UAE Explores Financial Backstop with US Amid Regional Conflict

The United Arab Emirates has begun discussions with the United States about a potential financial backstop arrangement. These talks reflect growing concerns about the economic impact of the ongoing regional war.

Details of the Discussions

UAE Central Bank Governor Khaled Mohamed Balama raised the idea of a currency swap line with Federal Reserve and US Treasury officials during meetings in Washington last week. Among the US officials he met was Treasury Secretary Scott Bessent.

According to US officials cited by The Wall Street Journal, Emirati leaders stated they have avoided the worst economic effects of the conflict but might still need a financial lifeline.

The discussions indicate UAE concerns that the war could affect its economy and position as an international financial center, potentially draining foreign currency reserves and triggering capital flight.

It is important to note that, as of now, Emirati officials have not formally requested a swap line from the United States.

Economic Context

The regional conflict has already had tangible effects on the UAE's economy:

• The war has caused damage to UAE energy infrastructure.
• The conflict has blocked oil shipments through the strategic Strait of Hormuz, reducing a critical source of dollar income for the country.