Besant has rejected allegations that the Trump family’s financial ties to the UAE are driving the decision to offer the swap line.
United States Treasury Secretary Scott Besant has said that many allies in the Gulf region and Asia have requested currency swap lines from the US to help offset energy shocks and other fallout from the US-Israel war on Iran.
Besant told US senators on Wednesday that both the US and the UAE would benefit from the proposed swap line – the act of central banks exchanging currencies to provide liquidity that can stabilize markets in times of economic uncertainty – which US President Donald Trump said he was considering on Tuesday.
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Besant did not name the countries making such requests, but said at a budget hearing of the US Senate Appropriations Committee that such facilities would help stabilize financial markets amid the turmoil from the war.
“And the swap lines, whether it’s from the Federal Reserve or the Treasury, are meant to maintain order in the dollar funding markets and prevent disorderly selling of US assets,” Besant said. “So, the swap lines will benefit both the UAE and the US, and as I said, many other countries, including some of our Asian allies, have requested them as well.”
The U.S. Treasury last October provided a $20 billion currency swap to Argentina to help stabilize the country’s peso during a tumultuous election period, helping strengthen the position of President Javier Milie’s party.
The swap line, backed by the Treasury’s $219 billion Exchange Stabilization Fund, provided Argentina with a safety net of dollars that the central bank could use to help prop up the value of the peso and prevent devaluation ahead of the vote. It has since been paid off.
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Democrats on the committee rejected Besant’s claims. Maryland Senator Chris Van Hollen argued that such a move would put pressure on American consumers.
“In addition to lives being lost, we’re talking about over a billion dollars a day of taxpayers’ money, we’re talking about higher gas prices, higher prices overall, and now we understand that the UAE is asking you to provide them a swap line through the Exchange Stabilization Fund,” Hollen said.
“It’s more likely that this question is symbolic and one of several ways in which the UAE government is trying to signal its commitment to the US, at least in national security sensitive areas like AI development, defense and more,” Rachel Ziemba, adjunct senior fellow at the Center for a New American Security, said in a post about the currency swap idea on her Substack, Weaponized Economy.
“In addition, the UAE would like to join the nexus of global financial centres, making a swap line particularly attractive,” Ziemba wrote.
At the hearing, Van Hollen raised concerns that the Trump family’s close ties to the UAE could be responsible for the decision.
“President Trump and his family have done very good business with the UAE over the last few years,” Van Hollen said.
These include a top UAE government official investing $500m in World Liberty Financial, the Trump family’s crypto venture, and using $2bn worth of its stablecoin to invest in Binance, whose founder Changpeng Zhao was pardoned by Trump in October while the US government relaxed export controls on UAE companies, Hollen reported.
Besant denied any “connection” between those claims and this swap line.
Swap lines are usually approved by the Federal Reserve, but such a proposal is unlikely to be passed by its Board of Governors, according to media reports.
However, the Treasury has previously issued currency swaps without Federal Reserve oversight, including a $20 billion arrangement with Argentina in October.
During the onset of the COVID-19 pandemic, the Fed issued swap lines to Brazil, Mexico, South Korea, and Singapore due to economic uncertainty over emerging markets.
