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Saudi Arabia suggests the possibility of selling off certain European debt securities if the Group of Seven (G-7) were to move forward with plans to confiscate nearly $300 billion in frozen Russian assets. The Saudi Ministry of Finance is said to have communicated its opposition to some G-7 colleagues, with an insider interpreting this as a veiled threat.
Specific mention was made of debts issued by the French Treasury, as noted by two persons aware of these discussions. This hint from Riyadh came as the G-7, in May and June, was considering various strategies regarding the Russian central bank's frozen funds. In the end, the G-7 decided to use the profits generated from these assets and leave the capital itself untouched, despite pleas from the U.S. and U.K. for more drastic measures, including direct confiscation. Some eurozone countries opposed the confiscation, fearing it could undermine the currency.
Saudi Arabia's stance appeared to be influencing reluctance among some G-7 countries, sources suggested. However, a statement from the Saudi Ministry of Finance denied that any threats had been made, stressing that their relationship with the G-7 is based on mutual respect and the pursuit of global growth and resilience of the international financial system.
While Saudi holdings in euro and French bonds are likely to be in the tens of billions of euros, this amount is not substantial enough to cause a significant market shock if they were to be sold. Still, European officials expressed concern about potential domino effects, fearing that other countries would follow Saudi Arabia's lead.
A Saudi official clarified that it is not common for the kingdom to make such threats, but acknowledged that they may have highlighted the potential impact of asset confiscations on G-7 members. Following the G-7's decision not to expropriate the assets, Saudi Arabia's stance changed, according to a source.
The precise motivation behind Saudi Arabia's actions remains unclear. There is speculation as to whether Riyadh acted out of self-interest, fearing that asset confiscation would set a dangerous precedent for other countries, or out of solidarity with Russia, a country with which it has maintained close ties since the invasion of Ukraine. Together, Saudi Arabia and Russia lead the OPEC+ cartel of oil producers.
At the same time, Saudi Arabia has also built ties with Ukraine, which was underscored by President Volodymyr Zelenskiy's visit to the kingdom to meet with Crown Prince Mohammed bin Salman. Regardless of their intent, Saudi Arabia's actions underscore their growing influence on the world stage and the challenges for the G-7 to gain support from so-called Global South countries amid Russia's aggression.
In June, at a summit in Italy, after extensive discussions, the G-7 leaders agreed on a financial framework to provide Ukraine with about $50 billion in new aid. This framework includes loans repaid with profits from Russia's approximately €260 billion ($280 billion) in blocked funds, which are mainly held in Europe. The expected annual return of these funds is between €3 billion and €5 billion.
The G-7 and the EU are finalizing the details of this plan. Some EU countries see this as a move towards more comprehensive measures on assets, with calls likely to increase as the war continues and Ukraine's reconstruction costs escalate.
Saudi Arabia owns $135 billion in U.S. Treasuries, according to the latest data from the U.S. government. Some question the credibility of Saudi Arabia's implicit threat, citing minimal shifts in G-7 currencies following the freeze on Russian assets following the February 2022 invasion. G-7 members also noted that there are limited reliable alternatives to Saudi Arabia besides the dollar and the euro.
Despite speculation of a switch to other currencies such as the Chinese yuan, Saudi officials have consistently toned down this line of thinking, affirming that sticking with the dollar remains economically advantageous for the kingdom.
Saudi Arabia's maneuvers during the G-7 talks on Russian assets highlight their strategic influence in the world of finance and politics. As the international community navigates the complexities of supporting Ukraine and maintaining global economic stability, the kingdom's actions and motivations will continue to be examined and debated.
