The most striking moment in recent talks between United Arab Emirates officials and U.S. Treasury officials in Washington wasn’t the Emiratis’ suggestion of a currency swap line, but the warning they attached to it.
If the UAE runs out of dollars, Emirati officials reportedly told their American counterparts, it might be forced to use Chinese yuan instead of U.S. dollars for its oil sales and other transactions.
The U.S. dollar’s dominance rests, in part, on its near monopoly over oil transactions. And because the vast majority of global oil transactions are settled in dollars, almost every country must hold greenback reserves to buy fuel.
A Gulf ally openly floating the idea of yuan-denominated oil trade is therefore sure to get Washington’s attention, and serve as a reminder to the U.S. that alternatives exist.
The specific vehicle the UAE raised was a currency swap line —…
