Monday, December 14, 2009

Dubai Bailout

Today's biggest economic news is probably Abu Dhabi's decision to bail Dubai out of its economic woes with $10 billion. This has apparently been a trend:
"Abu Dhabi, which controls the UAE's presidency, has directly and indirectly provided Dubai with $25 billion over the past year, mostly by buying Dubai bonds. In all, Dubai's known debts are roughly equal to its total economic output last year. The full extent of its liabilities is uncertain, however, with some analysts putting the total at $100 billion or more.

"The aid package is key for Dubai, which despite its international celebrity has little of the oil wealth held by Abu Dhabi. Dubai's ruler is the UAE's vice president and prime minister."

What I'm wondering about is whether this will have an impact on Emirati politics, in which Dubai has proudly tried to stake out a position as Abu Dhabi's independent near-equal. Now that it's become the Arab Iceland, however, and been saved only by its wealthier neighbor, can it keep that up? Generous financial transfers are how Abu Dhabi built the UAE during the early oil boom under Shaykh Zayed bin Sultan.



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