Saudi Arabia threatens to sell European bonds over russian assets

According to Bloomberg, Saudi Arabia has unofficially sent a severe warning to the G7 group. The Saudis are threatening that if the West seizes Russia's savings, they will sell off European bonds. Given that these are worth hundreds of billions of euros, such a move would certainly impact the economy.

Bloomberg, citing anonymous sources, reported that the Saudi Ministry of Finance is warning the West against seizing Russian savings held in European accounts. Should this happen, the Saudis would start selling off European bonds.

The G7 makes the decision on what to do with Russian money. After the invasion of Ukraine, these funds were frozen—Russia cannot use them. However, the United States is pushing to permanently deprive the Kremlin of these assets, estimated at around £210-250 billion.

Saudi Arabia's Ministry of Finance has officially denied Bloomberg's reports, asserting that "no such threats have been made." However, the agency insists that Saudi Arabia presented its stance unofficially before the recent G7 meetings. During this gathering, the fate of the frozen Russian funds was discussed.

At the June summit, G7 leaders decided to provide Ukraine with £40 billion from the profits of frozen Russian assets held in the EU and G7 countries.

It is not only Saudi Arabia that objects to the plans to confiscate Russian assets. China and Indonesia also urged the EU to refrain from seizing these funds, fearing a precedent.

According to Bloomberg, the G7 fears that other countries might follow the Saudis' lead and also begin selling European bonds. The consequences of such decisions are hard to gauge, but they would certainly affect the exchange rates and bond prices.

Let's recall how it started: after the outbreak of the war in Ukraine in 2022, the G7 group (United States, United Kingdom, Germany, France, Italy, Canada, and Japan) froze Russian financial assets worth around £250 billion.

The assets, mainly in the form of currencies and government bonds, are held in banks outside of Russia. Their freezing aimed to pressure Russia and support Ukraine in its struggle.

- This is likely just a bluff that Saudi Arabia would not fulfil. But there is no certainty about this. And this uncertainty is the point - he explains.

In the face of pressure, the European Union ultimately adopted in June the aforementioned plan to use the profits from frozen Russian assets to finance military aid for Ukraine. It was a compromise between completely confiscating the funds and leaving them untouched.

It is worth noting that despite close ties with Moscow, Saudi Arabia is also trying to build relations with Kyiv. In June, the country unexpectedly hosted Ukrainian President Volodymyr Zelensky, and in August 2023, it hosted a peace summit dedicated to Ukraine, to which Russia was not invited. These actions point to the complexity of Saudi foreign policy and its desire to maintain a balance between different sides of the conflict.