Tesla-Saudi deal may spur national security scrutiny

Mr Elon Musk said earlier that Saudi overtures made him confident about securing funding to buy Tesla.
Mr Elon Musk said earlier that Saudi overtures made him confident about securing funding to buy Tesla.

WASHINGTON • Tesla chief executive Elon Musk's idea of taking the company private faces risks beyond the financial and disclosure-related kind. Saudi Arabia's help in a buyout could spur national security scrutiny under the newly expanded powers of the Committee on Foreign Investment in the United States (CFIUS).

Mr Musk had earlier said that Saudi investment overtures made him confident he could secure funding to buy the US$60 billion (S$82 billion) Tesla.

The same day, US President Donald Trump signed into law a Bill that overhauled the CFIUS, which is led by the Treasury Department. The committee reviews overseas investments in US companies for national-security concerns and can block deals or force divestitures.

Its increased authority allows CFIUS to examine non-controlling investments in critical technology. Because the committee still has to write new rules, it's unclear whether Tesla would fall into that category.

If the Saudi Public Investment Fund (PIF) were to take a majority stake, it would draw a CFIUS review regardless - though that's not the likelihood. Still, the carmaker is known as an innovator and owns advanced battery technology.

Trump officials have also expressed concern about China's Made in 2025 programme, which includes electric vehicles, perhaps increasing sensitivities about even minority stakes in US EV proponents.

Such considerations help explain why Saudi's PIF has been raising its lobbying game. It hired law firm Akin Gump to advise on CFIUS matters, said a March 8 filing with the Justice Department. The previous day, virtual-reality start-up Magic Leap said it had raised US$400 million from the fund - although the 7 per cent stake would not have drawn CFIUS scrutiny at that time.

Another possible hiccup is Congress. In 2006, a state-owned Dubai company obtained CFIUS approval to manage operations at six US ports but faced political opposition, forcing it to drop the deal. A potential Saudi-Tesla deal has not yet drawn similar scrutiny, but that could change once lawmakers return to Washington in September.

Saudi Arabia has its share of critics, too. In 2016, the kingdom alienated many politicians with its opposition to a Bill allowing families of the victims of the Sept 11, 2001 attacks to sue the nation for its alleged involvement. It all adds up to one more uncertainty for Mr Musk's convoluted plans.

REUTERS

A version of this article appeared in the print edition of The Straits Times on August 20, 2018, with the headline 'Tesla-Saudi deal may spur national security scrutiny'. Print Edition | Subscribe