The United Arab Emirates has signaled it may shift to the Chinese yuan in oil trade, raising concerns in Washington over the dollar’s dominance in global energy markets. According to the Wall Street Journal, UAE Central Bank Governor Khaled Mohamed Balama conveyed the potential move during a meeting with US Treasury Secretary Scott Bessent, framing it as a response to possible dollar liquidity constraints amid escalating tensions with Iran.
The warning comes as the UAE has absorbed significant economic fallout from Tehran’s retaliation against US and allied interests. Reports indicate that more than 2,800 drones and missiles were fired at the country during recent exchanges, straining its financial resilience. Balama reportedly pressed for a US financial backstop to prevent a liquidity crunch, suggesting that without such support, Abu Dhabi could be “forced to use Chinese yuan” in oil transactions.
The US Treasury could offer a currency swap, but such arrangements typically fall under the Federal Reserve’s purview. The Fed is unlikely to approve direct support for the UAE, the Journal noted, citing last year’s Treasury-led $20 billion aid package for Argentina ahead of its election. Meanwhile, the Trump administration has floated the idea of Gulf states partially underwriting the costs of the Iran conflict, with Harvard Kennedy School Professor Linda Bilmes estimating US direct spending at $2 billion per day during the first 40 days of hostilities.
The UAE’s position reflects broader regional unease with US policy. Abdulkhaleq Abdulla, a former adviser to UAE President Mohammed bin Zayed, publicly called for the closure of US military bases in the country, arguing they are more of a liability than an asset. He advocated instead for acquiring advanced US weaponry as an alternative security strategy.
Iran has also been collecting transit fees from ships passing through the Strait of Hormuz, demanding payment in yuan or cryptocurrencies to circumvent US financial sanctions. The move underscores Tehran’s efforts to reduce reliance on the dollar and exploit alternative payment channels.
The UAE’s veiled threat highlights the growing economic leverage of China in the Middle East and the potential for shifts in the global oil trade that could undermine the dollar’s long-standing supremacy. As Gulf states reassess their security and economic ties, Washington faces increasing pressure to deliver tangible financial assurances or risk losing influence in a region critical to global energy stability.
