To win the cloud game you need large volumes of business to justify large amounts of hardware purchases with large discounts. If amazon and Microsoft pick up a bunch of DoD deals, Google will be paying premium for hardware they can get cheaper. That affects costs and therefore profitability. So I think that Google, by not pursuing deals that Amazon and Microsoft have clearly stated they, as a business, want to pursue, would set itself up for being a perennial 3rd or 4th placer (after Oracle of all companies).
The only countries I expect cloud providers to not deal with are the ones prohibited by the country their corporation is legally housed in (countries embargoed or sanctioned by the US, like North Korea, Iran, Syria). If I dislike a country and don't want Google to do cloud business, I'll tell me representative and they can attempt to change the law.
