Saudi Arabia has warned it may sell off some European debt holdings in response to the G7's consideration of seizing nearly $300 billion in frozen Russian assets. Earlier this year, Saudi Arabia’s finance ministry discreetly conveyed this threat to some G7 members as the group deliberated using Russian assets to support Ukraine. The warning specifically targeted the euro debt issued by France.

This decision focuses Riyadh’s long-standing concern over Western attempts to confiscate Kremlin assets. In April, Politico reported that Saudi Arabia, along with China and Indonesia, had been lobbying the EU privately against such confiscations.

Saudi Arabia’s threat to offload European Union debt marks a major stance, showcasing the kingdom's willingness to leverage its economic influence to impact Western policy decisions. In June, the G7, which includes the US, Canada, the UK, France, Germany, Italy, and Japan, agreed to provide Ukraine with $50 billion in loans backed by profits from Russian assets. However, they stopped short of fully seizing approximately $322 billion in frozen Russian central bank assets.

Bloomberg suggests that Saudi Arabia's warning strengthened opposition among some EU states to a more aggressive approach, despite pressure from the US and UK for a direct asset seizure. This situation underscores Gulf states' concerns that similar economic measures could one day be used against them due to human rights criticisms or foreign policy decisions.

Russian President Vladimir Putin has been courting Saudi Arabia, relying on the oil-rich kingdom to counter Moscow’s global isolation and stabilise energy markets. In December, Putin made a rare visit to Saudi Arabia and the UAE, where he sought Crown Prince Mohammed bin Salman’s approval before arming Houthi rebels in Yemen with anti-ship cruise missiles. The Saudi leader, engaged in a conflict against the Iran-backed Houthis, urged Putin not to proceed, and Russia complied.

Saudi Arabia competes with Russia as the world's largest crude oil exporter. Like other Gulf states, Saudi Arabia's currency is pegged to the dollar, and it sells its oil in US dollars, bolstering the dollar's status as the world's reserve currency. In January 2023, Saudi Arabia announced it was considering trading in currencies other than the US dollar, following discussions with China about selling some crude in yuan.

It remains unclear how much European debt Saudi Arabia holds, but its central bank's net foreign currency reserves amount to $445 billion. Saudi Arabia holds $135.9 billion in US treasuries, ranking 17th among US bond investors.

US President Joe Biden's previous pledge to make Saudi Arabia “a pariah” over the murder of journalist Jamal Khashoggi has fuelled concerns that Washington might turn against its long-time ally. However, Biden has since shifted his approach, seeking Saudi Arabia's cooperation to normalise relations with Israel and contribute to post-war governance in Gaza.

Image source: AFP