BackAbu Dhabi to aid Dubai “case by case”
Abu Dhabi to aid Dubai “case by case”
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Abu Dhabi: Abu Dhabi, capital of the United Arab Emirates and one of the world’s top oil exporters, will “pick and choose" how to assist its debt-laden neighbour Dubai, a senior Abu Dhabi official said on Saturday.
“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," the official in the government of the emirate of Abu Dhabi told Reuters by phone.
A policy of selectively assisting cash-strapped companies affiliated with the government of Dubai, instead of providing blanket assistance, challenges assumptions made by many investors who assumed that wealthy Abu Dhabi provided a complete safety net for its racier neighbour.
Dubai’s crisis exploded on Wednesday when the emirate, known for flashy lifestyles and the world’s tallest building, said it would delay payment on debt issued by one of its flagship firms, angering investors and sending global markets sharply lower.
“Some of Dubai’s entities are commercial, semi-government ones. Abu Dhabi will pick and choose when and where to assist," said the official, who declined to be identified because he is not authorised to speak to the media.
Abu Dhabi, which pumps 90% of the oil that make the United Arab Emirates the world’s third-largest oil exporter, has already provided $15 billion in indirect support for Dubai through the UAE central bank and two private Abu Dhabi banks.
How much more support the emirate provides for its cash-strapped neighbour, however, will depend on how Dubai clarifies its stand on unresolved issues.
“Until things become clearer, it is very difficult to make any further investment decision on the bonds. Many things have to be clarified by Dubai," the official said.
Central bank monitoring
The UAE central bank said it was closely watching events stemming from the Dubai debt crisis to ensure no harm results for the national economy, a spokesman for the central bank said on Saturday.
“The central bank is monitoring developments very carefully to ensure that there is no negative impact on the UAE economy," the spokesman told Reuters by phone.
Constitutionally, each emirate in the UAE is a separate legal entity within the loose federation, and each controls its own natural and financial resources. The federal government has no guaranteed access to those resources nor is it obliged to underwrite the liabilities of any emirate.
International markets were rocked when Dubai said on Wednesday it was instigating a major restructuring at one of its biggest holding companies, Dubai World.
As part of the restructuring programme, investors have been advised of a “standstill" in repayment of flagship real estate developer Nakheel’s $3.5 billion Islamic bond, or sukuk, due for maturity on 14 December.
Dubai World had $59 billion of liabilities as of August, making up the majority of Dubai’s total debt of $80 billion. International banks’ exposure related to Dubai World could reach $12 billion in syndicated and bilateral loans, banking sources told Thomson Reuters LPC.
A statement from the Dubai government is expected on Monday, when the markets reopen following an extended break for Eid, a religious holiday observed across the Gulf region.
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