Dubai's Reaching Out to Neighbor Abu Dhabi Highlights the Seriousness of its Self Inflicted Commercial Real Estate Wound; Pressure Should Mount from Conservative Islamists Against a Dubai Bailout as Devout Islam Forbids Paying or Receiving any Interest Income; Socioeconomic Conundrum Unfolding, caution ...

Associated Press (AP):
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Yet Abu Dhabi's largesse may be reaching some limits. On the same day that Dubai announced its debt
payment "standstill," two Abu Dhabi-controlled banks bought $5 billion in Dubai bonds for a stopgap cash infusion, but went no further.
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"I guess Abu Dhabi is saying there will be no blank check for Dubai," said Jane Kinninmont, a London-based specialist on Gulf economies at the Economist Intelligence Unit.
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What Abu Dhabi could get for their money, however, is greater long-term influence over Dubai's development policies. That would essentially mean giving the wealthy and more conservative rulers in the UAE's capital the task of trying to rein in Dubai after years of living beyond its means.
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Dubai crash landed about a year ago as the global economic downturn ended a sizzling property boom, which saw prices skyrocket and investors lining up for new projects. The state-backed Dubai World led the charge with a catalog brimming with ever-bigger ideas and the bold motto: "The sun never sets on Dubai World."
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Some were completed before the bubble burst, such as the Palm Jumeirah island that included a Hollywood A-list opening of the Atlantis resort in November 2008. But dozens of major projects, including entire mini-cities in the desert, have been shelved.
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Abu Dhabi has moved ahead with more caution — comfortable in the fact it has vast oil wealth that Dubai does not enjoy.
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Its rulers have concentrated on what they see as attempts to gain global stature as hub for culture and innovation: funding an alternative energy research center and building satellite museums for the Louvre and Guggenheim. The Abu Dhabi sovereign wealth fund is constantly on the hunt for new investments, including U.S. companies such as Citigroup Inc.
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Abu Dhabi's strategists are expected to dig deeper into Dubai World's books before deciding their next move, analysts say.
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Dubai officials said plans to restructure Dubai World will not include its profitable ports management division, DP World, which has a presence in nearly 50 facilities around the world. The main retooling will be to Dubai World's battered real estate units, led by Nakheel.
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A report from Goldman Sachs said the lenders HSBC Holdings PLC and Standard Chartered PLC could have the most exposure to Dubai debt, but the potential credit losses appeared relatively small. The deeper risks could directly hit Emirates' banks and investment firms.
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Christopher Davidson, an expert in Emirate affairs at Britain's Durham University, wondered if Abu Dhabi wanted to become too deeply involved in lifting Dubai from its fiscal wreckage.
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"There is no point throwing good money into Dubai's black holes," Davidson said. "These are mistakes of Sheik Mohammed and he needs to deal with them."
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