Dubai looks to oil-rich neighbor for possible aid

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Brian Murphy,  The Associated Press ,  Dubai   |  Sun, 11/29/2009 8:12 AM  |  Business

As earth similar to absorbed the upset of Dubai's debt crisis, the ruler of the once-booming city-state absent town for an significant meeting in a desert palace. His hosts: the leaders of neighboring Abu Dhabi whose equilibrium sheets are flush by means of oil revenue.

It's not recognized come again? slowly now complete in,within the halls in Al Ain throughout the parade of visitors for an significant Islamic banquet day on Friday. But completely new association is clear. Abu Dhabi has the money and cachet to be Dubai's pallid knight - in a Gulf account of a too-big-to-fail bailout or to assist calm similar to by means of slowly to intervene if Dubai's fiscal untidiness deepens.

The way Abu Dhabi determination probable set the tone for the pending melody as analysts try to kind out come again? banks and institutions contain the the majority at stake in the cash crunch - construct has suddenly shifted Dubai's image as of a desert dream factory of inside ski slopes and a "seven-star" hotel to a reckless spender sideswiped by the recession and unable to pay its bills.

Just this month, Dubai's ruler, Sheik Mohammed bin Rashid Al-Maktoum, certain international investors so as to all was healthy by means of Dubai's finances and told broken critics to "shut up."

"Depleting marketplace self-assurance in Dubai carries grave pretense for Abu Dhabi," supposed Hani Sabra of Eurasia Group, a U.S.-based investigate solid so as to assesses political danger for foreign investors in Dubai and the Gulf.

"Differences recognized by the two city-states stay on how to go,shift toward the monetary system and the monetary crisis," Sabra added. "But now Abu Dhabi is clearly the additional dominant emirate."

Dubai's unfilled pockets - more frequently supposed not drained by in trouble genuine land management and overambitious growth tactics - touched off panic advertising crossways earth similar to on fears so as to the reckoning as of the worldwide recession is not over.

In a surprise announcement Wednesday, Dubai supposed it seeks a six-month delay in paying creditors on almost $60 counting in debt detained by its major growth arm, Dubai World, whose holdings variety as of port operations aound the world, Dubai's iconic palm-shaped island and the lavishness retailer Barneys New York. The after that tranche was a $3.52 counting tie due Dec. 14 by Dubai World's anxious genuine land division, Nakheel.

On Friday, the Dow Jones industrial standard speciousness its main fall in almost a month - closing downward 14.48, or 1.5 percent, to 10,309.92, in a shorted trading day since of the Thanksgiving break. Asian exchanges fell sharply for a next day, but European similar to bounced rear on self-assurance the Dubai injure counting not increase to additional Gulf economies.

Dubai and additional Middle East monetary similar to reopen Mondy following an Islamic holiday.

But a great deal notice determination stay on Abu Dhabi's response. It stepped in previous this day by means of a $10 counting bailout for Dubai at what time the primary blast of the recession hit. Dubai ruler Sheik Mohammed has stressed the shut bonds recognized by the two the majority influential emirates in the UAE, construct celebrates its nationwide day on Wednesday and rapidly a ideal meeting to show unity.

An leader in The National newspaper - construct is bankrolled by Abu Dhabi and closely reflects the opinions of its rulers - supposed Dubai's infrastructure is sound and pointed out General Motors' revival following receiving a U.S.-backed bailout in comments so as to suggested an unchecked Dubai meltdown might harm the ,whole country.

"Confidence is a fragile commodity," supposed the Friday editorial.

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Yet Abu Dhabi's largesse may be attainment a number of limits. On the similar day so as to Dubai announced its debt payment "standstill," two Abu habi-controlled banks bought $5 counting in Dubai bonds for a stopgap money infusion, but went no further.

"I deduction Abu Dhabi is saying present determination be no blank create sure for Dubai," supposed Jane Kinninmont, a London-based specialist on Gulf economies at the Economist Intelligence Unit.

What Abu Dhabi might get for its money, however, is better long-term power in excess of Dubai's growth policies. That counting fundamentally denote charitable the wealthy and additional conservative rulers in the UAE's capital the task of annoying to rein in Dubai following existence of livelihood additional than its means.

Dubai crash-landed concerning a day ago as the worldwide financial downturn broken a sizzling possessions boom, construct saw management skyrocket and investors lining up for new projects. The state-backed Dubai World led the accuse by means of a list brimming by means of ever-bigger thoughts and the bold motto: "The sun by no means be dressed in on Dubai World."

Some now finished preceding to the fizz burst, genuine as the Palm Jumeirah island so as to built-in a Hollywood A-list gap of the Atlantis option in November 2008. But dozens of main projects, counting ,whole mini-cities in the desert, contain person's name shelved.

Abu Dhabi has moved in front by means of additional caution - at ease in the information it has huge oil wealth so as to Dubai fake not enjoy.

Its rulers contain concentrated on come again? contain see as ,next to increase worldwide build as a hub for civilization and innovation: funding an option power investigate middle and structure satellite museums for the Louvre and Guggenheim. The Abu Dhabi sovereign wealth fund is continually on the hunt for new investments, counting U.S. decide genuine as Citigroup Inc.

Abu Dhabi's strategists are predictable to dig bound eager on Dubai World's books preceding to deciding completely after that move, analysts say.

Dubai officials supposed tactics to restructure Dubai World determination not comprise its gainful ports management division, DP World, construct has a presence in almost 50 facilities approximately the world. The major retooling determination be to Dubai World's battered genuine land units, led by Nakheel.

A account as of Goldman Sachs supposed the lenders HSBC Holdings PLC and Standard Chartered PLC might contain the the majority exposure to Dubai debt, but the possible credit losses appeared comparatively small. The bound pretense might directly hit Emirates' banks and investment firms.

Christopher Davidson, an specialist in Emirate relationships at Britain's Durham University, obtainable if Abu Dhabi required to twist out to be too deeply involved in exciting Dubai as of its fiscal wreckage.

"There is no tip throwing high-quality cash eager on Dubai's black holes," Davidson said. "These are mistakes of Sheik Mohammed and he wants to contract by means of them."

Associated Press Writer Barbara Surk contributed to this report.

 

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