How the Private Sector Supports Authoritarians in the Arab World

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by Charles W. Dunne

When the global resilience of authoritarianism and its causes are considered, the role played by governments, leaders, and international organizations and their policies in confronting or abetting dictatorships worldwide is often the focus of discussion. President Trump’s apparent affinity for autocrats, for example, has frequently been linked to the recent success of populist strongmen worldwide. In fact, there is evidence to suggest many of the globe’s authoritarians look to him as an inspiration.

But it would be a mistake to focus on politicians and governments as the only agents capable of making or breaking authoritarian regimes. Beneath the surface of official policies, democracy promotion strategies, and international human rights resolutions, nongovernmental actors have a major influence on the persistence of global authoritarianism. In particular, the international private sector has succored authoritarian regimes for decades, providing investments, arms, advice, technology, and lobbying power that help keep many dictatorial regimes afloat and shield them from the consequences of their domestic abuses and occasional international adventurism. Together, international corporations and repressive regimes in the Middle East comprise a sort of “authoritarian-industrial complex” that bolsters the political status quo in the region, helps governments resist internal pressure for change, and incentivizes external powers to prefer the apparent stability authoritarianism engenders over the messy unpredictability of free societies and accountable governance.

The international private sector has succored authoritarian regimes for decades, providing investments, arms, advice, technology, and lobbying power that help keep many dictatorial regimes afloat and shield them from the consequences of their domestic abuses and occasional international adventurism.

Bolstering the Authoritarian Regime

International corporations help bolster the authoritarian status quo that prevails in most of the Arab region through several key elements: arms sales, security and censorship technology, expertise and dual-use knowhow, willing acquiescence to repressive governance, and political influence, both overt and implied. And, always, money.

Arms Sales: Supporting Interventions Abroad and Security Needs at Home. Arms exports to the Middle East doubled over the last ten years, according to a 2017 report by the Stockholm International Peace Research Institute, with the United States leading the way. By the end of 2017 the United States accounted for 34 percent of global arms exports (58 percent higher than Russia, the second leading exporter), with nearly half (49 percent) of total US exports headed for the Middle East. The top five customers for US defense articles in the Middle East are, in order, Saudi Arabia, Egypt, Israel, Iraq, and the United Arab Emirates.

The vast influx of arms has helped equip US allies, especially Egypt, Jordan, and the Gulf states, to modernize their forces and achieve a certain degree of interoperability with the United States and with each other, which is useful for joint operations of various kinds, combating terrorism more effectively, and deterring Iran. It has also, however, equipped these states to conduct unwise adventures at home and repression abroad.

Following are some cases in point. In Yemen, a Saudi-led coalition has prosecuted a conflict for nearly five years that has resulted in the world’s worst humanitarian crisis, and numerous attacks have caused high civilian death tolls inflicted with US-supplied weapons. Last October the European Parliament approved a nonbinding resolution calling on member states to impose a boycott on arms sales to Saudi Arabia because of the Khashoggi killing, but it is unlikely such a general ban has any chance of being adopted. In Egypt’s Sinai peninsula, the Egyptian army has been pressing its campaign to destroy the “Sinai Province” of the Islamic State, utilizing heavy weapons, cluster munitions, and air power provided through the $1.3 billion US military assistance program. (The United States is not alone in this regard; many EU states have continued to equip Egypt with arms and police equipment supposedly banned by EU policy since the 2013 Rabaa massacre.) Arms sales to Bahrain likewise became controversial after the crackdown on the so-called Pearl Revolution of 2011-14, in which disenfranchised Shia citizens demanded greater political freedoms. Allegations arose that US weapons were being used against unarmed demonstrators.

American arms sales to the Middle East serve an important US national security purpose. But lack of rigorous oversight of equipment end-use has permitted abuses that help regimes maintain internal security to the detriment of human rights.

According to industry analysts, the homeland security market in the region is projected to grow 15.5 percent annually through 2022, with the greatest growth expected to come in the Gulf region.

Internal Security: A Big, and Growing, Business. Like the arms market, the internal security needs of the Middle East are a big business, and it is poised to get bigger. According to industry analysts, the homeland security market in the region is projected to grow 15.5 percent annually through 2022, with the greatest growth expected to come in the Gulf region. Saudi Arabia and the UAE are the biggest buyers in this market. Internal security technology remained the top seller, with Saudi Arabia representing 45 percent of the market in terms of revenue (as of 2017), followed by the Emirates with a 16.6 percent share.

Many of the sales involve technology and systems with specific applications to enforcement of regime repression. The United Kingdom, for example, has approved the sale of over $40 million in spyware and other surveillance equipment to a variety of Middle Eastern countries since 2015, despite legal prohibitions under the 2008 British Export Controls Act barring such sales to countries where there is a substantial risk of internal repression. BAE, the largest UK arms exporter, sold surveillance technology to Saudi Arabia, UAE, Oman, Qatar, Algeria, and Morocco, spurring security concerns (if not human rights concerns) in Whitehall.

