Dubai Sheikh Turns to Abu Dhabi for Financial Assistance
As Dubai’s debt worsens, its ruler, Sheikh Mohammed bin Rashid al-Maktoum may have to turn to its oil-rich fellow emirate, Abu Dhabi for help.
MARWAN NAAMANI/AFP/Getty Images/FILE
But will that emirate assist Dubai again? Abu Dhabi already helped Dubai earlier this year with a $10 billion bailout when the global recession first hit. Sheikh Mohammed has always said the two emirates have tight bonds, but how the two will ride out this financial crisis will determine that.
“Differences between the two city-states remain on how to approach the economy and the financial crisis,” said Hani Sabra of Eurasia Group, a U.S.-based research firm. “But now Abu Dhabi is obviously the more dominant emirate.”
When Dubai announced its debt payment was being put on hold, two Abu-Dhabi banks bought $5 billion Dubai bonds, but nothing more.
“I guess Abu Dhabi is saying there will be no blank check for Dubai,” said Jane Kinninmont, a London-based specialist on Gulf economies at the Economist Intelligence Unit.
Just this month, Sheikh Mohammed insisted that all was well with Dubai’s finances and told media critics to “shut up.” Most of the plans he had for Dubai’s development – such as real-estate on the artificial island Palm Jumeirah, and other major property plans – have been put on hold. As a result, Dubai has become the biggest symbol of the global property bubble bursting. Its financial woes have some wondering if another crisis is on the way.
Next week may display that. The global stock markets reopen on Monday, following the shockwaves Dubai caused on Friday. Wednesdaay is the UAE’s national day. Whether Abu Dhabi is willing to help its neighbor remains to be seen.
“There is no point throwing good money into Dubai’s black holes,” said Christopher Davidson, an expert in Emirate affairs at Britain’s Durham University. “These are mistakes of Sheikh Mohammed and he needs to deal with them.”
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Tags: Abu Dhabi, Dubai, economics, finance, Sheikh Mohammed Al-Maktoum
