Abu Dhabi 'will want extra power in return for Dubai bailout'

15 December 2009

Middle East analysts are speculating that Dubai may pay a political as well as financial price to Abu Dhabi after its United Arab Emirates' (UAE) neighbour provided the struggling state with a $10 billion bailout earlier this week.

The money has gone to help Dubai World pay off some of its immediate debts, including a $4 billion Islamic bond due to be paid this week by its property development arm Nakheel.

John Sfakianakis, chief economist at BSF-Credit Agricole Group, told the Financial Times that the loan may have far-reaching implications for the balance of power in the UAE.

"We believe Abu Dhabi has and will attach political conditions to its financial rescue, including possibly seeking strategic equity stakes in Dubai assets and reining in Dubai's independence in foreign policy," he said.

His words were backed by Christopher Davidson, a professor of Middle East studies at the UK's Durham University.

He told Bloomberg that Abu Dhabi may see $10 billion as a small price to pay for influence over Dubai's relationship with the rest of the UAE federation.

By Gary Cooper

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