The United Arab Emirates has held discussions with the United States about a possible financial safety net to shield its economy if the conflict with Iran in the Persian Gulf escalates further, according to a report by The Wall Street Journal citing US officials.
During meetings in Washington last week, UAE Central Bank Governor Khaled Mohamed Balama raised the idea of establishing a currency swap line with US Treasury Secretary Scott Bessent, along with officials from the US Treasury and the Federal Reserve.
US officials said the proposal was presented as a precautionary step. While the UAE has so far avoided the worst economic fallout from the conflict, it may require support if conditions worsen.
UAE-US talks on dollar alternative
The talks highlight rising concerns in the UAE that the conflict could disrupt its economy and weaken its position as a global financial hub.
According to the report, the crisis has already affected Emirati oil and gas infrastructure and disrupted tanker movement through the Strait of Hormuz, reducing a key flow of dollar-denominated oil revenues.
Although no formal request has been made, Emirati officials indicated a need for a financial backstop if pressure on foreign reserves grows or investor confidence declines.
They also signalled that if dollar liquidity tightens, the UAE may consider conducting oil transactions in alternative currencies. One of them is the Chinese yuan, a move that could challenge the US dollarโs dominance in global trade.
Approval uncertain
Currency swap lines are typically managed by the Federal Reserve, but approval in this case appears unlikely. Officials noted that such arrangements are usually reserved for situations involving severe funding stress with potential spillovers to the US financial system.
The Federal Reserve currently maintains standing swap lines with central banks in the United Kingdom, Canada, Japan, Switzerland and the European Union, and has extended temporary facilities to countries like Mexico, South Korea and Brazil during periods of crisis.
Compared to these economies, the UAE has fewer direct financial linkages with US markets, reducing the likelihood of approval.
The report added that the US Treasury has recently explored alternative mechanisms outside the Federal Reserve framework, including a USD 20 billion swap arrangement for Argentina through the Exchange Stabilisation Fund.
Also read:ย IRGC takes control of Iranian military and diplomatic leadership, calling shots on truce with US
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