{"id":591858,"date":"2026-04-26T23:38:27","date_gmt":"2026-04-26T23:38:27","guid":{"rendered":"https:\/\/buglecall.org\/?p=591858"},"modified":"2026-04-26T23:38:27","modified_gmt":"2026-04-26T23:38:27","slug":"bessent-defends-us-dollar-swap-lines-as-uae-considers-formal-funding-request-3","status":"publish","type":"post","link":"https:\/\/buglecall.org\/?p=591858","title":{"rendered":"Bessent Defends US Dollar Swap Lines As UAE Considers Formal Funding Request"},"content":{"rendered":"

Bessent Defends US Dollar Swap Lines As UAE Considers Formal Funding Request<\/span><\/p>\n

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Several Gulf countries have discussed receiving dollar swap lines from the US, the WSJ reported last week<\/a>. In the near term, there is an economic drag if volumes of oil and gas sales have fallen by more than the price effect can offset, or where tourist and business travel has dried up. The effect is similar to that of the pandemic: slowing growth and fiscal revenues, and accelerated demand for fiscal spending.<\/p>\n

As the WSJ reported, UAE. Central Bank Gov. Khaled Mohamed Balama had raised the idea of a currency-swap line with Treasury Secretary Scott Bessent and Treasury and Federal Reserve officials in meetings in Washington. The Emiratis emphasized that they had so far avoided the worst economic effects of the conflict but might still need a financial lifeline.<\/p>\n

The talks highlighted the U.A.E.\u2019s concern that the 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. The conflict has damaged Emirati oil-and-gas infrastructure and shut off their ability to sell oil using tankers transiting the Strait of Hormuz, depriving it of a key source of dollar revenues. Meanwhile tourism, another key source of hard currency, has also been throttled as a result of regional instability.\u00a0<\/p>\n

Emirati officials haven\u2019t made a formal request for a swap line, which would give the UAE. central bank inexpensive access to dollars to support its currency or shore up its foreign reserves in case of a liquidity crisis. A swap line would also avoid forcing a liquidation of dollar-denominated assets. The Emirati officials\u00a0argued that it was President Trump\u2019s decision to attack Iran that entangled their country in a destructive conflict whose effects may not be over; they added that if the U.A.E. runs short of dollars, it may be forced to use Chinese yuan or other countries\u2019 currencies for oil sales and other transactions, strongly hinting that UAE may be forced to seek financial backing from Trump’s arch-nemesis.<\/strong><\/p>\n

In that scenario is an implicit threat to the U.S. dollar, which reigns supreme among global currencies partially because of its near-exclusive use in oil transactions.<\/p>\n

Gulf central banks hold dollar reserves in liquid assets like Treasury bonds and bills. However, using these reserves for fiscal support would be unwise according to UBS economist Paul Donovan who noted that “it would rapidly call into question the stability of the region\u2019s currency pegs to the US dollar.”<\/em><\/p>\n

The Emirati dirham is pegged to the dollar and backed by foreign-currency reserves of $270 billion, but the war has put it under pressures from capital-flight risks, stock-market volatility and other disruptions, analysts said.\u00a0<\/p>\n

The credit-rating firm S&P Global said in a March 6 report that the U.A.E.\u2019s \u201csubstantial fiscal, economic, external, and policy flexibility will act as an effective buffer\u201d against the war\u2019s economic effects. But it warned that \u201cthe potential for prolonged disruption\u201d to its oil exports and damage to infrastructure \u201cadd clear risk to our expectations.\u201d<\/p>\n

The Fed used swap lines heavily used during the 2008 financial crisis, buying the currency of other borrowing central banks with dollars and later selling it back. It also used swap lines to support foreign central banks after the start of the Covid-19 pandemic.\u00a0Countries that don\u2019t have a swap line with the Fed can still exchange their holdings of Treasury bonds for dollars through a program administered by the New York Fed.<\/p>\n

Gulf sovereign wealth funds are different. The region\u2019s wealth fund holdings (in excess of USD 5 trillion) are not for currency stability, but to provide long-term income streams. Gulf sovereign wealth fund holdings skew toward US dollar-denominated assets, but they are generally held in less liquid assets.<\/strong><\/p>\n

Using these assets to meet short term fiscal needs risks disrupting US markets. That might risk a vicious downwards spiral (like the UK\u2019s Truss debacle). <\/strong>Swap arrangements give Gulf economies the cash without creating disorderly markets. However, in the longer term, the need to reconstruct and rearm means that asset sales may be considered<\/strong>, UBS warned.<\/p>\n

On Friday, Treasury Secretary Scott Bessent defended the possibility of the US participating in currency swaps with allies in the Persian Gulf and Asia who are seeking financial backstops due to the Iran war.<\/p>\n

