Saudi Arabia has warned it might sell off European debt if the G-7 seizes $300 billion in frozen Russian assets to support Ukraine. This threat highlights Saudi Arabia’s economic power and concerns that similar actions could target Gulf states in the future. The G-7, including the US and UK, supports seizing the assets, but Saudi Arabia’s warning has swayed some EU countries against it. This move underscores the complex global economic and political tensions, especially as Saudi Arabia balances its relationships with both Western countries and Russia.

According to Bloomberg, Saudi Arabia has warned that it may sell some of its European debt holdings in response to the G-7’s decision to confiscate over $300 billion in frozen Russian assets.

The veiled threat was sent along by Saudi Arabia’s finance ministry to several G-7 peers earlier this year, as the group considered seizing Russian assets intended to bolster Ukraine.

Saudi Arabia particularly mentioned France’s euro debt, according to Bloomberg.

Riyadh has been concerned about Western efforts to seize Kremlin assets for several months. Politico reported in April that Saudi Arabia, China, and Indonesia were secretly pressing the EU against confiscation.

However, Saudi Arabia’s threat to unload the debts of European Union members would be a serious display of power and willingness by the kingdom to use its economic clout to convince Western governments as reported by Bloomberg.

In June, the G-7 countries, which include the United States, Canada, the United Kingdom, France, Germany, Italy, and Japan, agreed to lend Ukraine $50 billion backed by revenues from Russian assets. The measure fell short of a complete seizure of the approximately $322 billion in Russian central bank assets frozen in the West.

Bloomberg said Saudi Arabia’s warning would likely galvanize opposition among certain EU member states to a more muscular approach, despite the US and UK urging for a direct seizure.

Spotlight on Russia-Saudi Relations

Saudi Arabia’s warning raises concerns in affluent Gulf states that the West may one day use the same economic leverage it has against Russia to seize Gulf powers’ offshore assets if criticism of Gulf human rights issues or foreign policy decisions resurfaces.

Russian President Vladimir Putin has courted Saudi Arabia, relying on the oil-rich monarchy to offset Moscow’s global isolation and stabilize energy markets.

Putin paid a rare visit to Saudi Arabia and the UAE in December.

Before providing Yemen’s Houthi rebels with anti-ship cruise missiles, Putin requested authorization from Crown Prince Mohammed bin Salman. The Saudi leader, who has waged a vicious war against the Iran-backed Houthis, urged Putin not to arm the organization, and Russia agreed.

Saudi Arabia competes with Russia for the position of the world’s largest crude oil exporter.

Saudi Arabia, like other Gulf governments, pegs its currency to the dollar and sells its oil in dollars, bolstering the dollar’s status as the world’s reserve currency.

Saudi Arabia announced in January 2023 that it was considering trading in currencies other than the US dollar, following allegations that it was in talks with China about selling some crude in yuan.

It is unclear how much European debt Saudi Arabia possesses, but the central bank’s net foreign currency reserves are $445 billion. Saudi Arabia currently holds $135.9 billion in US treasuries, ranking 17th among bond investors.

US President Joe Biden’s threat to make Saudi Arabia “a pariah” after the death of Middle East Eye and Washington Post contributor Jamal Khashoggi fueled fears that Washington will one day turn against its long-time ally.

Biden has since shifted his focus, relying on Saudi Arabia to reach an agreement with Israel and play a role in Gaza’s post-war governance.

Recently, GreatGameIndia reported on Arab nations’ perspectives regarding Russia’s military operation in Ukraine as a reaction to Western disregard for its concerns. Responses vary, with some supporting Russia and others emphasizing adherence to international law. Many advocate for a diplomatic resolution.