By Eric Vandenbroeck and co-workers

The Emerging Age of AI Diplomacy

In a vast conference room, below chandeliers and flashing lights, dozens of dancers waved fluorescent bars in an intricately choreographed routine. Green Matrix code rained down in the background on a screen that displayed skyscrapers soaring from a desert landscape. The world was witnessing the emergence of “a sublime and transcendent entity,” a narrator declared: artificial intelligence. As if to highlight AI’s transformative potential, a digital avatar—Artificial Superintelligence One—approached a young boy and together they began to sing John Lennon’s “Imagine.” The audience applauded enthusiastically. With that, the final day dawned on what one government minister in attendance described as the “world’s largest AI thought leadership event.”

This surreal display took place not in Palo Alto or Menlo Park but in Riyadh, Saudi Arabia, at the third edition of the city’s Global AI Summit, in September of this year. In a cavernous exhibition center next to the Ritz Carlton, where Crown Prince Mohammed bin Salman imprisoned hundreds of wealthy Saudis on charges of corruption in 2017, robots poured tea and mixed drinks. Officials in ankle-length white robes hailed Saudi Arabia’s progress on AI. American and Chinese technology companies pitched their products and announced memorandums of understanding with the government. Attendants distributed stickers that declared, “Data is the new oil.”

For Saudi Arabia and its neighbor, the United Arab Emirates (UAE), AI plays an increasingly central role in their attempts to transform their oil wealth into new economic models before the world transitions away from fossil fuels. For American AI companies, hungry for capital and energy, the two Gulf states and their sovereign wealth funds are tantalizing partners. And some policymakers in Washington see a once-in-a-generation opportunity to promise access to American computing power in a bid to lure the Gulf states away from China and deepen an anti-Iranian coalition in the Middle East.

They should temper their expectations. Saudi Arabia’s and the UAE’s economic and political relationships with China are more robust than ever, and that is unlikely to change. Although the Gulf states are eager for advanced AI chips that for now only the United States can provide, they also have strong and enduring incentives to hedge their bets, playing the major powers off against each other to extract concessions. When appropriate, the United States and its tech companies should cooperate with the Gulf states on AI. But they should do so within limits and with safeguards—and without deluding themselves that doing so will bring a lasting strategic realignment in the Gulf.

 

Bridging the Gulf

The two Gulf states’ interest in AI is not new, but it has intensified in recent months. Saudi Arabia plans to create a $40 billion fund to invest in AI and has set up Silicon Valley–inspired startup accelerators to entice coders to Riyadh. In 2019, the UAE launched the world’s first university dedicated to AI, and since 2021, the number of AI workers in the country has quadrupled, according to government figures. The UAE has also released a series of open-source large language models that it claims rival those of Google and Meta, and earlier this year it launched an investment firm focused on AI and semiconductors that could surpass $100 billion in assets under management.

U.S. technology companies have eagerly reciprocated this interest. The infrastructure required to train the latest generation of AI models uses vast amounts of energy, capital, and land—three things the Gulf states have in abundance. OpenAI chief executive Sam Altman has talked with investors in the UAE about multitrillion-dollar investments in chips and data centers, and state-backed Emirati firms participated in OpenAI’s recent round of fundraising. Top executives at the semiconductor giants Taiwan Semiconductor Manufacturing Company and Samsung have floated the idea of building factories in the UAE. Amazon announced a $5.3 billion investment for data centers in Saudi Arabia earlier this year, and the AI startup Groq has partnered with Saudi Arabia’s state-owned oil giant Aramco to build a huge AI data center in the country. Microsoft, meanwhile, has invested $1.5 billion in the UAE’s leading tech company, G42, in a deal that will help Microsoft expand its business in emerging economies and give G42 access to Microsoft's computing power.

Where American AI companies see a commercial opportunity, some policymakers in Washington see a strategic one: access to U.S. computing power could be an important carrot to draw countries away from a rapidly expanding Chinese technological ecosystem. The United States wants to shore up its relationship with the world’s largest oil exporters and deepen an anti-Iranian coalition in the Middle East. Both Saudi Arabia and the UAE are increasingly influential in the region and beyond—in 2023, for example, the UAE announced $45 billion in investments in Africa, far surpassing Chinese expenditures there that year. It is in Washington’s interests that Gulf actors invest their vast sums of capital in U.S. technology companies rather than Chinese ones.

Washington has a good deal of leverage over these technological partnerships because exporting the advanced chips used in AI data centers requires licenses from the U.S. government, which has been slow-walking approvals for large-scale sales for months while it debates what conditions to attach. If the U.S. government doesn’t greenlight these licenses, some fear, China might soon offer an alternative. At the AI summit in Riyadh, the subject of U.S. export controls was a regular conversation starter. Google and Microsoft had the most prominent booths by the entrance, but the Chinese firms Alibaba and Huawei were not far away, their booths stationed in an adjoining room around the corner—a tangible reminder of the Chinese options that may be available to the Gulf states if Washington adopts a more restrictive approach.

