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US-UAE AI Cooperation: Microsoft Deal Squeezes Out China’s Influence on G42

US-UAE AI Cooperation

Microsoft reached an AI agreement with the UAE G42, and US diplomatic mediation forced Beijing’s Middle East forces away?

WASHINGTON — G42, a technology giant based in the United Arab Emirates, has agreed to terminate its business cooperation with China under the mediation of the U.S. government. In exchange, G42 will collaborate with U.S. Microsoft on artificial intelligence technology, with Microsoft investing $1.5 billion in G42 and providing access to its Azure cloud computing service.

This move is seen as a win-win for both the U.S. and UAE in enhancing their strategic AI capabilities while also thwarting China’s efforts to bypass U.S. technology export controls. The partnership signifies a strengthening of ties between the U.S. and UAE in the field of AI technology, as the UAE looks to transition its economy towards emerging technology fields like AI.

Key Concepts

  • G42 terminates business cooperation with China under U.S. government mediation.
  • G42 partners with Microsoft on AI technology, cutting ties with Huawei and China.
  • UAE and Saudi Arabia shift focus to AI technology for economic growth.
  • G42’s partnership with Microsoft strengthens U.S. AI capabilities globally.
  • Concerns were raised about G42’s ties to China, including the CEO’s background and business dealings.
  • The CIA is monitoring G42’s CEO for potential ties to the Chinese government and military.
  • G42’s investments in Chinese companies and collaboration with Huawei and BGI raise suspicions.
  • G42 agrees to divest from Chinese business and comply with regulations under U.S. pressure.
  • Analysts believe U.S. pressure has been effective in ensuring G42 cuts off ties with China.
  • The G42 CEO’s attendance at the Chinese Government Friendship Award ceremony in the UAE raises questions.

Under the mediation of the U.S. government, the United Arab Emirates technology giant G42 has agreed to terminate business cooperation with China in exchange for technical cooperation with the U.S. Microsoft in the field of artificial intelligence (AI).

Although the outside world has been worried that US technology export control to China may be broken by Beijing through a third country, the cooperation arrangement between Microsoft and G42 shows that the United States is trying to thwart China’s efforts.

Chinese content deal to squeeze out G42 signals win-win for U.S.-UAE technology cooperation

Microsoft Corporation of the United States announced on Tuesday (April 16) that it has reached an artificial intelligence cooperation agreement with G42, a wealthy UAE technology group. Microsoft invested US$1.5 billion in G42 and authorized G42 to use Microsoft’s Azure cloud computing service, provided that G42 must remove China’s Huawei telecommunications equipment from the system and terminate many business cooperation with China.

This agreement is an expansion of the existing partnership between Microsoft and G42. Under the agreement, Microsoft President Brad Smith will gain a seat on G42’s board of directors.

The cooperation agreement between Microsoft and G42 is regarded as a “win-win” move for the United States and the United Arab Emirates to enhance each other’s AI strategic capabilities in the field of AI.

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Middle Eastern countries such as the United Arab Emirates and Saudi Arabia hope to shift their economic focus from oil to emerging technology fields and are trying to build themselves into the world’s AI technology hub. At the same time, Western AI companies have a strong interest in cooperation with Middle Eastern countries, and many companies are trying to obtain the huge investments needed to develop AI projects from Middle Eastern countries.

G42 is regarded as the core of the UAE’s strategy to promote artificial intelligence. Sheikh Tahnoon bin Zayed Al, UAE national security adviser, brother of UAE President Mohammed, and the top person in charge of multiple sovereign wealth funds in Abu Dhabi Sheikh Tahnoon bin Zayed Al Nahyan is the chairman and controlling shareholder of the company, which is backed by the UAE sovereign wealth fund Mubadala Investment Company (Mubadala).

G42’s business scope includes data centers and healthcare. The company launched a large-scale Arabic language model called Jais in 2023.

The UAE’s AI ambitions and strong financial resources have also attracted many international artificial intelligence companies. Sam Altman, CEO of ChatGPT producer OpenAI, has visited several times and discussed with UAE investors, including Sheikh Tahnoon, a project to improve chips that could cost billions of dollars. Production plans were discussed.

Hodan Omaar, director of the Data Innovation Center at the Information Technology and Innovation Foundation (ITIF), a Washington think tank, said this is a major victory for the global expansion of U.S. AI capabilities. “This will expand the footprint of American companies globally and in the Middle East,” she told the media.

“Companies need to continue to build global partnerships and leverage advances in artificial intelligence and other emerging technologies to gain strategic advantage on the global stage,” she said. “

Under pressure from the U.S. government, the G42 made it clear that it would abandon China and join the U.S.

This agreement was reached through long-term communication and coordination between the U.S. government and the UAE government. Microsoft said in a statement that the two companies reached this unprecedented agreement by “providing assurances to the U.S. and UAE governments” to “ensure the safe, trustworthy, and responsible development and deployment of artificial intelligence.”

The statement made it clear that both companies are committed to complying with U.S. and international laws and regulations regarding artificial intelligence technology and signed the guarantee agreement “in close consultation with the UAE and U.S. governments.”

The statement quoted G42 Chief Executive Officer (CEO) Xiao Peng as saying that the cooperation between the two parties “combines G42’s unique artificial intelligence capabilities with Microsoft’s strong global infrastructure, greatly enhancing our influence in the international market.”

