The White House has discussed offering the United Arab Emirates a financial lifeline as the U.S. war with Iran is having a devastating impact on the Gulf state’s economy, a White House official told CNBC.
The UAE has not formally requested a currency swap line and no plans are currently being drawn up, the official said, speaking on condition of anonymity to discuss non-public plans. Still, it is being discussed within the administration, the person said. Such a move would provide the oil-rich United Arab Emirates with dollar liquidity but could be politically sensitive for the government as U.S. consumers struggle with higher prices at home.
The United Arab Emirates and other Gulf states have been hit hard by the US war with Iran. Tehran has fired scores of missiles at the US’s regional allies, damaging the economic infrastructure. Iran’s closure of the Strait of Hormuz has also largely halted oil exports, on which the UAE depends for its cash flow.
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The United Arab Emirates is a particularly close ally of the Trump administration and has sought rapprochements with Washington since Trump’s return to the White House. The country committed to investing more than $1 trillion in the U.S. last year. The Gulf state’s leaders are also reportedly intertwined with President Donald Trump’s family business.
Trump appeared to say on CNBC’s “Squawk Box” on Tuesday that he was willing to help the UAE when asked directly if a currency swap was being considered.
“If I could help them, I would,” the president said. “It was a good country. It was a good ally of ours.”
However, a possible currency swap line poses political risk for Trump because U.S. voters could see it as a bailout for a foreign country – and a wealthy one at that – while American consumers face higher prices.
The White House official said Trump viewed the United Arab Emirates as an important U.S. ally and was open to helping it, but warned that a swap is still “something we’re thinking about.”
A key Republican lawmaker appeared cautiously supportive of a possible swap on Tuesday.
“They are such a strong ally in the Middle East, I think we should look at what needs to be done to help them in this difficult time,” Sen. Steve Daines, R-Mont., who sits on the Senate Finance and Foreign Relations Committee, said in a brief interview. “[Treasury] Minister Bessent, he is good at a lot of things, the only thing he was really good at from his own experience before he was Secretary was currency swaps.”
“I think the secretary is moving in that direction, and I support him in that,” he said.
But Democrats are deeply skeptical of any deals the government might make with the UAE.
“Every time I’ve seen the president do anything different with the United Arab Emirates, it’s for the good of the Trump family,” said Rep. Gregory Meeks, D-N.Y., the top Democrat on the House Foreign Affairs Committee. “I understand that the UAE has been hit hard in this regard and I want to make sure we help our friends and allies in the region, but I would have to really examine this deal.”
Even if the government is willing to provide support, the final decision on providing swap lines rests with the Federal Reserve.
Historically, swap lines have been limited to major central banks and systemically important markets, so providing such a line to the UAE would represent an unusual expansion of the scope.
The prospect of a U.S.-UAE trade line first emerged last week on the sidelines of World Bank and IMF meetings in Washington, when U.S. Treasury officials pulled aside some Gulf allies and asked what they might need to rebuild their economies after the end of the Iran war, the official said. The Wall Street Journal first reported that the United Arab Emirates later floated the prospect of a possible currency swap but did not make a formal request for it.
The Journal also reported that the UAE warned that it may have to use the Chinese yuan for oil sales and other transactions if it runs out of dollars, posing a threat to the dollar’s dominance in oil markets.
The UAE denied it needed a bailout in a statement sent to X from its embassy in the US.
“Any suggestion that the UAE needs external financial support ignores the facts,” the statement said. “The United Arab Emirates and the United States will continue to thrive together in the decades to come, not because each relies on the other’s support, but because both benefit from one of the world’s most important economic partnerships.”
—CNBC’s Jeff Cox contributed to this report.
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