Microsoft’s G42 deal puts UAE in America’s AI tent

The United Arab Emirates likes to think of itself as a sort of Switzerland of the Gulf. Microsoft’s (MSFT.O), opens new tab $1.5 billion stake in Abu Dhabi artificial intelligence company G42, announced opens new tab on Tuesday, shows the limits of remaining a neutral counterparty of the United States and China, especially when it comes to AI. While nominally a private sector deal, the main upshot is to shove the UAE firmly into the U.S. camp.

As part of Tuesday’s deal, Microsoft President Brad Smith will join the board of G42, and the $3 trillion group will get to sell a set proportion of cloud capacity to G42, a person familiar with the matter told Breakingviews. G42 in return can use its AI models on Microsoft’s platforms. But there’s an additional, political condition: G42 has to stop using Huawei telecom equipment, which the United States reckons the Chinese government employs for intelligence.

In some ways, China and the UAE have a close relationship – not least because the Middle Kingdom buys lots of Abu Dhabi oil. (...)