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Akbar Novruz

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Authorities in the United Arab Emirates held talks last week with the United States over a potential financial “lifeline” in case tensions linked to the conflict with Iran escalate further, AzerNEWS reports.

According to the Wall Street Journal, the meeting involved UAE Central Bank Governor Khaled Mohamed Balama, US Treasury Secretary Scott Bessent, and representatives of the Federal Reserve System. Discussions reportedly focused not on a loan, but on a pre-approved currency swap arrangement.

UAE officials described the move as precautionary, stressing that the situation is not yet critical. However, they acknowledged that recent Iranian strikes have inflicted significant economic damage.

“They also believe that President Donald Trump’s decision to attack Iran has drawn their country into a destructive conflict, the consequences of which have not yet been fully resolved,” the report said, citing sources. “They have told US officials that if the UAE does not have enough dollars, they will be forced to use yuan or other currencies for transactions.”

Such a shift could have broader implications for the global financial system, where the US dollar remains dominant, particularly in energy markets, where most oil contracts are denominated in dollars.

The report notes that the UAE currently does not have a standing swap line with the Federal Reserve, and it remains unclear whether such a request would be approved. Existing arrangements are typically reserved for close US partners, including Mexico, Canada, Brazil, the European Union, and more recently Argentina.

The issue comes amid heightened financial activity in the Gulf. The Financial Times recently reported that Persian Gulf states have increased debt issuance, taking advantage of a temporary ceasefire to secure funding through both sovereign and state-backed channels.

The Emirati dirham, which is pegged to the US dollar, is supported by reserves of around $270 billion. However, the ongoing conflict has put pressure on the currency due to capital outflows, market volatility, and broader economic uncertainty.