What’s the catch?

Abu Dhabi hands Dubai a US$10 billion life-line

In a surprise development, oil-rich Abu Dhabi has extended a US$10 billion lifeline to its debt-laden neighbour Dubai to help it stave off default on a US $4.1 billion Islamic bond repayment. The bail-out, expected to tide over the debt-laden city-state until April, sparked a recovery in the region’s stock markets. Still, Dubai’s financial woes are far from over: Dubai World, the government-owned conglomerate at the centre of a $26 billion debt storm, still needs creditors to agree a standstill on a massive restructuring in order to get financial support to cover working capital and interest expenses. The other unanswered question is whether the bail-out is a loan or a grant. One Dubai government spokesperson said it came with “no conditionality.” Yet it’s expected some strings are attached: Among issues on which Abu Dhabi may seek concessions are Dubai’s trade with Iran, the future of its Emirates airline, and its freewheeling nightlife in a conservative Muslim region.


Looking for more?

Get the best of Maclean's sent straight to your inbox. Sign up for news, commentary and analysis.