The repressive regime of Bashar al-Assad in Syria has been an important customer, too; several Western European firms supplied the regime with tens of millions of dollars’ worth of surveillance equipment and technology in the lead-up to the Arab Spring and the Syrian revolution as part of an official project to build a “Central Monitoring System for Public Data Network Services and Internet.” This effort provided the regime the capability to monitor all Internet-based communication and web searches, including email, chat room discussions, Voice over IP (VoIP) calls, instant messaging, Virtual Private Networks, and other web-based applications, and to censor online content, a capability it put to full use to spy on and target activists and regime opponents.

Saudi Arabia is another major buyer of surveillance technology; it is an especially attractive buyer in part because of its interest in building high-tech cities from scratch, where the technology can be built right into the infrastructure and thus tested on an industrial scale. Riyadh also has the deep pockets to pay for it all. The UK firm Hugslock and the American company Gatekeeper Intelligent Security are among the firms marketing high-tech surveillance systems to the kingdom, including sophisticated facial recognition equipment and other detection devices. (The UAE is another leading Gulf customer of the companies.) Not to be outdone, the Israeli firm NSO Group—which provides, among other things, spyware aimed at unlocking the iPhone—has sold equipment to the Saudis which has been used to spy on dissidents overseas, including at least two associates of the slain Saudi journalist Jamal Khashoggi.

Saudi Arabia is another major buyer of surveillance technology; it is an especially attractive buyer in part because of its interest in building high-tech cities from scratch, where the technology can be built right into the infrastructure and thus tested on an industrial scale.

While human rights activists are alarmed by the largely unfettered provision of surveillance technology to repressive regimes in the region, up to now little has been (and can be) done to stop the transfers, which are by and large permissible under EU and American law. In January 2018, the European Parliament passed tighter rules on the export of surveillance technology because of concerns involving the Middle East, but its effectiveness remains to be seen. Lawsuits intended to stop the transfers have been filed in several European countries by affected individuals and human rights groups. In this regard the United States has lagged behind Europe, where many countries, consistent with their undertakings under the Wassenaar Arrangement, have placed restrictions on the export of this technology. The United States has pressed for exemptions.

Free Trade and Free Investment Don’t Necessarily Support Freedom; They Sometimes Produce Its Opposite. “The murder of Jamal Khashoggi in the Saudi consulate in Istanbul was utterly unacceptable. But what do you do? What part do you play in the process of economic and social change?” With these words, Morgan Stanley’s chairman and chief executive James Gorman, speaking at the World Economic Forum in Davos on January 24, absolved corporate interests of any need to evince concern about egregious human rights abuses or take them into account when plotting business strategy.

Concern for the bottom line over government repression is nothing new, and the Middle East remains a very attractive market. Upwards of $2 trillion worth of projects in a wide variety of fields are now being planned in the Gulf alone, with construction, transport, and power leading the way; healthcare, education, and technology are also major growth sectors. Energy projects remain poised for strong expansion as well, with an estimated $1 trillion worth of existing projects and new development expected to come online by 2023. And, as noted above, arms sales to the region remain a multibillion-dollar industry, with more growth expected as unrest continues in Syria, Iraq, Yemen, Egypt, and elsewhere, while the possibility of an American-led confrontation with Iran remains an ever-present worry. The United States has a major slice of the pie: US direct investment in the Middle East totaled $69.13 billion in 2017 and has shown consistently dramatic growth since the turn of the 21st century, wars and revolutions notwithstanding.

International businesses often take into account the possibility of reputational damage if they become too closely involved with bad actors; however, they have demonstrated reluctance to risk their ongoing business relationships in the Middle East.

International businesses often take into account the possibility of reputational damage if they become too closely involved with bad actors; however, they have demonstrated reluctance to risk their ongoing business relationships in the Middle East by vocally opposing objectionable conduct of governments whose behavior has outraged the human rights community. After Khashoggi’s murder last October, for instance, a number of prominent international business executives bowed out of Saudi Arabia’s Future Investment Initiative (“Davos in the Desert”) that month, but many of the companies involved were represented at a lower level and still others attended anyway.

The ambivalent reaction to the Saudi investment conference was something of an aberration; more typically, corporations have quietly argued behind the scenes for business as usual with repressive regimes. In the United States, their appeals are not so much based on specific foreign policy recommendations as on reminding American policymakers, including the White House and Congress, of the money and jobs flowing into US communities and congressional districts from overseas business deals. In addition to reminding politicians of the value of free flowing commercial deals, those in the defense industries, backed by tens of millions of dollars in lobbying campaigns and star-studded boards of directors, stress their role in promoting “regional stability” and combatting terrorism. Their implicit message is that US national security interests (and economic growth) are best served by maintaining or improving relations with regional actors regardless of their record on political freedoms and human rights.

