"Status is more important than dollars": why the Emirates want to join the "elite club" of central banks

The United Arab Emirates has made it clear that the currency swap talks it is having with the United States are not driven by a need for external financing, but by a desire to join a small club of countries that have access to Federal Reserve liquidity lines, Bloomberg writes.

The agency drew this conclusion from comments by UAE Foreign Trade Minister Thani Al Zayoudi. "This is a matter of elite status, not financial assistance," the minister said at the Make it in the Emirates forum in Abu Dhabi on Ma. 4(quoted by Reuters).

He said the U.S. only implements its swap policy with an "elite group" of five countries. "Membership in this group means that transactions, trade, investments between the two countries reach a level where such a swap is really necessary," Al Zayoudi said.

The minister did not name the Fed and did not specify with whom exactly the talks are being held. But now only the European Central Bank, Great Britain, Japan, Canada and Switzerland have permanent dollar swap lines with the Fed, Bloomberg writes. This allows them to use the U.S. currency to support national financial institutions in times of crisis.

Fed officials declined to comment for Bloomberg.

It became known in April that the United Arab Emirates was discussing the possibility of a dollar swap with the United States. The Emirates - one of the richest countries in the world with a wealth fund with assets worth trillions of dollars - said that they do not need external financing even in the war in the Middle East, notes Bloomberg. UAE Ambassador to Washington, Yousef Al Otaiba, suggested that the talks rather signaled deepening economic ties with the United States. Abu Dhabi has pledged to invest $1.4 trillion in the U.S. over the next ten years, including in energy infrastructure and artificial intelligence data centers.

The liquidity swap line with the Fed differs from a similar instrument of the U.S. Treasury Department, Bloomberg explains. The latter is usually provided to countries experiencing financial difficulties or facing a balance of payments crisis. Last year, the Treasury Department concluded a similar agreement for $20 bln with Argentina.

"This is a call for confidence, not a plea for help," Ziad Daoud, chief emerging markets economist at Bloomberg Economics, wrote in an April 22 research note, commenting on the UAE's situation. He said the Emirates simply "want to join the club of central banks" that have standing swap lines with the Fed. "Status is more important than dollars," the economist emphasized.

This article was AI-translated and verified by a human editor