The global financial crisis ended the oil and real estate
fuelled boom in the world’s biggest oil producing region,
sending its top economies — Saudi Arabia and the UAE — into a
downturn this year.

Dubai’s debt problems have further dented expectations that
the UAE could return to solid growth next year.

“Regarding the global financial crisis, we — praise God –
with the solid foundations of our economy … have been able to
contain the negative impact of the (global) crisis and overcome
many of its ramifications, UAE President Sheikh Khalifa bin
Zayed al-Nahayan told the official Kuwait news agency, KUNA.

“We have the capability and determination to continue
working in this direction to complete the steps we have taken in
this regards to arrive at removing all the obstacles that
prevent the continuation of the momentum and thrust of the
development process,” he said in an interview.

Saudi oil minister Ali al-Naimi told a petrochemicals
conference in Dubai that Gulf economies remained strong.

“The soundness and growing diversification of our regional
economy will help restore calm following the turbulence of the
moment,” he said.

Saudi Arabia, the Arab world’s largest economy and world’s
biggest oil producer, has said its banks have only very limited
exposure to the Dubai debt crisis.

State-controlled Dubai World stunned global markets by
asking for a debt standstill last month as it tries to
renegotiate a multi-billon dollar debt mountain. [ID:nGEE5AO2FN]

The UAE economy was expected to expand by 2.9 percent next
year after shrinking by 1.1 percent in 2009, a Reuters poll
showed last month. [ID:nLK68345]

But Dubai’s shock announcement that it would ask creditors
of its flagship firms for a standstill on billions of dollars of
debt made some economists expect a more modest UAE
recovery. [ID:nGEE5B11T1]

Sheikh Khalifa said the UAE and fellow members in the Gulf
Cooperation Council — a six-member loose economic bloc — would
look into further moves to immunise their economies against the
global financial crisis and “any possible ramifications”.

“It is only normal that the Kuwait summit would review the
steps taken by the Council countries in this regard and to study
any completing steps to fortify the economies of the Council
countries and avoid any possible ramifications,” he said.

Sheikh Khalifa did not elaborate on the envisaged steps in
an interview with KUNA ahead of the Dec. 14-16 Gulf Arab summit,
where he is going to meet the fellow rulers from Saudi Arabia,
Kuwait, Qatar, Oman and Bahrain.
(Writing by Martin Dokoupil and Andrew Hammond; editing by
Mike Peacock, John Irish and Toby Chopra)

Dubai World met its main creditors on Monday to discuss its
request to delay repayment of $26 billion, which has shaken
global markets and confidence in the Gulf business hub.

Dubai shocked the world in November when it asked creditors
for a six-month standstill on debt worth billions of dollars
held by Dubai World and its subsidiary Nakeel.

“The period of six months would be too short for a full
restructuring,” Abdulrahman al-Saleh told Al Arabiya televison
said. “The six-month period would focus on the creditors, the
contractors and so on.”

Dubai’s government would support the group “as an owner”, he
said without being more specific.

“The government is present to provide backing as an owner
… we would like to emphasise the distinction between
guaranteeing and backing. The company receives large backing
from the government since its inception,” Saleh said.

He did not rule out using the land bank of Nakheel, the
group’s developer, so long as local law permitted but said the
issue could only be decided through talks between the firm and
its lenders.

Dubai allows foreign ownership only in certain free-zone
areas.

Saleh said it was premature to talk about cash injections
into Nakheel. The developer has already received funds from a
$20 billion fund aimed at helping the emirate’s
government-linked companies.

Saleh also reassured investors that the government would be
able to tap debt markets in the future. Dubai raised about $2
billion in an Islamic bond sale earlier this year as part of a
wider $6.5 billion borrowing programme.

“We believe yes … the media exaggerated the situation …
Dubai is capable of meeting its sovereign debt,” he said when
asked if the debt market would accomodate any borrowing requests
by Dubai in the near-future.

