UAE in talks with US about currency swap line if war drags on: report

The UAE is in talks with the Trump administration on possible financial assistance if the war with Iran drags on, the Wall Street Journal reported.

The report published Sunday said UAE Central Bank Governor Khaled Mohamed Balama met with US Treasury Secretary Scott Bessent and Federal Reserve officials last week in Washington, DC and raised the idea of a currency-swap line.

Emirati officials want to obtain a "financial lifeline" from the US in case the Iran war plunges the oil-rich Persian Gulf state into a deeper financial crisis, the report said.

A prolonged war "could inflict major damage on its economy and its position as a global financial hub, depleting its foreign reserves and scaring away investors who once saw it as a stable and secure place for their money," it added.

Iranian airstrikes have damaged oil and gas infrastructure in the UAE. The blockade of the Strait of Hormuz by Iran since late February has further shut off the UAE's oil shipments to buyers, depriving it of a key source of financial revenue.

While Emirati officials have not made a formal request for a swap line, if that access is granted, the UAE Central Bank would have inexpensive access to US dollars "to support its currency or shore up its foreign reserves in case of a liquidity crisis," the report further said.

UAE officials are of the view that President Donald Trump's decision to join Israel in the war on Iran has "entangled their country in a destructive conflict,” and the proposed financial assistance plan would be a precautionary "backstop" if their economy plunges into a deeper financial crisis due to the war, the report said, citing US sources.

US officials have speculated that such a financial plan might not be approved for the UAE, as the Federal Open Market Committee "usually reserves them for relieving severe funding-market pressures that could spill back into the US economy."

The US currently has standing currency swap arrangements with central banks in the United Kingdom, Canada, Japan, Switzerland, and the European Union.

The United Arab Emirates is not depending solely on the US, as it set up a roughly $5 billion swap line with Bahrain earlier this month to help improve financial stability.

Whether the US steps in to help the UAE, or other countries offer financial support to the Gulf nation, Middle East officials said they do not expect an easy or swift recovery for the region.

"The basic logistics of scheduling tankers and bringing them back after the chaos we have seen, that will take possibly to the end of June,” said Saudi Arabia's finance minister, Mohammed Al-Jadaan, in a statement on Thursday. "Anyone who’s counting for a quick recovery, even if there is a total end of hostilities, will need to recalculate that."