US Weighs Financial Backstop for UAE as Iran War Strains Region

April 21, 2026 | 11:37 pm

TEMPO.CO, Jakarta - The United States has stated its readiness to assist the United Arab Emirates (UAE) if the Gulf state's economy is shaken by the conflict with Iran. The Director of the U.S. National Economic Council Kevin Hassett stated that Washington is likely to provide financial support, including dollar-based loans if needed.

According to a report by Middle East Monitor citing Hassett's interview with CNBC, he emphasized the close relationship between the two countries in the context of the conflict. "The UAE has been an incredibly valuable ally throughout this effort, and I'm sure the treasury secretary will make every effort to help them out, should that be necessary," said Hassett. He also added that President Donald Trump has described the discussions to end the war with Iran as "very positive."

Proposal for Currency Exchange

Hassett's statement follows a report by The Wall Street Journal that the governor of the UAE central bank, Khaled Mohamed Balama, discussed the possibility of a currency swap with U.S. Treasury Secretary Scott Bessent and Federal Reserve officials during a meeting last week.

In response, Hassett stated that the currency exchange scheme is likely not needed, but the U.S. remains willing to assist if conditions worsen. The currency swap is an agreement between central banks to exchange currencies.

This program is typically used to enable foreign central banks to obtain U.S. dollars at lower costs during periods of financial stress. The U.S. dollar itself is the world's reserve currency used to repay debts and purchase imports. Meanwhile, the UAE dirham is pegged to the U.S. dollar at a fixed exchange rate.

Concerns of Currency Shift

The same report also mentioned the UAE's request accompanied by signals that the country could switch to using the Chinese Yuan or other currencies for oil and trade transactions if support is not available. Like other Gulf countries, until now, the UAE has sold oil in U.S. dollars, generating "petrodollars," which are then reinvested in U.S. government bonds, stocks, and other global assets.

As reported by NDTV, the US financial backstop scheme has the potential to become a sensitive political issue. Earlier, on March 30, the U.S. government was considering asking Gulf countries to bear the costs of the war. White House spokesperson Karoline Leavitt stated that President Donald Trump was very interested in that plan.

A similar precedent occurred during the Gulf War in 1991, when Saudi Arabia and Kuwait bore costs of $16.8 billion and $16 billion, respectively, while the U.S. only covered about 12 percent.

Read: Amnesty International Paints a Grim Picture for Human Rights

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