The US and UK had wanted to confiscate the frozen sovereign funds

The Group of Seven “likely” abandoned the US plan to expropriate Russia’s frozen central bank assets due to a “veiled threat” from Saudi Arabia, Bloomberg has reported.

The US and UK had been pushing for outright seizure of around $280 billion in Russian sovereign funds, which the West had frozen in 2022 citing the Ukraine conflict. The EU, where most of the immobilized assets are held, was reluctant to see the euro endangered by the possible backlash.

Saudi Arabia “privately hinted” that it might sell some of its EU debt holdings if the G7 went ahead with the confiscation plans, Bloomberg reported on Tuesday citing “people familiar with the matter.”

One of the outlet’s anonymous sources described the Saudi Finance Ministry’s message as “a veiled threat,” while two others said Riyadh specifically mentioned French treasury debt.

This “likely influenced” the G7 to stop short of seizing the frozen Russian funds and opt to turn the interest they generated into loans to Kiev. Moscow has condemned the move as illegal, with former President Dmitry Medvedev suggesting it could be interpreted as a cause for war.

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When reached for comment, however, the Saudi Finance Ministry told Bloomberg that “no such threats were made.”

“Our relation 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 ministry said.

One Saudi official told the outlet that making such threats wasn’t his government’s “style” and that the ministry might have merely outlined the “eventual consequences” of seizures to the G7.

Saudi Arabia owns about $135 billion of US Treasuries and an unspecified amount of euro bonds. EU officials were less concerned about the impact on French debt than about other countries following Riyadh’s lead, Bloomberg’s sources said. 

Two of the sources questioned the credibility of Saudi Arabia’s alleged threat, noting that there wasn’t a run on G7 currencies when the Russian funds were first frozen. The same argument was brought up by Daleep Singh, the White House’s deputy national security adviser, at a conference in May. 

The February 2022 freezing of Russian sovereign assets was a move without precedent. A number of experts in the West have cautioned against attempting to confiscate the funds, noting that this could undermine the dollar, the euro, and the entire global financial system.