Dubai’s debt rescheduling plans could continue beyond the
recently announced Dubai World standstill, extending to about
$47 billion on the back of further restructuring needs of
government-related entities, Morgan Stanley said in a note on
Tuesday.

When asked if the agencies had sought data from the
government about the firms they downgraded, Saleh said: “Ratings
agencies did not communicate with the government.”

He did not say when Dubai might tap the markets next.

Saleh reaffirmed that Dubai World had enough assets to meet
its obligations but did not give details of which assets would
be available for sale.

(Reporting by Inal Ersan and Jason Benham; writing by John
Irish; editing by Karen Foster)

The firm that spearheaded Dubai’s growth is set to meet with its main bank creditors later on Monday to discuss a request to delay repayments that has shaken global markets and damaged the reputation of the Gulf Arab business hub.

London-listed Standard Chartered, HSBC, Lloyds and Royal Bank of Scotland will attend the creditors’ meeting, along with United Arab Emirates lenders Abu Dhabi Commercial Bank and Emirates NBD, an Abu Dhabi bank executive said last week.

The UAE central bank told local banks to report any exposure to Dubai World in a circular dated December 6, bankers said.

Dubai’s finance chief said while Dubai World might sell some assets to finance its commitments, the government, which borrowed to transform the emirate from a desert backwater into the a major trading and tourism center, would not make any disposals of its own.

He said that Dubai’s government and Dubai World were not the same, suggesting the emirate’s most valuable firms like Emirates, Dubai Aluminum (DUBAL) or its 21 percent London Stock Exchange stake would not be involved in a firesale.

His comments sent the Dubai bourse tumbling almost 6 percent to a 20-week low, reversing gains made on Sunday. DP World, Dubai World’s flagship port operator, fell 5.5 percent.

“There is confusion in the media that the government plans to sell assets,” Abdulrahman al-Saleh, head of Dubai department of finance, told Al Jazeera television. “The company has foreign investments and real estate investments abroad. There is nothing to prevent selling these assets.”

MARKET JITTERS

The emirate’s overall assets could be worth as much as two to four times their debt, according to analysts. Moody’s estimates Dubai debt at about $100 billion.

But quite what Dubai World could sell remains unclear.

The struggling group shed some light on November 30 on how it planned to restructure the $26 billion debt pile, including through asset sales, but said Istithmar World, DP World and Jebel Ali Free Zone would not be included.

Istithmar’s portfolio ranges from U.S. high-end retailer Barneys to the luxury W Hotel in Washington D.C. as well as sought-after property in London including 10 Whitehall Place. Infinity World, another unit exempt from the plans, is a stakeholder in MGM Mirage.

“Is it enough? What exactly are they are putting aside and even if they do both of these, will they find the right price and willingness of investors outside of Dubai to buy into them?” said John Sfakianakis, chief economist at Banque Saudi Fransi.

The cost of insuring Dubai’s debt against restructuring or default rose on Monday to 496 basis points from 485.5. The $3.5 billion sukuk bond for Nakheel, maturing this month, one of the issues to be restructured, fell 1 point to 53 points, while property stocks were all trading limit down.

“(The market) did not react well to the Dubai government news, which again cast a cloud of doubt,” said Ayman el-Saheb, Darahem Financial Brokerage’s director of operations.

REGIONAL SUPPORT

Since Dubai World requested a payment standstill on November 25 regional government officials and bankers have looked to downplay the impact of the measure on their economies.

Bahrain’s central bank governor said on Monday the kingdom’s exposure to Dubai World was limited to $281 million.

Deutsche Bank’s Middle East’s chief executive Henry Azzam said the lender did not have any exposure, and that he did not expect a major impact on the region’s banking sector.

Qatar’s Prime Minister Sheikh Hamad bin Jassim al-Thani, whose country is a major gas exporter and an active global investor, said the media had exaggerated Dubai’s debt problems.

“It is normal for such things (debt problems) to happen during the global crisis,” he said in remarks carried by country’s state news agency.

“Therefore things should not be given connotations beyond what they bear.”

