On April 22, Treasury Secretary Scott Bessent publicly disclosed that the United Arab Emirates (UAE) was in discussions with the United States government about a currency swap to assist the Gulf nation as it struggles with a liquidity crisis caused by the war with Iran. He supported the concept and said that “many” U.S. allies in the region have asked for swap lines amid the economic shock of the Iran war that has left them short on dollars—the currency for oil trading—as shipping through the Strait of Hormuz has all but stopped.
This is not a conventional currency exchange between central banks, for instance, as between the Federal Reserve System and its central bank counterparts during the financial crisis of 2008, a point ignored or quickly glossed over in news accounts of the proposed exchange of dollars for UAE dirhams. The Fed engages in exchanges with independent central banks that it considers near-peers, such as the Bank of England or the Bank of Japan.
So far, the UAE hasn’t formally asked for the swap, but Bessent said he would use the Exchange Stabilization Fund (ESF), a normally obscure account within the Treasury Department, to facilitate the swap with the UAE and potentially with other requesters. However, there is some question of whether the fund is large enough to accommodate the UAE’s shortfall. The last time the ESF was used should set off alarm bells.
In September 2025, Bessent pledged a $20 billion bailout for the Argentine government through the ESF. The purpose was to give electoral help to Argentine President Javier Milei, thereby helping entrench him as a strong man in the mold of Viktor Orbán. This scheme was the inverse of Trump’s imposition of tariffs on Brazil to “punish” the country for bringing his would-be dictator friend Jair Bolsonaro to justice after he lost his reelection bid in 2022, and prompted some wags to say that MAGA stood for “Make Argentina Great Again.”
It should also be noted that a politically charged operation like the Argentine bailout was not something the independent Federal Reserve would have been likely to undertake under normal circumstances, and certainly not while Jerome Powell remained Fed chairman. The Treasury Department, under the executive branch, is different. One of Trump’s pliable cabinet members, in charge of a fund like ESF, whose use requires no congressional approval, would be a natural choice.
It does not take a great deal of imagination to hypothesize why the UAE might receive similarly favorable treatment and why it might jump to the head of the line of countries reeling from the Iran War. In early 2025, entities linked to the UAE invested heavily in Donald Trump’s business ventures, including a $500 million stake in the Trump family’s cryptocurrency venture, World Liberty Financial. This investment included a 49-percent stake bought by a firm connected to Abu Dhabi royal Sheikh Tahnoon bin Zayed. In 2023, the UAE sovereign wealth fund invested around $200 million in Affinity Partners, the firm run by Jared Kushner, Trump’s son-in-law and negotiator with Iran (and Israel/Hamas and Russia/Ukraine).
If the UAE, along with other Gulf satrapies, is short of operating funds due to the closure of the Strait of Hormuz, it could lead to a distressed liquidation of many of its assets in the U.S., including U.S. Treasuries and other debt instruments. Given that the UAE has over $1 trillion invested in America, this could potentially cause a market meltdown. Bessent himself has given the rationale that he wants to avert a “disorderly” sale of assets by the UAE and other nations. To the extent the crisis is real, it is yet another indictment of Trump’s reckless misadventure in the Persian Gulf. As with certain bailouts associated with the Financial Crisis, a swap with UAE may have become a grim necessity but only because a cavalcade of buffoonery and malevolence got us into this mess.
That a portion of UAE’s assets are invested in Trump and his family, however, gives off more than a whiff—more like a stench—of corruption. At the time of the 2008 financial crisis, there was much debate about the wisdom of bailing out the banks or General Motors. The moral hazard, according to detractors, was too great. But when a president’s family can receive tribute from foreign despots in the form of “investments” in his family’s businesses and then order his Treasury Secretary, once a respected financial advisor who worked for George Soros, to bail out those “investments” with taxpayer funds demonstrates that under Trump, the United States has sunk to the level of a banana republic.
