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UAE is in a tough spot because while they have diversified from oil, the industries they have diversified into like tourism, air travel and banking, were relying on a halo of safety that turns out to not exist.
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Also, for tourism they aren't exactly welcoming to western culture. They don't even allow trans or non binary people (X) to transit to other places at dubai or abu dhabi. Can't have your cake and eat it.
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That Western culture is only a few years old and only affects a tiny percentage of people who opt into it.
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While true, that doesn't really factor into this given that that market is so small that they don't lose anything by banning things that aren't compatible with their values.

So no, they most definitely can have their cake and eat it, and have done so for over two decades.

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Emirates is one of the world’s largest airlines, and in many parts of the world Dubai offers the best and most frequent air connections between various cities. So while UAE itself may be a small market, it’s quite a major transit route.

They also turn a blind eye to plenty of other things that go against conservative islamic values: alcohol is served onboard, gay flight attendants are employed, etc. So it’s surprising to me that they aren’t a bit more tolerant here.

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You always choose where to draw your lines.

It may be confusing to others but it's ultimately your choice.

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I think it's not so much that they don't have liquid assets they can sell.

The issue is those liquid assets are US Treasuries and US public market equities (mag7 etc.).

They don't really want to sell them, and they also know that the US really doesn't want them to sell them - the last thing Trump wants heading into the midterms is an S&P500 bear market and 10y treasuries heading back to 5+%.

So they ask for a swap line and they're negotiating from a position of strength, the US doesn't have much of a choice but to give them as much as they need and damn the consequences

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This kind of cooperation is not unprecedented, for example they've collaborated in the occupation of Socotra.
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Sometimes foreign aid is good, other times it's bad.
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