(Reporting by Matt Smith, Frederik Richter, Stanley Carvalho, Rania Oteify, Rachna Uppal and Jason Benham; Writing by John Irish; Editing by John Stonestreet and Lin Noueihed)

Flags, fairy lights and fanfare marked the UAE’s 38th
anniversary at a moment when Dubai’s request for a payment delay
on $26 billion of debt owed by government-owned Dubai World has
exposed the frailties of “quasi-sovereign” lending.

It has also provoked questions about whether Abu Dhabi, the
oil-producing powerhouse of the seven-emirate federation, will
rescue its ambitious neighbour, perhaps exacting a political
price.

Abu Dhabi’s ruler, who is also the president of the UAE,
said on Tuesday that the national economy was in good shape, but
made no comment on the debt woes disclosed by Dubai on Nov. 25.

UAE markets, battered in two days of trading this week, were
closed on Wednesday, but other Gulf bourses were expected to
fall as the impact of Dubai’s debt restructuring continues to
send ripples across the region.

Anshuman Jaswal, an analyst with Celent, a Boston-based
financial research and consulting firm, said Dubai World’s
planned restructuring had shown the need for transparency.

“The panic caused could have been at least partly averted if
there was clarity about the fact that debt worth $26 billion
needed to be restructured,” Jaswal said.

“Secondly, companies such as Dubai World can no longer be
seen as having the protection of their respective governments.
This is true all over the region and not just in Dubai.”

Dubai World said on Monday that it had started negotiations
with its lenders over $26 billion of debt owned by its main
property firms, Nakheel World and Limitless World, that matures
before the standstill deadline of May 30, 2010.

This indicates a staggered approach to solving the Emirate’s
debt problems — tackling bond and loan maturities as they fall
due — which will do little to reassure loan and bondholders who
are scrambling to assess support for their debt, bankers said.

“If banks are put into a Dubai World restructuring, they
will have to decide whether to cut their lines to Dubai and if
they would be prepared to refinance other Dubai debt,” one
London-based banker said.

The $26 billion of debt affected under the standstill
includes a $3.52 billion sukuk bond for Nakheel that matures in
December and another 3.6 billion dirham bond due May 2010.
[ID:nGEE5B01GJ]

SPOOKED MARKETS RECOVER

Global markets were alarmed when news first broke that Dubai
World, which led Dubai’s transformation into a regional hub for
finance, investment and tourism, could not meet its debt
commitments.

But fears of contagion have eased despite further falls in
Gulf stock markets, and European finance ministers said on
Tuesday that Dubai’s debt troubles would have little impact on
their region, which is emerging from recession.

“What we understand today is there is no systemic risk,” said
French Economy Minister Christine Lagarde. “It’s not a drama for
the world of finance and the impact seems to be essentially
regional.”

Dubai’s government has made clear it will not guarantee the
debts of Dubai World — the group has almost $60 billion in
liabilities overall — including those of units not included in
the restructuring.

“It seems likely that an arrangement will be found with the
creditors,” said Baldwin Berges, in a note for Silk Invest, a
British fund manager, arguing that market reaction could have
been less severe had expectations been managed better.

“Dubai is a maturing economy and it is now confirmed that
there is room for success and failure,” he wrote.

“By the initial reaction on markets, it seems that many
foreign investors actually believed that businesses were `bullet
proof’ in Dubai and that they could count on unconditional
financial support from the local authorities.”

Legal documentation showed the government did not guarantee
Dubai World’s debt, something investors receiving a spread above
governmental debt should have realised, Berges wrote.

“In contrast to some developing countries which have stepped
up state aid in the last months, Middle Eastern governments are
choosing to not to so,” he added. “In essence, they are sending
out a message that companies and their investors must understand
they are fully accountable for their actions.”

