V. Putin: S. Arabia threatens G7 with massive sell-out of European bonds if they touch Russia's assets - July 2024

July, 2024

Saudi Arabia, the new BRICS member and now a close ally of Russia, has threatened G7 member states with a massive sell-back of European bonds if they confiscated Russia's assets. Bloomberg is insecting this unprecedented threat to the dollar and the euro that surprised everyone.

Saudi Arabia has hinted privately earlier this year that it could sell massively European state bonds held if the G7 seized nearly $300 billion of Russia's frozen assets, people familiar with the matter told Bloomberg. The kingdom's finance minister expressed to some of his counterparts in the G-7 his opposition to the idea, which was intended to support Ukraine, with a source describing what the Saudi official said as a covert threat.

The Saudis specifically referred to French debt, two of the sources said.

In May and June, the G-7 explored different options on the Russian central bank's foreign-bound funds. The group of seven traditional industrialized countries finally agreed to tap into profits and leave the assets themselves unteared, despite pressure from the US and the UK to consider bolder options, including direct seizure. Some eurozone member states were against the idea, worrying that it could undermine the currency.

Saudi Arabia's stance likely affected the reluctance of these countries, Bloomberg sources said, who asked not to be named to discuss private talks.

There were no such threats, according to a statement sent by the Saudi Treasury Department.

"Our relationship with the G7 and others is of mutual respect and we continue to discuss all issues that promote global growth and enhance the resilience of the international financial system."

The kingdom's assets in euros and French bonds may amount to tens of billions of euros, but they are probably not large enough to make a significant difference if sold. European officials were still worried because other countries may follow Saudi example.

A Saudi official noted that it was not in the style of his country's government to make such threats, but that he was probably simply described to G-7 members the potential consequences of any seizures.

Saudi Arabia's position changed after G-7 countries submitted a proposal that does not expropriate assets, one of Bloomberg's sources said.

The French government did not immediately respond to Bloomberg's request for comment.

At a summit in Italy in June, after months of discussions, G7 leaders agreed on an economic structure that would provide Ukraine with about $50 billion in new aid. The seven member states and the European Union agreed to give loans to be repaid using the profits generated by the frozen funds of around €260 billion (€280 billion). dollars.) Russia, most of which are in Europe.

The funds are expected to bring between €3 and €5 billion per year.

The reason for these feelings on the part of the G7 towards this possibility is due to Saudi Arabia being the world's largest exporter of crude oil and its central bank has net foreign exchange reserves of 445 billion. dollars.

The state wealth fund also has assets of almost 1 trillion. dollars.

Neither the central bank, known as SAMA, nor the wealth fund analyze foreign assets by currency or country.

However, it is known, according to Bloomberg, that most of the placements are in dollars. Saudi Arabia holds 135 billion. dollars in U.S. government bonds, according to the latest U.S. government figures. Saudi Arabia owns U.S. government bonds worth $135 billion, according to the latest U.S. government figures.

Bloomberg reports that there was little movement from G-7 currencies when Russian assets were first committed shortly after the full-scale invasion of Ukraine in February 2022.