Abu Dhabi leaves Dubai dangling over debts
It was inevitable really, considering the violence of Sheikh Mohammed’s protestations earlier in the month.
It seems that the other emirates, and Abu Dhabi in particular, may have grown tired of indulging Dubai’s reckless expansion after all. Despite Sheikh Mohammed’s vehement denial that Dubai would be left to sort out its own mess, additional help has not been forthcoming from the richest of the emirates.
Experts from Deloitte and Rothschild have been appointed to restructure Dubai World’s estimated $59 billion debt and there is expected to be a fire sale of the government owned subsidiary’s assets.
Repercussions have been felt throughout the world, with so much of Dubai’s building binge funded by borrowed money from abroad. Europe’s FTSE 100, DAX, CAC, America’s Dow Jones and Asia’s Nikkei, Hang Seng and Kopsi indexes all fell sharply on the news, but later recovered.
Dubai’s rulers tried to calm the markets with Sheikh Ahmed bin Saeed al-Maktoum, head of the Supreme Fiscal Committee, rushing to assure the world that:
Our intervention in Dubai World was carefully planned and reflects its specific financial position. The Government is spearheading the restructuring of this commercial operation in the full knowledge of how the markets would react.
But it was Abu Dhabi’s response that everyone was awaiting.
After an extended and ominous silence on the subject Reuters reports quotes from an Abu Dhabi official who says:
We will look at Dubai’s commitments and approach them on a case-by-case basis. It does not mean that Abu Dhabi will underwrite all of their debts.
Some of Dubai’s entities are commercial, semi-government ones. Abu Dhabi will pick and choose when and where to assist.
Perhaps it is no more than a strategic slap on the wrists for the ambitious emirate, or perhaps this is a lesson in accepting and preparing for the consequences over-ambition, either way these are tough times for Dubai.
Related posts:
- Sheikh Mohammed tells Dubai and Abu Dhabi doubters to shut up
- Dubai government moves to stabilise economy
- The rise, fall and salvation of Dubai
- The founding of the Al Maktoum dynasty
- Roller coaster week for Dubai shares – better times ahead?
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