In a strategic March 2025 policy letter to the Office of Science and Technology Policy, OpenAI outlined a comprehensive framework for maintaining American AI leadership while managing global AI diffusion. OpenAI’s “three-tier” country classification system reveals a sophisticated geopolitical strategy with far-reaching implications for international AI deployment, governance, and business planning.
The Geopolitical Chess Game of AI Diffusion
OpenAI’s policy letter introduces a concept that deserves deeper examination: “winning diffusion.” This framing positions AI deployment not merely as a technological or economic challenge but as a geopolitical imperative. The company explicitly states that “as much of the world as possible” should be “aligned to democratic values and building on democratic infrastructure.”
This represents a fundamental shift in how AI companies are approaching international expansion. Rather than treating global markets as a uniform opportunity for growth, OpenAI’s framework suggests a strategic prioritization of markets based on their alignment with “democratic AI principles.”
The three-tier system proposed in the letter offers unprecedented clarity on how this might work in practice:
Tier I: Democratic AI Allies
Countries in this category would receive preferential access to frontier AI technologies with minimal restrictions. The qualification criteria revolve around a country’s commitment to deploy AI systems in ways that “promote more freedoms for their citizens.”
What’s striking about this classification is its departure from traditional security alliance structures. While NATO and other security alliance members would likely qualify, the criteria are explicitly tied to AI governance principles rather than existing security arrangements.
This approach creates a new kind of geopolitical alignment—one based on AI governance values rather than traditional security or economic interests. For businesses, this signals that AI deployment strategies may need to be adjusted based on a country’s alignment with these principles.
Tier II: The Contested Middle
More revealing is the treatment of Tier II countries, described as those “with a history of failing to prevent export-controlled chips and other US-developed IP from being diverted into, or used by Tier III countries.”
This category represents a significant shift from traditional export control approaches. Rather than implementing blanket restrictions on these markets, OpenAI proposes a carrot-and-stick approach:
- Encouraging “greater economic interdependence” between these countries and the US
- Establishing “transparent pathways” for these countries to reach Tier I status
- Implementing “technology-enhanced protections” against the diversion of export-controlled chips
This nuanced approach reflects the recognition that achieving global AI leadership requires engagement with contested markets rather than isolation from them.
Tier III: The Excluded
The document clearly positions China and its closest allies in a distinct category subject to “strict export controls of AI systems.” This reflects the zero-sum competition framing that permeates the document.
Decoding the Economics of AI Scaling
Beyond geopolitics, OpenAI’s letter offers rare insights into the economics of AI scaling that have profound implications for business planning:
The 10x Annual Cost Reduction Claim
Perhaps the most striking economic claim in the document is that “the cost to use a given level of AI capability falls by about 10x every 12 months.” This is presented as a more dramatic version of Moore’s Law, suggesting that AI capabilities are becoming more affordable at an unprecedented rate.
This claim has profound implications for business planning:
- Adoption Timing: Organizations may benefit from delaying certain AI investments to capitalize on this cost curve, particularly for capabilities that aren’t immediate strategic necessities.
- Deployment Strategy: The falling cost curve suggests that businesses should design their AI strategies with rapid expansion in mind, starting with high-value use cases but planning for broader deployment as costs decrease.
- Competitive Dynamics: This cost trajectory may accelerate winner-take-most dynamics in industries where AI capabilities are determinative of competitive advantage.
The Infrastructure Constraint
Despite the falling cost curve for AI capabilities, the document highlights significant infrastructure constraints that could limit access to these capabilities. Most notably, the letter states that “transmission lines can take 10 years or more to complete,” highlighting a critical bottleneck in the AI supply chain.
This infrastructure constraint creates a tension between the falling cost curve of AI capabilities and the ability to deploy those capabilities at scale. For businesses, this suggests:
- Location Strategy: Proximity to existing AI infrastructure may become a competitive advantage, influencing facility location decisions.
- Power Sourcing: Organizations with significant AI ambitions may need to develop sophisticated power sourcing strategies, potentially including on-site generation or direct investments in renewable energy projects.
- Compute Reservation: Securing access to compute resources through long-term agreements may become as strategically important as other supply chain considerations.
Practical Implications for International Business Strategy
The three-tier system, combined with the economic insights, presents several practical implications for businesses operating internationally:
Geographic Prioritization for AI Deployment
The tiered system suggests that businesses should evaluate their international AI deployment strategies based not just on market opportunity but on the regulatory and geopolitical positioning of each market:
- Tier I Markets: These represent the lowest regulatory risk for AI deployment and should be prioritized for advanced AI capabilities.
- Tier II Markets: These markets may require more careful risk management, including enhanced security measures and potential local partnerships.
- Tier III Markets: These markets may require fundamentally different approaches, potentially including the development of separate AI stacks or partnerships with local providers.
Data Center Location Strategy
The document’s emphasis on infrastructure constraints suggests that data center location decisions will become increasingly strategic. Businesses should consider:
- Proximity to reliable, affordable power sources
- Regulatory environment for data processing and AI deployment
- Security considerations, particularly for sensitive applications
- Compliance with the evolving export control regime
IP Strategy and Training Data Sourcing
OpenAI’s emphasis on copyright as a competitive advantage suggests that businesses should evaluate their IP strategies in light of international AI competition:
- Organizations with significant data assets should consider how those assets might be leveraged in AI training
- Businesses should monitor evolving copyright regimes in different jurisdictions and adapt their AI training strategies accordingly
- Companies may need to develop jurisdiction-specific approaches to data collection and model training
The Evolving Governance Landscape
The OpenAI letter also provides insights into how AI governance may evolve globally:
From Infrastructure to Principles
Traditional export controls have focused on hardware and software. The proposed framework shifts focus to principles-based governance, where a country’s access to AI technology is tied to its governance approach.
This suggests that businesses should monitor not just export control lists but broader governance principles in their target markets.
The Role of Technical Standards
The document emphasizes the importance of “technical standards for evaluating and safeguarding frontier models.” This suggests that technical standards may become a key mechanism for implementing the tiered system.
Businesses should actively engage with emerging technical standards for AI safety and security, as these may become prerequisites for market access.
The Emergence of AI Alliances
The proposed “Compact for AI among US allies and partner nations” suggests that we may see the emergence of AI-specific alliances that transcend traditional economic or security partnerships.
These alliances may create new opportunities for businesses operating within their boundaries while creating new barriers for those outside them.
Conclusion: Navigating the New AI Geopolitics
The OpenAI letter reveals a vision of AI deployment that is fundamentally geopolitical in nature. Rather than treating AI as a purely technological or economic phenomenon, it positions AI as a tool for advancing specific governance values and securing national advantage.
For businesses, this suggests that AI strategy can no longer be developed in isolation from geopolitical considerations. Organizations will need to:
- Monitor evolving AI governance regimes in their target markets
- Develop market-specific AI deployment strategies that account for the tiered system
- Invest in infrastructure and partnerships that enable compliance with emerging regulatory requirements
- Engage with policymakers to shape the evolving governance landscape
As AI becomes more central to business and government operations, the geopolitics of AI diffusion will become an increasingly important factor in strategic planning. Organizations that understand and adapt to this new reality will be better positioned to navigate the complex landscape of global AI deployment.