Discussions with those countries about US dollar swap lines \u201care part of ongoing, routine conversations that @USTreasury has been having with our partners over a number of years,\u201d Bessent said in an X post, in which he offered\u00a0a full-throated defense of additional swap lines.<\/p>\n

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Discussions with countries, including our Gulf and Asian allies, about U.S. dollar swap lines are part of ongoing, routine conversations that @USTreasury<\/a> has been having with our partners over a number of years. They are a testament to the U.S. dollar\u2019s primacy and the strength\u2026<\/p>\n

\u2014 Treasury Secretary Scott Bessent (@SecScottBessent) April 24, 2026<\/a><\/p><\/blockquote>\n

\u201cThey are a testament to the U.S. dollar\u2019s primacy and the strength of America\u2019s economic shield,\u201d he said of the potential swaps adding that dollar dominance and reserve currency status are strengthened by constant long-term initiatives, including countering the growth of problematic, alternative payment systems,\u201d he added. \u201cUnder @POTUS, this is American Economic Leadership at work.\u201d<\/p>\n

The assertion of swap lines\u2019 benefits and commonness comes as the Trump administration considers offering the financial lifeline to the\u00a0United Arab Emirates<\/a>, CNBC reported Tuesday.<\/p>\n

It also comes two days after Bessent said that \u201cmany\u201d allies in the\u00a0Persian Gulf<\/a>\u00a0are seeking the same backstop as the ongoing war wreaks havoc on the oil-rich nations\u2019 economies.<\/p>\n

A potential swap line runs the risk of being seen as an unnecessary bailout of a foreign country \u2014 especially if it\u2019s a rich one like the UAE, which has one of the world\u2019s highest per capita incomes.<\/p>\n

The Treasury can provide its own version of swaps using its Exchange Stabilization Fund (ESF), though traditional swaps are most often offered by the Federal Reserve.\u00a0The arrangements can pose political risks for President Donald Trump, whose approval ratings on the economy have sunk as war-induced supply shocks rapidly raise prices for gasoline and other products, exacerbating Americans\u2019 existing inflation woes.\u00a0<\/p>\n

Trump, asked on CNBC\u2019s \u201cSquawk Box\u201d Tuesday about a possible UAE swap line, appeared to say he is in favor of it.<\/p>\n

\u201cIf they had a problem … I would be there for them,\u201d <\/strong>Trump said.<\/p>\n

Gulf countries have also raised billions of dollars in debt from investors <\/a>– primarily PIMCO – in recent weeks via private deals, highlighting their push to have cash on hand as they face what the International Energy Agency has called \u201cthe most severe oil-supply shock in history.\u201d<\/p>\n

\"\"<\/a><\/p>\n

Bahrain also set up a roughly $5 billion swap line with the UAE. earlier this month to help improve financial stability, the countries\u2019 central banks said.<\/p>\n

Finance ministers and central bankers in Washington for the IMF and World Bank meetings said they didn\u2019t expect an easy or swift recovery for the region.<\/p>\n

\u201cThe basic logistics of scheduling tankers and bringing them back after the chaos we have seen, that will take possibly to the end of June,\u201d said Mohammed Al-Jadaan, Saudi Arabia\u2019s finance minister, during a panel on Thursday. \u201cAnyone who\u2019s counting for a quick recovery, even if there is a total end of hostilities, will need to recalculate that.\u201d<\/p>\n<\/div>\n

Tyler Durden<\/a><\/span>
\nSun, 04\/26\/2026 – 19:38<\/span><\/p>","protected":false},"excerpt":{"rendered":"

Bessent Defends US Dollar Swap Lines As UAE Considers Formal Funding Request Several Gulf countries have discussed receiving dollar swap lines from the US, the WSJ reported last week. In the near term, there is an economic drag if volumes of oil and gas sales have fallen by more than the price effect can offset,… Continue reading Bessent Defends US Dollar Swap Lines As UAE Considers Formal Funding Request<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":591848,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"rop_custom_images_group":[],"rop_custom_messages_group":[],"rop_publish_now":"initial","rop_publish_now_accounts":[],"rop_publish_now_history":[],"rop_publish_now_status":"pending","footnotes":""},"categories":[20,23],"tags":[],"class_list":["post-591858","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-economic-empowerment","category-national-security","entry"],"_links":{"self":[{"href":"https:\/\/buglecall.org\/index.php?rest_route=\/wp\/v2\/posts\/591858","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buglecall.org\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buglecall.org\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buglecall.org\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buglecall.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=591858"}],"version-history":[{"count":0,"href":"https:\/\/buglecall.org\/index.php?rest_route=\/wp\/v2\/posts\/591858\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buglecall.org\/index.php?rest_route=\/wp\/v2\/media\/591848"}],"wp:attachment":[{"href":"https:\/\/buglecall.org\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=591858"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buglecall.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=591858"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buglecall.org\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=591858"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}