Arabian angst

Kaeser cancels Saudi trip despite Siemens' ties to conference

future investment initiative conference, saudi arabia
The guest list is shrinking for the Future Investment Initiative conference in Saudi Arabia. Source: DPA

Siemens CEO Joe Kaeser agonized for days before announcing on Monday he would not be attending the Future Investment Initiative conference in Saudi Arabia because of uncertainty surrounding the death of journalist Jamal Khashoggi, a prominent critic of the Saudi regime.

It was a difficult decision, Mr. Kaeser said, because of the long and close commercial relationships between Siemens and the kingdom. Mr. Kaeser is on the advisory council for the conference, and Siemens is a sponsor.

But a number of prominent business and government officials had already pulled out of the conference promoted by Crown Prince Mohammed bin Salman as the launch pad for building Saudi Arabia’s future.

CEOs from Deutsche Bank, HSBC, JPMorgan and other banks announced their withdrawals over the past week. On Friday, Ulrich Spiesshofer, CEO of Siemens’ engineering rival ABB, said he would not be attending.

Backlash put pressure on Siemens CEO

Pressure within Germany for Mr. Kaeser to withdraw grew over the weekend. Leaders of both partners in the coalition, the Christian Democrats and Social Democrats, urged him to cancel.

Also over the weekend, Chancellor Angela Merkel said all arms exports to Saudi Arabia were being put on hold. A government spokesman clarified on Monday the even those already approved were under review until the journalist’s death was explained.

After first denying that Mr. Khashoggi had been killed three weeks ago when he went to the Saudi consulate in Istanbul for legal papers, Saudi authorities acknowledged last week that he had been killed but that it was an accident.

Siemens closely intertwined with Saudis

Mr. Kaeser’s dilemma was particularly complicated because Siemens is trying to land some of the hundreds of millions in contracts the kingdom is dispensing for its ambitious growth.

German bosses are also in a bind because of the recently thawed relations with Saudi Arabia. In November 2016, then-foreign minister Sigmar Gabriel condemned Saudi “adventurism” in Lebanon and Yemen. Riyadh, annoyed, withdrew its ambassador in 2017, and German businesses came to suspect a de facto freeze out from lucrative contracts. Only 10 months later, in September of this year, did the countries agree to normalize relations.

There are business strong ties between Germany and Saudi Arabia: Mr. Kaeser’s predecessor at Siemens is chief executive of the crown prince’s plan to raise a new modern city out of the desert. Klaus Kleinfeld has become a close aide, among those helicoptered at night to the prince’s luxury yacht.

saudi arabia, jamal khashoggi, siemens kaeser withdraws from conference
Source: AFP

An ex-manager of another German arms exporter, Andreas Schwer, is head of the newly founded Saudi Arabian Military Industries after years on the executive board of Rheinmetall. German arms exporters are seeking clarification from the chancellor’s office regarding the export stop. They argue that the legal principle of legitimate expectation should cover exports already approved.

Saudi sovereign fund has become influential

Saudi Arabia is an important market for German exporters, but the kingdom has also become an influential investor through sizable stakes taken by the Public Investment Fund, the world’s largest, with assets of $2 trillion.

The Saudi fund, for instance, has committed $45 billion to Masayoshi Son’s Softbank Vision Fund to help fund technology startups. But a Saudi connection has now become a liability. Softbank shares have lost 18 percent since the beginning of October.

The only alternative for Mr. Kaeser and other CEOs would have been to attend the conference and confront the Saudis with their questions about Mr. Khashoggi’s fate. Standing up for the West’s commitment to freedom and democracy would have been an acceptable way to attend.

In a lengthy explanation on LinkedIn, Mr. Kaeser said he considered that option, describing it as the “the most courageous one — and the honest one.” It would have honored Siemens’ partners and customers in Saudi Arabia, its 2,000 employees and the 33 million Saudi citizens who had no part in the killing, he said.

In the end, Mr. Kaeser decided not to go. “It’s the cleanest decision but not the most courageous one,” he said. For all Siemens’ history of supporting Saudi Arabia, he said, “For now, the truth must be found and justice must be served.”

Axel Höpner covers companies for Handelsblatt in Munich. Nicole Bastian is foreign editor and Thomas Sigmund is Berlin bureau chief. Darrell Delamaide adapted this article into English for Handelsblatt Global. To contact the authors: hoepner@handelsblatt.com, bastian@handelsblatt.com, and sigmund@handelsblatt.com.

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