Commerce-backed deal with Emirati AI giant sets off alarm bells in Congress

A Commerce Department-backed plan to pry an Emirati artificial intelligence company away from Beijing is sparking growing unease among the very lawmakers it appears designed to impress: China hawks.

When Microsoft inked a $1.5 billion investment deal with UAE-based G42 last month, Commerce Secretary Gina Raimondo hailed it as a way to keep the firm out of China’s “camp.”

G42 — which is striving to build one of the world’s most advanced Arabic large language models — has long had ties to Chinese emerging technology and surveillance companies. But it promised to stop using Chinese equipment and adhere to new safeguards under the deal, in exchange for access to Microsoft technology.

But now, there are increasing concerns among China hawks on the Hill that the deal could soon put sensitive AI technology at risk of Chinese espionage. In recent briefings from Microsoft and the Commerce Department, lawmakers are finding out that G42 may get access to advanced semiconductors that the U.S. government wants to protect from China.

“I have serious concerns that the Biden Commerce Department, under Secretary Raimondo, is not adequately safeguarding our advanced technologies and pushing U.S. companies to cut deals that may end up endangering our national security,” Sen. Marco Rubio (R-Fla.), the ranking member of the Senate Intelligence Committee, said in a statement about the deal.

The deal and its skeptics are a sign of the increasingly delicate tight-rope the U.S. must walk amid a global AI arms race: Between empowering U.S. tech companies to extend into regions where foreign adversaries like China have already made inroads — and trying to protect sensitive technology that could one day be used to engineer chemical or biological weapons.

“American innovation and American values should be leading the world, and deals like this are one of the ways we accomplish that,” Sen. Mark Warner (D-Va.), the chair of the Intelligence Committee, said in a statement. “At the same time, we have to make sure any agreement is structured in a way that protects the crown jewels of our intellectual property.”

Concern on the Hill about G42 first became public in January, when the then-head of the China Select Committee urged Commerce to probe G42 for export control risks, citing its ties to an “expansive network” of firms that abet Beijing’s security services or have built surveillance tools that have been turned on dissidents. In recent months, top Biden administration officials, including national security adviser Jake Sullivan and Raimondo, have conveyed similar warnings to the Emirati government.

To a certain extent, that pressure campaign paid off.

In February, G42 promised to divest its stakes in Chinese companies. And Biden administration officials have said the UAE has signaled a willingness in recent months to replace telecommunications gear made by Huawei and other Chinese vendors with U.S. alternatives.

Microsoft and Raimondo have pitched the deal with G42 as the latest move to bring the Middle Eastern AI champion — which is overseen by the UAE’s national security adviser — more closely into the U.S.’s fold. The day it was announced, Raimondo also promised that the deal met the highest security standards and “does not authorize the transfer of artificial intelligence, or A.I. models, or GPUs.”

But briefings to the Hill since then have left China hawks especially in the GOP increasingly uneasy that the plan is half-baked and could backfire, leaking sensitive AI technology to China in the name of cutting them off from it.

A flashpoint for those worries is that Microsoft and G42 are already in preliminary talks for a more sensitive follow-on agreement that could — in seeming contrast to Raimondo’s assurances — include the transfer of cutting-edge U.S-designed semiconductors to G42, according to three staffers briefed by Commerce and Microsoft on the talks, and another individual familiar with the matter.

Microsoft President Brad Smith acknowledged those details for the first time in an interview Thursday .

While many on the Hill agree it is important to keep a major player in the global AI market like G42 in the U.S.’s corner, advanced semiconductors are widely regarded as one of the key ingredients in U.S.’s current AI edge over China.

And a number of lawmakers are both privately and publicly warning that the U.S. government shouldn’t be putting so much trust in G42 or the UAE so quickly.

G42 did not reply to multiple requests for comment on the deal or the concerns on the Hill.

Microsoft spokesperson David Cuddy said the tech giant’s current agreement with G42 is helping bring it in line with “the highest U.S. export control and AI standards.” He added that any forthcoming parts of the deal would include extensive, government-agreed protections.

On the Hill, however, mixed messaging from the Commerce Department and Microsoft have left many skeptical about how many guardrails the Biden administration really has around the deal.

In briefings to the Hill over the last month, Commerce “is saying this is a totally commercial transaction, the U.S. government does not get involved in commercial transactions, and then Microsoft, you know, tells us that this was Secretary’s Raimondo’s brainchild,” said a Republican staffer on the House Foreign Affairs Committee — one of the four people briefed on the chip transfers.

The person shared that Microsoft has briefed the Foreign Affairs Committee twice and Commerce once in the last month, but that they have received no “comprehensive briefing” from the Biden administration.

Another person familiar with the discussion on the Hill echoed that sentiment, and said that “a big letter” calling on Commerce and the Biden administration to provide greater transparency into the deal is now accumulating signatories in the House and Senate.

The deal could send critical technology to “a country that is not our best friend, has close ties to China [and] has a mixed human rights record,” the person said. Congress wants to hear that the plan supports U.S. foreign policy “from an actual U.S. government employee, not someone that has fiduciary interest in seeing the deal go forward.”

Asked about concerns that the administration is not as involved in the deal as Raimondo has suggested publicly, a Commerce Department spokesperson said the agency's authority over the deal is limited to export controls, but stressed that any future export control decisions — an implicit nod to possible GPU exports — would be subject to review by multiple departments.

The Commerce Department placed the UAE on a broad list of “restricted” countries it fears could help China skirt AI export controls last October.

The White House declined to comment. However, a senior administration official said the White House has broadly encouraged several U.S. firms “to explore opportunities in the UAE” ever since Abu Dhabi signaled a willingness to pare back its ties to Chinese tech firms.

The person, granted anonymity as a condition of discussing a sensitive matter, clarified that the White House “does not vet the contractual terms of particular transactions.”

One concern among security hawks, the GOP HFAC staffer said, is that Raimondo has already promised G42 that it would receive licensing approval for future chip exports, potentially without the support of other agencies. Asked for comment on whether Raimondo had made any such suggestion, a Commerce Department staffer said “This is incorrect and demonstrates a fundamental misunderstanding of how U.S. export controls work.” The staffer was granted anonymity to discuss a sensitive matter.

Rep. Mike McCaul (R-Texas), the chair of the House Foreign Affairs Committee, said he plans to invoke the Export Control Reform Act of 2018 to review all licenses Commerce has or will grant under the deal.

“These high-end chips are critical in the race for AI dominance,” McCaul wrote in a response to a question regarding his concerns on the deal. “The Department of Commerce must understand that Congress will be scrutinizing every decision.”

The deal isn’t a worry in every China skeptic's eyes.

Rep. Ritchie Torres (D-N.Y.), a lawmaker on the hawkish China Select Committee, hailed the deal and said he has “complete confidence” the Biden administration has done the necessary due diligence on it.

“We should welcome countries who choose to align themselves with the United States,” said Torres, who described the UAE as a strategic ally and a moderating force in the Middle East.