Step Aside, War! Arab Countries Threaten to Ditch the Dollar and Use China's Yuan
The United Arab Emirates (UAE) has warned the US Department of the Treasury that the country may be forced to use China’s yuan in oil trade. Citing a Wall Street Journal report on Sunday, this step signals cracks in the economic relationship between Washington and Abu Dhabi.
UAE Central Bank Governor Khaled Mohamed Balama conveyed what was described as a veiled threat to the dominant position of the US dollar during a meeting with US Treasury Secretary Scott Bessent in Washington last week. Citing unnamed US officials, the meeting highlighted the UAE’s shifting bargaining position.
Balama explained that Abu Dhabi might require emergency assistance to prevent a dollar liquidity crisis if the economic impacts of the US war against Iran continue to escalate. The Gulf state’s financial conditions are increasingly strained as protection costs soar.
Tehran has implemented an asymmetric pressure strategy aimed at raising costs for Washington and its allies. The UAE has borne the brunt of Iran’s retaliatory strikes on US military bases and other high-value sites, with reports of over 2,800 drones and missiles fired at the country.
The US Treasury could potentially offer a currency swap deal, though such arrangements are typically handled by the Federal Reserve. However, the media report states that Federal Reserve approval for the UAE is unlikely and refers to last year’s precedent where the Treasury arranged a US$20 billion (Rp340 trillion) aid package for Argentina ahead of key elections.
The administration of US President Donald Trump previously floated the idea that Gulf countries cover part of the Iran war costs. Citing estimates from Harvard Kennedy School Professor Linda Bilmes, the US spent US$2 billion (Rp34 trillion) per day in direct funds during the first 40 days of the conflict.
Arab frustration with US policies is also emerging in public comments from figures linked to Gulf governments. On Sunday, Abdulkhaleq Abdulla, a former adviser to UAE President Mohammed bin Zayed, called for the closure of US military bases in the country, viewing them as a burden rather than a strategic asset.
Abdulla argued that the government should prioritise acquiring advanced US weapons as an alternative national defence strategy. In his view, reliance on foreign bases no longer aligns with Abu Dhabi’s long-term interests.
At the same time, Iran has been collecting payments from ships passing through the Strait of Hormuz, deemed neutral in the conflict. Iran demands payments in yuan or cryptocurrency to avoid US financial controls and potential future sanctions.