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Saudi Journalist's Disappearance Sends Chill Into Business Community

The Wall Street Journal. logoThe Wall Street Journal. 12/10/2018
a close up of Mohammad Bin Salman Al Saud wearing a hat © amir levy/Reuters

The Saudi crown prince’s plans to lure investors and transform his country’s economy face dire threats after the disappearance and alleged murder of a dissident writer at a Saudi consulate in Turkey.

Since Turkish officials blamed Saudi Arabia for the Oct. 2 disappearance of journalist Jamal Khashoggi, foreign investors have begun re-examining their relationship with Crown Prince Mohammed bin Salman and their participation in his plans to overhaul his country’s economy.

Some say they worry the 33-year-old crown prince, the country’s day-to-day ruler, has put the kingdom’s stability at risk by allegedly targeting a writer with deep connections in Washington, Europe and the Middle East. The Saudi government has denied any involvement in Mr. Khashoggi’s disappearance.

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Richard Branson, the British entrepreneur, said in a statement late Thursday on his Virgin Group website, that he was giving up two directorships related to Saudi tourism projects focused on the Red Sea, amid questions over Mr. Khashoggi’s fate.

He also said that, pending investigations into the journalist’s whereabouts, he would suspend talks with the country’s Public Investment Fund about its proposed investment in Mr. Branson’s Virgin Orbit and Virgin Galactic space ventures.

“What has reportedly happened in Turkey” to Mr. Khashoggi, Mr. Branson said, “if proved true, would clearly change the ability of any of us in the West to do business with the Saudi government.”

WASHINGTON, DC - OCTOBER 10: Michael Beer holds a poster during a rally about the disappearance of Washington Post journalist, Jamal Khashoggi outside the Embassy of Saudi Arabia on Wednesday October 10, 2018 in Washington, DC. Khashoggi disappeared after entering the Saudi Consulate in Instanbul. (Photo by Matt McClain/The Washington Post via Getty Images) © Getty WASHINGTON, DC - OCTOBER 10: Michael Beer holds a poster during a rally about the disappearance of Washington Post journalist, Jamal Khashoggi outside the Embassy of Saudi Arabia on Wednesday October 10, 2018 in Washington, DC. Khashoggi disappeared after entering the Saudi Consulate in Instanbul. (Photo by Matt McClain/The Washington Post via Getty Images)

Separately, former U.S. Energy Secretary Ernest Moniz this week suspended his work on Saudi Arabia’s new futuristic city, Neom, citing “deep concerns” over Mr. Khashoggi. Dan Doctoroff, the founder of Sidewalk Labs, Alphabet Inc.’s urban innovation company, also said he wouldn’t work on Neom, shortly after a Saudi government announcement that he would be on its board. And Sam Altman, a partner at startup investor Y Combinator, said: “I am suspending my involvement with the NEOM advisory board until the facts regarding Jamal Khashoggi’s disappearance are known.”

Neelie Kroes, another Neom board member and a former vice president of the European Commission, in an email Thursday said she, too, would suspend her role in the project “until more is known” on the journalist’s fate.

A business conference the kingdom hoped would renew investor optimism, dubbed a “Davos in the Desert,” is proving to be a test of nerves for foreign firms and executives.

Among the planned speakers for the Oct. 23-25 conference are Blackstone Group LP Chief Executive Stephen Schwarzman, JPMorgan Chase Chief Executive James Dimon and SoftBank Group founder Masayoshi Son. Treasury Secretary Steven Mnuchin is also scheduled to attend. Prince Mohammed promised in a Bloomberg interview that major business deals would be announced before and during the event in Riyadh.

The Blackstone Group Chairman & CEO Stephen A. Schwarzman © AP The Blackstone Group Chairman & CEO Stephen A. Schwarzman

Several media outlets and executives pulled out over Wednesday and Thursday, according to their representatives. The New York Times withdrew as a media sponsor of the event; the owner of the Los Angeles Times, Patrick Soon-Shiong, dropped out and no longer plans to speak; media executive Arianna Huffington, an advisory board member for the conference, no longer plans to attend; and Viacom CEO Bob Bakish has also decided not to attend, according to a Viacom spokesman..

ABB, the Swedish-Swiss technology company, said it was monitoring the fallout from Mr. Khashoggi’s disappearance before deciding whether to attend.

“There is no excuse to detain or harass journalists, and there should never be even a shred of suspicion that a country murdered a member of the press,” said Seth Bannon, the founding partner of Silicon Valley-based venture capital fund Fifty Years. “That there is here speaks volumes.”

