The Treasury secretary said that currency swap line would benefit both the United Arab Emirates and the United States.
Treasury Secretary Scott Bessent said on Wednesday that he backed the idea of providing economic support in the form of a currency swap to the United Arab Emirates, an oil-rich ally that has been contending with economic fallout from the war in Iran.
Speaking at a Senate hearing, Mr. Bessent said that the Emirates, along with several other countries in the Persian Gulf and Asia, had inquired about the possibility of a swap. He said such a maneuver would prevent the disorderly sale of U.S. assets as nations look to secure access to dollars. The war in Iran has damaged oil and gas infrastructure throughout the Middle East, dealing a blow to economies such as the Emirates that rely on the Strait of Hormuz to transport crude around the world.
The Treasury secretary said that providing a currency swap to the Emirates could benefit the United States by stabilizing foreign exchange markets and protecting American assets around the world. He added that it could be provided by the Federal Reserve or by the Treasury Department, which can deploy its Exchange Stabilization Fund to buy another nation’s currency.
“Swap lines, whether it’s from the Federal Reserve or the Treasury, are to maintain order in the dollar funding markets and to prevent the sale of the U.S. assets in a disorderly way,” Mr. Bessent said. “The swap line would both benefit the U.A.E. and the U.S.”
A currency swap would entail the United States purchasing the Emirates’s currency, the dirham, so that it has more dollars for handling its oil sales transactions.
Senator Chris Van Hollen, a Maryland Democrat, questioned the idea of providing economic support for the Emirates and pointed out that President Trump and his family have personal financial ties to the nation. The Trump administration has been facing criticism over the cost of the conflict in Iran, which many view as unnecessary.
“The war in Iran has already cost us dearly,” Mr. Van Hollen said. “In my view, it’s been a huge mistake, made us less safe and a lot worse off.”
Mr. Bessent did not specify which other countries had asked for financial support.
The Treasury Department deployed a $20 billion currency swap through its Exchange Stabilization Fund last year to provide support for Argentina’s struggling economy as it tried to bolster the political prospects of Argentina’s president, Javier Milei. Mr. Bessent has broad discretion over the use of the fund, which had a net balance of about $44 billion as of February. It is not clear how big a lifeline the Emirates might need — or even whether it needs one at all.
The Emirati currency is pegged to the dollar, and the country’s central bank still has ample reserves, despite the disruption to oil exports that the war has caused.