A weak and uncertain statement from the UAE has stoked ‘fears of tension between emirates,’ The panic question among businessmen in the region is whether Dubai will default or not. Some investors are quick to defend the emirate. According to Thani al-Falaasi, a businessman in Dubai, “Only a few decades ago, this country was nothing, just a desert. Sheik Mohammed built it up. Even if there is a crisis, he can solve it. We have great confidence in him.” Some fear that Dubai’s total debt could be as high as $120 billion.

What is adding panic to the ongoing Dubai financial crisis, surprising that it was, is the ‘vaguely-worded statement of support for Dubai’ by the United Arab Emirates. Investors are not reassured with the gesture, especially that many fear the rocky relations between the two emirates of the cash-strapped Dubai and oil-rich Abu Dhabi.’

The most intelligent and dominant of speculations states that Abu Dhabi ‘could easily wipe out Dubai World’s delinquent $59 billion debt, but it’ll want major concessions in any bailout’ such as demanding ‘a stake in prominent Dubai enterprises like Emirates Airlines.’

Tensions between Dubai and Abu Dhabi have been common. ‘Dubai is seen as the brash, secular upstart of the seven emirates, and Abu Dhabi is known as the religious and conservative big brother.’ It is a well-known fact that Abu Dhabi has more oil than Dubai and no cash problems.

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Via The New York Times