Treasury Secretary Scott Bessent defended potential U.S. dollar swap lines with Gulf and Asian allies as the Iran war strains regional economies.
Treasury Secretary Scott Bessent on Friday defended the possibility of U.S. dollar swap lines with allies in the Persian Gulf and Asia, framing the discussions as routine financial planning rather than an extraordinary intervention during the Iran war.
The comments come as the Trump administration considers offering such a backstop to the United Arab Emirates, CNBC reported, and after Bessent said many Gulf allies were seeking similar protection as the war disrupts oil-rich economies.
Discussions about dollar swap lines “are part of ongoing, routine conversations that @USTreasury has been having with our partners over a number of years,” Bessent wrote in a post on X. He said potential swaps reflect “the U.S. dollar’s primacy and the strength of America’s economic shield.”
Swap lines allow two central banks to exchange equivalent amounts of currency and agree to reverse the transaction later. They are designed to improve access to dollar liquidity and ease pressure in funding markets. The Federal Reserve maintains standing dollar liquidity swap arrangements with the central banks of Canada, England, Japan and Switzerland, as well as the European Central Bank.
The tool has a long history, dating to the 1960s, and has been used in periods of financial stress, including after the Sept. 11 attacks, during the 2008 financial crisis and at the start of the Covid-19 pandemic, according to a Yale School of Management report cited by CNBC.
Treasury can also use its Exchange Stabilization Fund for its own version of swaps, though traditional swap lines are most commonly associated with the Federal Reserve.
Bessent argued Friday that additional swap lines could support U.S. interests by reinforcing dollar use, keeping dollar funding markets functioning, supporting trade and investment, and reducing the risk of disorderly sales of U.S. assets in a stress scenario. He did not name the countries under discussion in the post.
The idea carries political risk for President Donald Trump. CNBC noted that a potential swap line could be portrayed as a bailout of a foreign country, particularly if offered to a wealthy Gulf state such as the UAE. The debate is unfolding as war-related supply shocks push up gasoline and other prices and as a CNBC All-America Survey released Thursday found 60% of respondents disapprove of Trump’s handling of the economy.
Trump, asked Tuesday on CNBC’s “Squawk Box” about a possible UAE swap line, appeared supportive. “If they had a problem ... I would be there for them,” he said.
No final arrangement was announced in the captured report. For now, the administration is defending the talks as a way to strengthen dollar liquidity abroad while trying to avoid the domestic political backlash that can come with extending financial support overseas.
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