Saudi Arabia– America’s most loyal ally for decades with its petrodollars – is now rushing to Russia’s aid. And it threatens the G7: don’t you dare use Russia’s “frozen” assets in European banks to help Ukraine». The world has turned upside down!
Riyadh’s threat was presented as a “warning of consequences” to G7 finance ministers, causing a major headache. A potential sale of these bonds could have incredible profit implications for the countries involved.
The threat came from Saudi Arabia’s Finance Ministry, according to Bloomberg: Riyadh could sell its holdings of European government bonds to pressure the EU not to use the proceeds from seized Russian assets to invest in weapons for Ukraine.
For the record, Saudi Arabia invests much of its massive oil revenues in Western bonds and stocks. For example, it holds about $130 billion in U.S. bonds.
After all, the Riyadh central bank has $445 billion in foreign exchange reserves and the sovereign wealth fund has $1 trillion in assets in its vault. These are “weapons” that, if used, could cause a lot of damage. To this day, no one knows exactly how much European debt Saudi Arabia holds.
But with the EU navigating without a compass among the world’s giants, the implications will be far-reaching. Especially for France, too. Moody’s warned of the possibility of a downgrade of French bonds to negative if post-election political instability caused government paralysis.
Of course, Saudi Arabia has not suddenly become a Putin supporter. Saudi strongman Mohammed bin Salman’s concern is that the West could one day use the same weapon against Saudi assets abroad.
According to Bloomberg sources, the Saudis have also targeted France, warning that they will sell French government bonds as Macron is among the Western leaders most active in supporting Kiev.
The Russian Central Bank’s foreign exchange reserves frozen in European institutions amount to 280 billion euros and will generate profits of up to 5 billion euros per year.
The idea of a direct “attack” on Russian assets is welcomed by Canada, Britain and the United States, but much less so by European countries that fear the implications for the stability of the euro.
Riyadh’s decision comes after it bid farewell to its 50-year monopoly on the petrodollar, imposed in early June, by officially opening up crude oil trading in other currencies. First the Chinese yuan!