The G42 has shown an extremely clear position on the issue of “choosing sides” between the United States and China. Under the agreement, G42 will remove and stop using hardware provided by Chinese company Huawei in its systems.

G42 made it clear that the choice of Microsoft was based on the need for U.S. technological strength. A company spokesperson told Bloomberg: “Geopolitical factors affect every international business, including ours.” The spokesperson said the opportunity to work with Microsoft and its partner OpenAI “is a real economic and technological change opportunity. These opportunities require a shift away from relationships, equipment, and services with China, and we are making that transition in a verifiable way.”

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The Financial Times quoted a source at G42 as saying, “After deciding to work with Microsoft last year, we began meeting with U.S. officials to ensure compliance with U.S. regulations, including those related to Chinese technology, so that we could complete the deal.”

The corporate logo of the American technology giant Microsoft
The corporate logo of the American technology giant Microsoft

Through this agreement, G42 obtained the right to use the computing power of Microsoft’s UAE data center. It is expected that the G42 will gain a competitive advantage in the Gulf region as a result.

Daniel Ives, executive director of Wedbush Securities and senior securities analyst, said that reaching this agreement with Microsoft marks important progress in the AI ​​​​industry in the UAE, and the Chinese company’s sad exit reflects that All parties are trying their best to break away from the dependence of the science and technology industry chain on China.

“This is a blow to China and shows that new technological artificial intelligence bases are being established outside China,” Ives told the media.

The print media quoted U.S. Commerce Secretary Gina Raimondo as saying on the 26th: “When it comes to emerging technologies, you can’t be in China’s camp and ours.”

Raimondo said Microsoft’s agreement with G42 will ensure that technology such as AI models and graphics processing units (GPUs) will not be leaked. “We have been extensively briefed and we are confident that this agreement is consistent with our values,” she said.

Mohammed Soliman, director of the strategic technology and cybersecurity program at the Middle East Institute, a Washington think tank, said Microsoft’s investment could help the United States “counter China’s technological influence in the Gulf.”

Suleiman told the media that this agreement may even become a model for the United States to strive to maintain its global leadership in artificial intelligence, aiming to eliminate the risk of “artificial intelligence technology spillover” to China.

The United States has long questioned the G42’s ties to China. The Chinese CEO has been under the attention of the CIA

The Chinese background of the G42 leadership and its extensive business dealings in China have long been wary of the U.S. government. When company chairman Sheikh Takhnoon visited Washington last June, U.S. national security adviser Jake Sullivan raised U.S. concerns with him about the close cooperation between the G42 under his control and China.

The U.S. House of Representatives Select Committee on the Chinese Communist Party sent a letter to U.S. Commerce Secretary Raimondo in January this year, asking her to investigate G42’s contacts with the Chinese government and military. Outgoing committee chairman Mike Gallagher said in the open letter that G42 has cooperated extensively with China’s “military, intelligence services and state-owned entities.”

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G42 CEO Xiao Peng’s Chinese background has also attracted attention from the outside world. The committee said G42 CEO Xiao Peng “operates and is affiliated with a vast network of Emirati and Chinese companies that develop dual-use technologies and provide material support for China’s military-civilian fusion and human rights abuses.”

G42 has collaborated with Chinese telecom giants Huawei and BGI. Both Huawei and BGI have been sanctioned by the U.S. government. The U.S. government is concerned that G42 is helping BGI in its attempts to collect genomic data from people around the world, including in the United States.

G42 last year invested $100 million in ByteDance, the Chinese parent company of Douyin, and its overseas version, TikTok. Its $10 billion investment fund, 42X, has an office in Shanghai

According to Wire China, G42’s chief investment officer, Zhang Xiaoping, is also the chief operating officer of Chinese company Yitu Technology. The U.S. government added Yitu Technology to its sanctions list in 2021 for developing surveillance technology used by the Chinese government to suppress the Uyghur Muslim community.

According to the New York Times, the US Central Intelligence Agency (CIA) has obtained Xiao Peng’s identity file. Reports say that Xiao Peng was born in China and gave up his American citizenship to obtain Emirati citizenship after becoming a U.S. citizen.

Public information shows that Xiao Peng studied as an undergraduate and graduate student in the United States and then worked at MicroStrategy, a technology company in Virginia, USA, before leaving in 2014.

Information from the Chinese Embassy in the United Arab Emirates shows that in 2021, Xiao Peng attended the “Chinese Government Friendship Award” award ceremony as the CEO of the G42 Group.

Previously, it was reported that G42 executives, including Xiao Peng, are related to a UAE cyber intelligence and hacking company called “DarkMatter”.

Xiao Peng told Bloomberg in February this year that G42 would divest from its Chinese business. In recent months, the G42 has agreed to divest itself of some of its ties to China, including its stake in ByteDance.

In addition, according to the agreement with Microsoft, G42 promised not to share its technology with the governments and military of other countries without a license and not to use the technology for surveillance. Microsoft has the right to review how G42 uses the company’s technology.

Although there are still U.S. officials who are worried about the possible secret connections between the G42 and China, analysts believe that the U.S. pressure campaign has achieved results and is capable of ensuring that the G42 abides by the agreement and cuts off business and technical ties with China.

“It’s hard to imagine the U.S. government approving an agreement on this type of artificial intelligence without ensuring and assessing that the technology is well protected,” said Suleiman of the Middle East Institute.

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