlackRock’s Fink mingled with Saudi leaders as the PIF floated ambitions to become the world’s largest sovereign fund.

Blackstone and the PIF firmed up plans to invest in U.S. infrastructure, with the fund providing a commitment of up to $20 billion. In July, BlackRock received licenses to conduct arranging and advising activities in the kingdom’s securities business.

SoftBank commitment

SoftBank Group Corp. founder Masayoshi Son said he planned to invest in the new city and potentially acquire a “substantial” equity stake in state-controlled Saudi Electricity Co. Son remains one of the few business chiefs who hasn’t pulled out of this year’s event, though SoftBank Chief Operating Officer Marcelo Claure has reportedly decided against attending.

The PIF closed the 2017 gathering by unveiling plans to invest about $1 billion in Virgin Group’s space companies. Billionaire Richard Branson said he was suspending talks with the fund, calling Khashoggi’s disappearance a potential game-changer for companies doing business with Saudi Arabia.

While the final program and attendee list for this year’s meeting isn’t clear – event organizers have taken down a list of attendees from the website – a spokesman said the event is “moving ahead with an updated program built around the latest global business, investment and technology trends, featuring over 120 speakers and moderators, across more than 35 sessions over 3 days.”

Many banks are still sending delegations in the hopes of minimizing the damage to ties to the House of Saud. HSBC, Societe Generale SA and Credit Suisse Group AG planned to send senior investment bankers, even after their CEOs backed out.

“Saudi is too big and too important an economy for the Middle East and rest of the world, and hence is unlikely to be ignored by investors for too long a period,” said Aarthi Chandrasekaran, a financial analyst at Shuaa Capital PSC in Dubai. “While investors are possibly in a pause mode for now, they will eventually step in when the dust settles.”