Mr. Bannon said he would still attend the conference and give a speech, saying he has met Prince Mohammed and is “inclined to give him the benefit of the doubt that he’s doing the best he can.”

Representatives for Saudi Arabia’s Public Investment Fund, the conference organizer, didn’t respond to requests to comment.

The Saudi government has repeatedly denied any role in Mr. Khashoggi’s disappearance. Saudi officials say Mr. Khashoggi, who is engaged to a Turkish woman, went to the Istanbul consulate, gathered some documents and left without incident. His fiancée, who accompanied him to the consulate and waited outside for him, has said he never emerged.

Turkish officials say the Saudis sent a hit squad on a government-owned plane to Istanbul the day that Mr. Khashoggi went to the consulate. Turkish officials believe Mr. Khashoggi died in the consulate, though they have yet to detail their findings outside of leaks to the local media.

Video: Trump says US investigators are looking into missing Saudi journalist (Fox Business)

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Western leaders, including President Trump, have asked the Saudis for answers about Mr. Khashoggi, a pressure campaign that has raised the specter of sanctions being placed on Riyadh.

“The disappearance of Saudi journalist Jamal Khashoggi in Istanbul raises fresh questions about Crown Prince Mohammed bin Salman’s reputation as a reformer and political developments pose a growing threat to the economic outlook,” said Jason Tuvey, an economist at Capital Economics.

It marks a moment for executives to choose whether they want to be associated with Prince Mohammed, said Karen Young, resident scholar at the American Enterprise Institute, a Washington think tank. “For high-profile CEOs, this is not a good moment for photo ops,” she said.

Prince Mohammed rose from an obscure young prince to become Saudi Arabia’s day-to-day ruler with a plan to modernize his country’s society and foreign policy and diversify its oil-dependent economy. He has made popular moves, including allowing women to drive, opening the first cinemas in three decades and pumping up Saudis’ sense of national pride.

He promised to open up Saudi Arabia to foreign investment with ambitious plans to publicly list the state oil company, Saudi Aramco, invest billions in electric vehicles and solar power and build a $500-billion futuristic city that would turn Saudi Arabia into a 21st century innovation hub. But investor sentiment was already shaken following a series of disruptive moves for businesses. The kingdom severed diplomatic ties with Canada, blockaded Qatar, and launched an anticorruption campaign that rounded up Saudi businessmen and government officials in the Ritz-Carlton hotel last year. The Riyadh investor conference will be held at the same hotel. Local businesses were also put off by domestic measures like cuts to energy subsidies, a new value-added tax and restrictions on hiring foreign workers.

At the same time, the prince’s economic plans have faltered in some places. The Aramco IPO has been indefinitely delayed, and the kingdom is working to scale down its solar-power ambitions.

Foreign-direct investment in Saudi Arabia plunged to a 14-year low last year, though it has recovered somewhat this year. The Saudis have worked to turn around sentiment among foreign investors, creating billions of dollars in new funds to launch partnerships with international companies.

People hold signs during a protest at the Embassy of Saudi Arabia about the disappearance of Saudi journalist Jamal Khashoggi in Washington © AP People hold signs during a protest at the Embassy of Saudi Arabia about the disappearance of Saudi journalist Jamal Khashoggi in Washington

Mr. Khashoggi’s case represents a new level of risk for investors already wary of the country. “This kind of behavior is a strong deterrent for private investors,” said Gilbert Achcar, professor of development studies and international relations at SOAS University of London.

Rising oil prices are providing a cushion for Prince Mohammed, giving the government extra cash to inject into the economy after two years of austerity measures when oil prices had crashed.

Prince Mohammed will likely engage in a charm offensive when potential investors come to Riyadh in less than 10 days, analysts said.

“These people are supposed to be buying your story and there comes a time when the story becomes unpalatable and they don’t want to be part it,” said David Butter, an associate fellow in the Middle East and North Africa program at Chatham House, a London think tank.

Some businesses are still planning to keep Saudi ties going strong.

Nicolas Sarkozy, the former French president and a board member of Accor Hotels, privately met with Prince Mohammed in Riyadh on Wednesday as part of a long-planned trip, people familiar with the matter said. Accor is in talks with the Saudi government about several hotel projects, and its chief executive, Sebastien Bazin, plans to attend the Saudi investment conference.

Corrections & Amplifications The former French President Nicolas Sarkozy met with Crown Prince Mohammed bin Salmanin Riyadh on Wednesday. An earlier version of this article incorrectly said the date was Thursday. (Oct. 11, 2018)

Write to Rory Jonesat rory.jones@wsj.com and Margherita Stancatiat margherita.stancati@wsj.com

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