The Trump administration has certainly taken this position to heart, and the president’s stance on arms sales is a prime example. In April 2018, the administration made a simple change to President Obama’s Conventional Arms Transfer Policy, which had forbidden arms transfers to countries committing “attacks directed against civilian objects or civilians.” The new wording of the policy prohibited sales only to countries that undertake such attacks “intentionally.” Human rights advocates criticized the change as making it more difficult to successfully oppose arms sales to countries with poor human rights records.

The president has extolled US arms sales to Saudi Arabia for their economic benefits to the United States, explaining his strong reluctance to upend them on the basis of anger over the Khashoggi killing.

The administration would most likely agree. The president has extolled US arms sales to Saudi Arabia for their economic benefits to the United States, explaining his strong reluctance to upend them on the basis of anger over the Khashoggi killing. He noted in October that “I don’t like stopping massive amounts of money that is being poured into our country. I know they [Congress] are talking about different kinds of sanctions, but [the Saudis] are spending $110 billion on military equipment and on things that create jobs for this country. I don’t like the concept of stopping an investment of $110 billion into the United States.” Trump’s comments strongly echoed similar assertions about the economic value of arms sales to Saudi Arabia he made during his visit to Riyadh a year earlier, a visit during which he pointedly downplayed human rights concerns as an element of US foreign policy toward the region.

Investment flows may work their subtle will in the opposite direction, too. For example, the United States is the top target for Middle East investors in the commercial real estate market. Saudi Arabia alone has become one of the largest investors in America’s Silicon Valley, buying into numerous startups and existing firms to the tune of billions of dollars through a variety of funds, including the Kingdom’s sovereign wealth Public Investment Fund, which is planned to reach $2 trillion in value by 2030. As capital flows into the United States and other countries from such investments, political influence is likely to follow.

International Consulting: Technocratic Expertise in the Service of Authoritarian Ends. In October 2018 the international consulting firm McKinsey issued a statement saying it was “horrified” after information emerged that a report it prepared for the Saudi government in 2015 on public reaction to economic austerity measures may have been used to identify, and arrest or shut down, leading government critics on Twitter. The moves against these individuals were a small part of a highly sophisticated and pervasive online effort to discredit or silence critics, including Khashoggi. McKinsey’s statement noted that “we have seen no evidence to suggest that [the report] was misused.” In fact, the McKinsey report was most likely used exactly as intended, if not the way McKinsey thought. The episode highlights a problem with the international consulting business in general: the lack of accountability for the use or misuse of the intellectual product.

It is a problem that pervades the international consulting industry in general, and certainly in the Arab region. According to the University of Maryland’s Calvert W. Jones, foreign consultants in the Gulf rapidly become co-opted by “local incentive structures characteristic of authoritarian states,” subject to the occasionally ruthless whims of their employers. As a result of this (and their own self-perception as neutral technocrats), they quickly “adapt to the incentives: They rarely say anything negative, let alone criticize human-rights abuses (which they see as having little to do with their own work).”

With slight control over the end-use of the information and advice they provide, and a studious disregard for the authoritarian politics of the regimes to which they provide it, international consulting firms tend to shun responsibility for any abuses they may inadvertently support.

With slight control over the end-use of the information and advice they provide, and a studious disregard for the authoritarian politics of the regimes to which they provide it, international consulting firms tend to shun responsibility for any abuses they may inadvertently support. As the author Duff McDonald, speaking of McKinsey business practices, told The New Yorker, “they take no responsibility for the result. They are saying to the client, ‘You can have all the credit you want, but you cannot push a bad outcome on us’.”

Helping State Censors Do Their Job. In late December Netflix abruptly pulled an episode of its stand-up comedy series, “Patriot Act With Hasan Minhaj,” from the lineup available to stream in Saudi Arabia. The episode was sharply critical of Saudi Arabian Crown Prince Mohammed bin Salman and his alleged involvement in the Khashoggi killing, as well as of American ties to the Kingdom. Netflix acted after an official request from Saudi Arabia’s Communications and Information Technology Commission, which said the episode violated Saudi cybercrime law, which bans “material impinging on public order, religious values, public morals, and privacy, through the information network or computers.” Netflix issued a statement acknowledging that it “removed this episode only in Saudi Arabia after we had received a valid legal request —and to comply with local law,” but that wasn’t enough to mollify critics. Netflix’s cooperation with the Saudi censorship regime drew immediate condemnation from The Washington Post, Amnesty International, and others.

