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[A view of downtown Abu Dhabi, UAE (Reuters Yonhap News material photo)]
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, ‘The United Arab Emirates (UAE) has begun negotiations with the United States to establish a currency swap agreement as a financial safety net in the event of an economic crisis due to the escalating war between the US and Iran, according to the Wall Street Journal (WSJ) citing anonymous US officials on the 19th local time.’,
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, ‘According to the report, Khalid Mohammed Al Balami, the governor of the Central Bank of the UAE, attended the International Monetary Fund (IMF) and World Bank annual meetings in Washington DC last week, where he proposed a currency swap agreement to US Treasury Secretary Scott Besant and other Treasury and Federal Reserve (Fed) officials.’,
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, ‘UAE officials have conveyed to US officials that although they have so far avoided the worst economic impacts of the US-Iran war, it is necessary to preemptively secure a currency swap with the US in anticipation of potential urgent financial support,’ WSJ reported.’,
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, ‘However, the newspaper noted that the UAE has not yet formally requested to establish a currency swap agreement.’,
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, ‘The UAE explained to the US that an involuntary destructive conflict instigated by a US attack on Iran could lead them to consider using currencies like the Chinese yuan for oil trades if a dollar shortage occurs, according to the newspaper.’,
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, ‘Since the outbreak of the US-Iran war, the UAE has faced concentrated drone and missile attacks from Iran, damaging its energy infrastructure, and the closure of oil export routes through the Strait of Hormuz, cutting off critical dollar revenue sources.’,
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, ‘A currency swap is a contract that allows a country to deposit its currency with another country and receive the other country’s currency or dollars in times of emergency such as a foreign exchange crisis.’,
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, ‘Establishing a currency swap with the US, a reserve currency country, plays an important role in securing dollar liquidity during an economic crisis, thereby stabilizing the foreign exchange and financial markets of the signatory country.’,
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, ‘Previously, the Fed signed currency swap agreements with 14 countries, including South Korea, during the 2008 global financial crisis. It also signed currency swap agreements with over 10 countries, including South Korea, during the pandemic in March 2020.’,
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