Saudi Arabia eyes data embassies amid sovereign AI push

As countries race to build local data centers in the name of sovereign AI, Saudi Arabia is betting on a more innovative idea: data embassies.

A data embassy is a place where data is stored outside the physical borders of a country but operates under its laws, just like a diplomatic embassy.

The concept is not new. Estonia established its first data embassy in 2017, and there has only been one other since then, from Monaco. The two embassies are located in Luxembourg and maintain a backup of important data for both countries, which was created as a security measure against cyber and climate risks.

As the scope of artificial intelligence expands, this concept could gain traction as a way to build data centers abroad – in places that have a lot of resources and power, since energy is one of the most important ones. The biggest bottlenecks in Europe are in construction AI infrastructure – while still operating within the laws of the developer’s country.

At least, this is what Saudi Arabia is counting on when positioning itself as a country A source of data instead of oil. Saudi Arabia is betting big on solar energy, but its water resources — needed to cool data centers — are scarce, clouding the idea. It comes as the country battles its neighbors to become an AI hub, with global investors and technology companies turning to the Middle East in search of its deep resources and influx of talent, marking a potential shift in global power.

This is another example of how the AI ​​race could reshape the kingdom’s geopolitics Conveniently arrives in the United States There was no indication that the United States was the partner of choice for data embassies, but the pair had established a “strategic AI partnership” with Saudi Arabia that included “building and developing advanced AI infrastructure.”

When asked if this concept could resolve tensions around ByteDance’s TikTok, as the US fears the Chinese government’s access to its citizens’ data and… Used to influence voters Ahead of the 2024 election, Mayer-Schönberger is not convinced.

“It would require a complex bilateral treaty between China and the United States that would take a long time to negotiate; moreover, given the lack of trust between the two countries, it is difficult to imagine that the United States would trust China to keep data off limits,” he said.

Big technology companies Google and Microsoft It already offers its cloud computing customers hosted on-premises data centers in Europe for sensitive data, as well as a proprietary governance structure designed to limit U.S. government access to that data.

“Whether these arrangements will actually protect the data from access remains to be seen,” Mayer-Schoenberger said.

Nathalie Barrera, who heads EMEA privacy and data regulations at Sovereignty, noted that sovereignty is a loose term. Palo Alto Networks. “Everyone is talking about it, but no one has defined it, which means that sovereignty for France looks different than sovereignty for Spain,” she told CNBC.

Palo Alto Networks customers care about three things: independence, which includes protecting data and understanding who has access and control; digital resilience to ensure uninterrupted services; and access to foreign government data.

Parreira believes that data embassies fall into the middle category, especially in the context of Estonia and Monaco.

“This is no different from the additional regional impact of GDP,” she said, noting that there could be data in the United States that is still subject to European laws.

“And so, this is just a different option or setting to protect certain categories of data, which, in my view, is pretty sensitive data that the government needs to keep, like tax information, health information, administrative information, from its citizens and its employees,” she added.

Part of the lure of Saudi Arabia is its cost, as land for data centers is much cheaper, as is energy and capital. The country is geographically well located as a link between Europe, the Middle East and Asia.

“It makes sense that Saudi Arabia can offer data center services at a lower cost than the countries that need them,” said Hortense Beuy, head of sustainable investing research at Morningstar Sustainalytics.

However, “the emergence of data centers introduces new ESG considerations that are now widely recognised, with carbon emissions and water density among the most pressing concerns.”

While sun is abundant in the arid country, its grid is still largely powered by fossil fuels. About 64% of Saudi Arabia’s total energy supply was oil in 2023, according to IEA data, suggesting in this case that the trade-off for sovereignty could be sustainability.

Overall, Mayer-Schoenberger remains skeptical that data embassies can become the next big thing. “The nation-state is still very strong and globalization is diminishing,” he added.