The incident highlights a subtle but pervasive problem: corporate collusion with authoritarian states to suppress free expression and unpopular views. In 2017, Snapchat removed Al Jazeera’s stories and video from the Saudi Arabian version of its app, prompting the Qatari-owned media company to complain that the US firm’s “alarming” move could encourage countries to silence dissent by using their clout with social media and content distributors. Twitter closed the account of prominent Egyptian activist Wael Abbas, responding to an online campaign against him likely instigated by Egypt’s government and its army of online trolls. This tactic has been utilized against other Egyptian social media users as well, a fact of which President Abdel-Fatah el-Sisi boasted in 2016. Further, many countries employ vague or excessively legalistic language to suppress online expression; Egypt, Jordan, Saudi Arabia, and Tunisia—an electoral democracy—all use various forms of law, from statutes prohibiting demonstrations to anti-terrorism laws and defamation regulations, to crack down on cyber speech. Foreign companies operating in their electronic space may be asked, or obliged, to go along, as was the case with Netflix.

Cooperation with the architecture of censorship goes beyond complying with cybercrime laws; it often extends to providing regional countries with the technology to monitor and remove online web content themselves.

Cooperation with the architecture of censorship goes beyond complying with cybercrime laws; it often extends to providing regional countries with the technology to monitor and remove online web content themselves. Companies such as McAfee, Netsweeper, and Websense have been accused of selling technology to enable authorities to block online political, religious, historical, cultural, and other content deemed sensitive by Arab governments. Consumers of such technology have included Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, Sudan, Tunisia, the UAE, and Yemen. And it is not just western corporations that are turning a profit; Russian and Chinese companies have emerged as big players in the internet surveillance market, including in the Middle East.

Changing the Game Plan: How to Respond

Western-based international corporations’ chief fault is not that they necessarily favor authoritarianism from an ideological standpoint, but that market imperatives and responsibilities toward shareholders lead to a certain political agnosticism that has advantaged authoritarian governments. The good news is that it is possible to re-incentivize corporations to change their behavior. Governments, shareholders, and the general public have the means to help reframe corporations’ perception of the bottom line.

In the United States, there are strategies to help. The Trump administration, in cooperation with Congress, has been considering tightening export controls on artificial intelligence and other products, with an eye to blunting China’s efforts to achieve primacy in vital technology fields. Specific controls under US law should also be reviewed and strengthened in order to prevent large-scale tech transfers to regimes that may misuse certain technologies for internal repression; the extensive network of US strategic export controls furnishes many tools that can be utilized in this regard. Stricter adherence to the Wassenaar Arrangement—essentially a voluntary pact—and other legal agreements to inhibit technology sales to (and by) repressive regimes would be useful and largely in keeping with bipartisan priorities established in both Democratic and Republican administrations.

Arms transfers constitute another area that deserves fuller scrutiny, especially from Congress. Legislators are now considering tighter controls on arms sales to Saudi Arabia due to its role in the Yemen war. This is a welcome development. But broader legal restrictions remain on the books prohibiting arm sales to military units that abuse human rights. Enforcing the Leahy Law, for instance, would go a long way to put repressive regimes in the Arab world, and their US corporate suppliers, on notice that concern for human rights will remain a key consideration in licensing decisions.

Improving corporate governance, a growing concern of investors, implicitly encourages the maintenance of a good business reputation, which can be leveraged to take into account human rights concerns in international business dealings.

Corporations also are not immune to pressure for change emanating from stockholders and the general public. For example, “ethical investing” is a significant phenomenon with a real bottom-line effect; according to The Wall Street Journal, over the last three years $20 billion flowed into so-called sustainable equity funds in the United States, which invest with a social, political, or environmental purpose in mind—an evident reaction to the 2016 presidential election and its runup. This represents a 25 percent increase from 2014, and inflows in this category significantly outstrip those into traditional mutual funds. Saudi Arabia has been affected by growing pressures to divest from its stock market due to concerns about its behavior, with foreign investors dumping a little more than $1 billion in Saudi stocks in one week of October—among the biggest selloffs since the Kingdom admitted foreign investors in 2015. Improving corporate governance, a growing concern of investors, implicitly encourages the maintenance of a good business reputation, which can be leveraged to take into account human rights concerns in international business dealings.

The private sector has not always acted as a good global citizen. There are certainly many examples where it has not. But corporations are not, in the end, entirely unaccountable. By means of a variety of actions—whether driven by governments, investors, or public opinion—the private sector can be encouraged to do more to support free societies and free peoples.

Charles W. Dunne is a non-resident fellow at Arab Center Washington DC. To learn more about him and read his previous publications click here. Reprinted, with permission, from the Arab Center Washington DC.

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