Microsoft’s AI Deal with UAE Firm G42 Raises National Security Concerns

Microsoft-G42 Partnership May Involve Advanced AI Technology Transfers

by Faruk Imamovic
Microsoft’s AI Deal with UAE Firm G42 Raises National Security Concerns
© Getty Images/Michael M. Santiago

Microsoft President Brad Smith has revealed that the company's high-profile partnership with G42, an artificial intelligence (AI) firm backed by the United Arab Emirates (UAE), could eventually encompass the transfer of advanced chips and tools. This development has sparked concerns from a senior Republican congressman about potential national security implications.

In a recent interview with Reuters, Smith outlined that the sales agreement, the specifics of which are being disclosed for the first time, might progress to a second phase. This phase could involve exporting critical AI technology components, such as model weights, which are central to AI systems' capabilities. However, there is currently no definitive timeline for this progression.

U.S. officials have previously indicated that AI systems could pose national security risks. These risks include the potential for facilitating the creation of chemical, biological, and nuclear weapons. Reflecting these concerns, the Biden administration mandated in October that developers of the most significant AI systems must share details about them with the U.S. government.

The deal’s progression would necessitate the approval of the U.S. Department of Commerce. Microsoft executives have emphasized that the agreement includes measures to protect Microsoft's technology from misuse, particularly by Chinese entities seeking to train AI systems. However, the specifics of these safeguards remain undisclosed, raising questions among some U.S. lawmakers about their sufficiency.

Congressional Concerns and Regulatory Challenges

The opaque nature of the negotiations between the two private companies concerning the terms and safeguards for transferring U.S. technology has alarmed several lawmakers. Michael McCaul, the Republican chairman of the House Foreign Affairs Committee, expressed his concerns to Reuters. He highlighted the lack of a comprehensive briefing from the executive branch about the agreement and questioned the adequacy of the protective measures in place against Chinese espionage, given the Chinese Communist Party's interests in the UAE.

Microsoft© Getty Images/David Becker

Currently, the Commerce Department mandates notifications and, in some regions, export licenses for sending AI chips abroad. However, the Microsoft-G42 deal underscores existing gaps in U.S. laws as regulators strive to keep pace with rapidly advancing technology. Notably, there are no current regulations restricting the export of AI models, though McCaul and a bipartisan group of lawmakers recently advanced legislation to grant U.S. officials more explicit authority in this area.

Microsoft has voiced its support for a new legal framework to govern AI technology transfers. The deal with G42 obliges the UAE firm to comply with evolving U.S. regulations. “Fundamentally, what we’re focused on is trying to ensure that American technology can move around the world safely and securely,” Smith said.

Expanding Horizons: Beyond the UAE

When Microsoft and G42 announced their partnership last month, it was framed as an initiative to bring G42 closer to the U.S. and extend U.S. technological influence amid strategic competition with China. Microsoft is investing $1.5 billion in G42, and Smith has taken a seat on its board.

Although the companies did not specify which technologies might be transferred to the UAE or other countries, or what specific security safeguards would be implemented, some details are being revealed for the first time. The broad aim of the deal is for Microsoft and G42 to jointly introduce AI technology into regions where neither company could operate as effectively alone. An early example of this collaboration is a deal in Kenya announced by the two companies.

The Microsoft-G42 agreement stipulates that both companies must provide security assurances to their respective home governments. However, there is no direct agreement between the U.S. and UAE governing the transfer of sensitive technologies. The companies may seek to transfer these technologies to other markets beyond the UAE, including Turkey and Egypt, according to Microsoft executives.

Smith emphasized that many details of the deal remain unresolved, including how to safeguard AI “model weights.” These weights are essential components of AI models that determine their responses to prompts or questions, acquired through extensive data training at significant expense. Currently, model weights cannot be encrypted during use, and Smith estimated that promising technical approaches for encryption are at least a year away.

To protect its technology, Microsoft has considered several alternative options, including creating a “vault within a vault.” This would involve physically separating parts of data centers housing AI chips and model weights and restricting physical access.

Smith believes that, eventually, a regulatory regime or trade export control approach will be established that applies broadly, not just to Microsoft and G42. Under the deal, G42 is required to follow a “know your customer” rule to identify who is using Microsoft’s technology, and it will not permit Chinese firms to use it for training AI models. U.S. regulators have proposed a similar rule, though it has not yet been enacted.

“We adopted a strategic commercial decision to partner with U.S. companies when it comes to advanced technologies. And we’re very clear on the fact that in order to do so, we will need to adhere to the requirements and our partners and government regulatory requirements or export control regulations,” said Talal Al Kaissi, an executive responsible for partnerships in G42's AI work.

Navigating Regulatory Hurdles

Under the terms of the agreement, Microsoft has the authority to impose financial penalties on G42, enforceable through arbitration courts in London. This arrangement means Microsoft would not need to navigate the UAE legal system to ensure G42's compliance, and it could seize assets in many countries if G42 is found in violation of the agreement.

The precise manner in which U.S. Commerce Secretary Gina Raimondo will permit the deal to advance remains uncertain. Smith described the provisions as “informal,” noting that “certainly with this Secretary of Commerce, one knows pretty clearly whether she approves or rejects something.”