(editing by John Stonestreet)

((alistair.lyon@reuters.com; +9611 983 885; Reuters
Messaging: alistair.lyon.reuters.com@reuters.net))

Dubai, one of seven members of the United Arab Emirates
federation, alarmed global markets last week when it asked for a
six-month repayment freeze on debt issued by Dubai World
[DBWLD.UL] and its unit Nakheel [NAKHD.UL], two of its flagship
developers. [ID:nSP5757]

“They do not understand anything,” Sheikh Mohammed bin
Rashid al-Maktoum said when asked about the global reaction to
Dubai World’s standstill request and restructuring plans.

The issue raised concern about the health of the emirate’s
economy as investors and creditors were assuming that the
government would help Dubai World shoulder its obligations.

“We are strong and persistent,” Sheikh Mohammed told
reporters. “It is the fruit-bearing tree that becomes the target
of (stone) throwers,” he added, in an apparent reference to
criticism of the emirate over the issue.

The remarks by Sheikh Mohammed came after United Arab
Emirates President Sheikh Khalifa bin Zayed al-Nahayan said the
OPEC member’s economy was strong and will not slip due to the
global financial crisis.

Sheikh Khalifa also voiced support for Dubai’s ruler, who is
also UAE vice president, prime minister and defence minister,
saying Sheikh Mohammed and his cabinet “face every morning
challenges, but plan and remove all obstacles to score
achievements”.

Sheikh Khalifa said the national economy was showing signs
of gradual growth in the fourth quarter.
(Editing by David Holmes)
((inal.ersan@thomsonreuters.com; +971 4 366 4255; Reuters
Messaging: inal.ersan.reuters.com@reuters.net))

Abu Yahya al-Libi, in a video posted on an Islamist website on Wednesday, warned China of a fate similar to that of former communist superpower, the Soviet Union, which disintegrated some two decades ago.

“The state of atheism is heading to its fall. It will face what befell the Russian bear (Soviet Union),” he said in the message in which he accused China of committing massacres against Uighurs and seeking to dissolve their identity.

Soviet forces invaded Afghanistan in 1979 to prop up a Marxist government against Islamist fighters, but was ground down by guerrilla warfare and withdrew in 1988-89. Al Qaeda emerged from the groups that fought Soviet forces at the time.

Uighurs are Muslim native to Xinjiang province, which Islamists call East Turkistan, and have cultural ties to Turkic peoples in Central Asia.

“There is no way to remove injustice and oppression without a true return to their (Uighurs) religion and … serious preparation for jihad in the path of God the Almighty and to carry weapons in the face of those (Chinese) invaders,” he said.

“It is a duty for Muslims today to stand by their wounded and oppressed brothers in East Turkistan … and support them with all they can,” said Libi.

He also accused China of using “satanic ways” to oppress Muslims in the province and replace them with other ethnicities while “looting their wealth and undermining their culture and religion.”

Beijing does not want to lose its grip on Xinjiang in the far West. The vast territory borders Russia, Mongolia, Kazakhstan, Kyrgyzstan, Tajikistan, Afghanistan, Pakistan and India. It has abundant oil reserves and is China’s largest natural gas-producing region.

AWARENESS CAMPAIGN

Libi said Muslims around the world needed to be made aware of the situation of Uighurs in China.

“Consecutive Chinese governments have worked hard to sever every link between the wounded people of Turkistan and the Muslim nation,” he said. “They are applying (policies) for their demise and destruction so that their numbers would decline and its Islamic identity would be dissolved.”

In August, the leader of a group calling itself the Turkistan Islamic Party (TIP) urged Muslims to attack Chinese interests to punish Beijing for what he described as massacres against Uighur Muslims.

TIP, which has claimed violent attacks in the past including bombing two public buses in Shanghai in May 2008, has launched violent attacks in the past and accused China of committing “barbaric massacres” against Muslims in Xianjiang.

The province witnessed a wave of violence in July when Uighurs attacked Han Chinese in Urumqi, the capital of Xinjiang, after police tried to break up a protest against fatal attacks on Uighur workers at a factory in south China.

The violence saw 197 people killed and more than 1,600 wounded, mostly Han Chinese. About 1,000 people, mostly Uighurs, have been detained in an ensuing government crackdown.

(Editing by Samia Nakhoul)