Khashoggi's murder hurt the business ties Saudi Arabia needs most

Editor's Note: (Leon Levy is a global macro analyst at Eurasia Group. The opinions expressed in this commentary are his own. )

One month later and the murder of Washington Post columnist Jamal Khashoggi continues to grip international headlines. But for all the Western commentary, this story has a lot less to do with press freedom than it does about power: who has it and how it can be used. The perpetrator (or perpetrators) made a critical mistake in assuming that having the power to reach across borders and permanently silence a well-known critic meant they were free to do so without fear of repercussions. It's a miscalculation that will haunt Saudi Arabia for years.

Saudi Crown Prince Mohammed bin Salman had staked much of his political legitimacy on transforming the Saudi Kingdom from sleepy petrostate into a modern and diversified economy as part of his ambitious Vision 2030. But to do that, Saudi Arabia had to fundamentally reform and become a country that companies and governments in the West wanted to partner with. After all, selling oil and buying arms would only get Riyadh so far. Hence the social reforms, like the decision to allow women to drive and pushing them to take a more active role in the Saudi workforce. Yes, there are practical economic reasons for wanting higher employment for Saudi women, like expanding the country's talent pool. And in a world where an increasing number of women are key decisionmakers across both businesses and governments, the country's refusal to allow women to drive was an unnecessary millstone around Saudi necks.

But more than all that, the reforms were intended to deliver a clear message to the West that Saudi society is changing. The response: a sudden surge of interest in investment in Saudi Arabia. And for a while there, this story of a new Saudi Arabia — more open and transparent, willing to play by Western rules — seemed to be taking hold. That narrative was so strong that it withstood a Saudi-backed humanitarian disaster raging in Yemen, a postponed IPO of Saudi Arabia's oil giant Aramco, and a crackdown on women activists who began demanding more freedoms. The world proved willing to overlook plenty to protect the investment gold rush — until the Khashoggi murder (and the political drama Turkish President Recep Tayyip Erdogan masterfully drew out) made it impossible to do so any longer.

Riyadh's saving grace is that countries with significant geopolitical interests in the Middle East will have a hard time breaking financial ties with the Saudis, given the Kingdom's outsized importance in the region. Germany may have decided to freeze arm sales to Riyadh for the time being, but no other major power has followed suit thus far (and Germany was drawing down its arms sales to Riyadh over human rights concerns long before the Khashoggi murder). Given its own geopolitical calculations, the US government is frantically attempting to give the Saudis the benefit of the doubt at every turn, even as each turn leads down a darker and darker path. It's a testament to Saudi Arabia's continued international influence.

But geopolitical necessities are no replacement for genuine enthusiasm for doing business with the Kingdom, which is what the Saudis will need if Vision 2030 is to be successful.

The Khashoggi killing has made deals with the Saudis a lightning-rod issue, particularly for companies looking to cultivate a more socially responsible image for themselves. Thorny issues of human rights could be overlooked so long as Saudi Arabia's trajectory was pointing in the right direction, which was why the narrative of "Mohammed bin Salman as reformer" was critical to the Kingdom and its investors. Make no mistake, Saudi Crown Prince Mohammed bin Salman is as much a reformer today as he was six months ago. It's entirely possible to be a strongman and genuine reformer simultaneously.

But more important than the reforms is the narrative, and no matter its final resolution, the Khashoggi killing has shattered that storyline. Many governments have little choice but to deal with the Saudis, but that's not true of increasingly reputation-conscious Western companies. And the Crown Prince will need both if he's to transform Saudi Arabia, as he knows he must.