Bloomberg Reports Saudi Arabia Issued Threat Over Russian Assets to G7

The United States and United Kingdom's intention to seize Russia's inhibited sovereign funds met with resistance.

According to a report from Bloomberg, the Group of Seven possibly had to abandon the US's proposal to confiscate Russia's frozen central bank assets due to a thinly veiled hint of retaliation from Saudi Arabia.

Throughout 2022, the US and UK have been advocating for the complete seizure of approximately $280 billion Russian sovereign funds. The funds, frozen in the wake of the conflict in Ukraine, were primarily held in the European Union. The prospect of potential repercussions had made the EU wary about jeopardizing the stability of the euro.

Sources cited by Bloomberg reported that Saudi Arabia hinted privately that it might consider liquidating some of its EU debt holdings if the G7 nations decided to proceed with their asset confiscation plans.

An anonymous source characterized the communication from the Saudi Finance Ministry as a thinly veiled threat. According to two other sources, the nation specifically mentioned the risk pertaining to French treasury debt.

These implications likely played a part in persuading the G7 nations to refrain from seizing the Russian funds. Instead, they decided to convert the interest produced by the funds into loans for Kiev. This move has been lambasted as illegal by Moscow, with ex-president Dmitry Medvedev hinting it could be construed as an act of war.

Nevertheless, when approached for a comment, the Saudi Finance Ministry denied issuing any such threats to Bloomberg. It maintained that its relations with the G7 and other countries were based on mutual respect and that they regularly engage in discussions aimed at enhancing the resilience of the global financial system.

An official from Saudi Arabia stated that the nation doesn't typically communicate through threats. He implied that the discussions with the G7 may have been about the potential repercussions resultant of the asset seizures.

Saudi Arabia currently holds around $135 billion worth of US Treasuries and an undisclosed amount of euro bonds. According to Bloomberg's sources, EU officials were less worried about the impact on French debt and more concerned about other nations following suit with Riyadh.

Two sources expressed doubts regarding the credibility of Saudi Arabia's apparent threat, citing the lack of a financial panic concerning G7 currencies when the Russian funds were initially frozen. Daleep Singh, the deputy national security adviser to the White House, raised a similar point in a conference in May.

The decision, taken in February 2022, to freeze Russian sovereign assets marked an unprecedented event. Many Western experts have warned against the potential risks of seizing these funds, underlining the resulting instability in the dollar, the euro, and the global financial framework in general.