Saudis Want Fewer Weapons, More Disney in U.S. Business Talks

By Margherita Stancati and Ben Fritz 

LOS ANGELES -- Saudi Crown Prince Mohammed bin Salman has courted a slew of American tech and entertainment heavyweights to bring everything from data centers to cinemas to Saudi Arabia, part of his push to transform the country into a more open and dynamic society,

Over the past week, he has met top business executives -- from Amazon.com Inc.'s Jeff Bezos and Microsoft Corp.'s Satya Nadella to Walt Disney Co.'s Robert Iger.

In the midst of a nearly three-week tour of the U.S., he is on a mission to reshape a Saudi-U.S. business relationship that was long based on oil sales and military contracts. The prince wants to win foreign investment to build a new Saudi Arabia, one less dependent on oil, with a more vibrant, open economy.

"Our focus in the past was only on oil and gas and commercial activities" in sectors like defense, said Ahmed Khateeb, a senior Saudi official in charge of deals in both the defense and entertainment sectors. "But now we have expanded the relationship and started to talk about social change -- culture, entertainment and tourism."

Prince Mohammed even aims to bring Disney to an Arab kingdom that is home to Islam's holiest sites and best known for its austere religious practices. The outfits of Disney princesses wouldn't be permitted on the streets of Riyadh, where women are required to wear head-to-toe gowns known as abayas.

"Entertainment is the new oil for Saudi Arabia," Faisal Bafarat, chief executive at Saudi Arabia's entertainment authority, said on Wednesday, as the kingdom announced a series of new partnerships with U.S. companies.

Among them: AMC Entertainment Holdings Inc. said it would open Saudi Arabia's first movie theater in over three decades later this month.

Prince Mohammed, who is Saudi Arabia's day-to-day leader, has sought to project a softer image of the kingdom. He has become a patron of Saudi artists, whose work is being exhibited during his tour. He has in appeared in public wearing suits with no ties, and even stopped at a New York Starbucks for coffee with Michael Bloomberg.

But the kingdom remains one of the world's most conservative countries, and the opaque nature of a far-reaching corruption probe last year spooked the corporate world. The old image of Saudi Arabia is hard to overcome.

When President Donald Trump last month used colorful cardboard posters to illustrate the billions of dollars of military equipment the Saudis are buying from the U.S., Prince Mohammed, who sat next to him, looked visibly uncomfortable.

"It's peanuts for you," Mr. Trump told the prince, who shook his head and smiled.

Privately, many Saudis seethed over the president's comments, which they felt blunted the kingdom's message. "They think we are only about oil, military and camels," said a Saudi close to the official delegation.

To be sure, the bulk of Saudi business with the U.S. remains oil and weapons. Over the weekend, Saudi Arabia signed a $450 million joint venture with Boeing Co. to maintain and repair military aircraft in the kingdom, part of a broader plan to create over 40,000 domestic defense jobs by 2030.

Broadening Saudi Arabia's commercial ties with the West has become a top priority in the past two years since Prince Mohammed unveiled a plan to diversify its economy away from the oil reserves that built its wealth.

The kingdom is planning to publicly list its state oil giant, known as Aramco, to raise capital for investments in other sectors. At the same time, American shale-oil companies have vaulted U.S. crude output ahead of Saudi Arabia's production for the first time this year since the early 1990s, changing the economic relationship between the two countries.

Prince Mohammed's team is negotiating a stake in the world's largest talent agency, Endeavor LLC, and working on deals to build data centers with Amazon and Google's parent company Alphabet Inc. Saudi Arabia's sovereign-wealth fund has taken big stakes in tech companies like Uber Technologies Inc.

On Tuesday, Saudi officials showed up at Disney's offices with a once-unthinkable idea: a Disney presence in Saudi Arabia. They want Disney to be part of several entertainment hubs being planned in their country, according to people with knowledge of the matter.

Saudi Arabia "is keen in building a strategic partnership with these companies that include theme parks, resorts, live shows and everything in between," said a spokesman for Saudi Arabia's General Entertainment Authority, singling out Disney, Warner Bros. and Universal.

Disney has given no indication it will support the Saudi pitch.

"Like so many places in the world, they are interested in exploring the idea of having a Disney park," a Disney spokeswoman said before Tuesday's meeting. "They will be presenting some concepts and we will respectfully hear them out."

Saudi officials have also discussed film and television partnerships with top executives from Netflix Inc., Time Warner Inc.'s Warner Bros. and Comcast Corp.'s NBCUniversal, some of whom attended a dinner Monday for Prince Mohammed hosted by 21st Century Fox Inc. and News Corp. chairman Rupert Murdoch. News Corp. owns the Wall Street Journal.

Among the prominent businessmen and royals detained on undisclosed charges of corruption was Prince al-Waleed bin Talal, one of the world's richest men and a prominent Disney investor.

Prince al-Waleed, who bailed out the financially troubled Euro Disney resort in 2014, first approached the entertainment giant last year about a theme park in Saudi Arabia, but talks halted after his detention in early November, according to people familiar with the matter.

Prince al-Waleed, who has since been released and maintains his innocence, wasn't available for comment, a spokesperson said.

Saudi Arabia's finance minister, Mohammed al-Jadaan, who is traveling as part of the delegation, said would-be investors have nothing to worry about -- and that the corruption crackdown has created new opportunities for them.

"We are basically creating a level-playing field" for investors, Mr. Jadaan said.

--Benoit Faucon contributed to this article.

Write to Margherita Stancati at [e-mail] and Ben Fritz at [e-mail]

(END) Dow Jones Newswires

April 05, 2018 08:48 ET (12:48 GMT)

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