 

Hedging Their Bets

Even though the United States has an economic and geopolitical opportunity in the Gulf, there are also significant risks to offshoring major clusters of advanced AI chips to authoritarian regimes with elaborate surveillance systems, an appetite for military adventurism, and expanding ties to China. Lawmakers and Pentagon officials have expressed concern that Chinese companies linked to the People’s Liberation Army could access those chips through data centers in the Middle East as a means of skirting U.S. export controls that have sought to restrict China’s access to cutting-edge AI technology.

More broadly, if AI systems soon gain the potential to drive explosions in economic growth, design new synthetic bioweapons, or develop impressive new cyber-capabilities, they may disrupt the global balance of power. If that proves to be the case, then the infrastructure that underpins frontier AI systems—in particular, the massive data centers where these models will be trained and hosted—should not be offshored lightly. As the former OpenAI researcher Leopold Aschenbrenner put it in a widely circulated memo: “Do we want the infrastructure for the [next] Manhattan Project to be controlled by some capricious Middle Eastern dictatorship?”

The UAE in particular appears to have made serious efforts to assuage these concerns, going out of its way to portray itself as a responsible steward of American AI technology. According to public reporting, the UAE has pledged that it will lock down its data centers, stripping them of Chinese hardware that might have backdoors, screening customers and workers, and monitoring how buyers use their chips. Under U.S. pressure, G42, which is chaired by the Emirati national security adviser Sheikh Tahnoon bin Zayed, divested from Chinese firms and stripped out its Huawei technology as part of its deal with Microsoft. Last month, partly in response to these efforts, the U.S. Department of Commerce published a rule that could ease the shipment of AI chips to the Middle East.

The UAE has declared that it seeks a “marriage” with the United States founded on AI. But U.S. policymakers should understand that any such marriage is unlikely to be monogamous. Saudi Arabia and the UAE both have powerful incentives to hedge their bets, given American domestic political instability and the enduring, if eternally frustrated, U.S. desire to “pivot” to Asia. China is Saudi Arabia’s largest oil customer and trading partner and the UAE’s top non-oil trading partner. It does not hector either state about its human rights abuses or regional activities. Chinese-made drones are among the UAE’s tools of choice for its covert campaigns in Sudan, and earlier this year the Chinese and Emirati air forces held joint exercises in Xinjiang, of all places. And even though G42 may have divested from Chinese firms, a new Abu Dhabi investment vehicle has taken over the management of G42’s Chinese-focused fund, and, like G42, the new vehicle is overseen by the Emirati national security adviser. At another conference in Abu Dhabi last month, Chinese and Emirati officials alike described the last few years as the “golden era” of Chinese-Emirati cooperation.

 

Make Yourself Comfortable

Even in the face of such hedging, the United States should not impose a blanket ban on all sales of advanced AI chips to the Gulf. Many, if not most, emerging powers believe that they can successfully balance relationships with both the United States and China, and U.S. policymakers should generally restrain themselves from pressuring regional powers into making zero-sum choices. At times, U.S. policymakers will have to become comfortable operating in regions and sectors in which U.S. and Chinese influence overlap. And it would not serve U.S. interests if Washington were to drive billions of dollars of Gulf funds toward projects that accelerate China’s technological progress.

U.S. policymakers should thus move forward with their negotiations with the Gulf states over chip exports. But they should do so without any illusions about the regimes they are working with, the risks involved, or the chances that such collaboration will help reshape the political order of the Middle East. The Gulf states will not cut off ties with China except in narrowly scoped areas, and even then such decisions will always be open to renegotiation. Without serious efforts at mitigation in the form of sustained investments in both physical and cybersecurity, building massive data centers in non-allied countries increases the risks of intellectual property theft and misuse, especially if those centers host the weights of frontier models (the parameters that encode the core intelligence of an AI system). The United States will need to devote resources to monitor—and enforce—compliance for any deals it reaches. In the absence of independent verification, the United States should treat Emirati and Saudi assurances about their stewardship of U.S. technology with skepticism. And U.S. policymakers should strongly encourage American tech companies to build their largest and most advanced facilities in the United States.

In this emerging era of AI diplomacy, Washington will face similar challenges in one setting after another: it will have to control the proliferation of technologies that might have critical national security implications without kneecapping American corporations or driving potential partners into the arms of China. In their negotiations with the Gulf, U.S. policymakers should make sure that they set the right precedents.

 

 

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