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India May Hold the Whip Hand in Dubai Power Game

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Posted on Nov 27, 2009
Dubai skyline
AP / Kamran Jebreili

Shown in a photo taken Thursday, Burj Dubai, the world’s tallest tower, is still under construction and slated to open in January.

By Robert Fisk

Editor’s note: This article was originally printed in The Independent.

Allah was kind to Dubai yesterday. Just when the emirate’s unspeakable wealth appeared on the point of collapse—stock markets, of course, naturally “trembled”—along came the feast of Eid al-Adha and sent all the kings and emirs and sheikhs off to their diwans to celebrate the decision by the father of monotheism—the Prophet Ibrahim himself—not to kill his son Ismail. But then again, Sheikh Mohamed bin Rashid al-Makhtoum knew that the week-long holiday in Dubai would close down the local markets even if it couldn’t stifle the rumours.

Among the latter came the old canard that Sheikh Mohamed will have to hand over his immensely profitable Emirates Airlines to his Abu Dhabi cousin, the ever-beneficent Sheikh Khalifa bin Zayed bin Sultan al-Nahyan, who seems to spend much of his time bailing out Dubai’s outrageous tourist and oligarchical ambitions. Indeed, Dubai may have the tallest tower in the world and the largest man-made island but it would help if it paid off the Japanese company that has just built the emirate’s first metro system—even if trains to the airport cannot carry passenger baggage.

There are, however, two basic truths about Dubai which, predictably, have not found their way into market speculation or newspaper analysis. The first is that Dubai may soon find itself a satellite not of its Abu Dhabi capital but of India. The biggest merchants in Dubai are Indian—they run the gold market, even the bookshops in Sheikh Mohamed’s playpen—and west India is only two hours’ flying time away. In fact, until 1962—and you have to be an oldie to understand the emirates’ economic world—the Indian rupee was the currency for most of the Gulf, including even Kuwait.

Sheikh Mohamed’s angry dismissal of his three top executives a week ago will not change this, although it might curb those who took too much advantage of the Dubai boom. The ruler may indeed have to reflect upon the future of Emirates, not to mention the invalid Dubai World, if he is to appease his friendly cousin up the road in Abu Dhabi, but in the end the emirs all know that Dubai—like the US and British banks that crashed so spectacularly this year—is too big to abandon. If Dubai World really defaults, then the rating agencies will start downgrading the whole shebang and the sheikhs and financial elite of the UAE will find it hard to get money.

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There’s always been a cosy relationship, of course, between haughty, starchy old Abu Dhabi and playboy Dubai. Sheikh Mohamed likes tourism and foreigners and racehorses and even the Russian oligarchs whose henchmen apparently fought a gun battle in the world’s tallest building a few months ago.

Abu Dhabi, holder of the world’s sixth largest crude oil reserves, believes in industry and art, occasionally poking gentle fun at its bling emirate to the east; the creation of Ettihad Airlines—ever expanding in the face of Emirates Airlines’ success—was both a joke and a warning.

But deep in their golden mosques, the ruling family are asking themselves some serious questions this Islamic holiday. Why was the call for a moratorium on debt so crudely and unprofessionally put together?

As one fine source—Independent readers must take on trust how high up the ladder he is, but he should have known of this announcement and didn’t—said privately last night: “It came as a shock and a surprise to everybody, not only to me but to anyone I know. All the information I had till yesterday was that everything was in hand. We had the finding for everything coming due this year— there was the $10 billion [£6 million] issued back in February and then nearly $8 billion over the past month—the money’s there.

“So it’s a puzzle, particularly since it was very clear, to people who knew, that the bond coming due in December was a litmus test. Everyone was planning to repay it. The people of Abu Dhabi didn’t know this was going to happen. The market did not expect anything like this.”

Too true. If Dubai World and all the other conglomerates symbolising Dubai were already in the process of being restructured, why Wednesday’s extraordinary statement? There was talk in Dubai last night of a “Diwan revolution” although you’d think this had commenced when Sheikh Mohamed started ditching his top guys seven days ago. As one financial journalist in the Gulf put it: “To get a six-month standstill on payments for creditors, you can’t just announce it before you’ve talked to them. They’re not going to get the creditors to accept this in a couple of weeks.”

Unless, of course, Sheikh Mohamed planned the whole fandango with Sheikh Khalifa. Unlikely, since Dubai’s decision to allow foreigners to buy property in the emirate was taken without any reference to the nation’s laws—or warning to Abu Dhabi. Or, rather than worrying about London and Tokyo, perhaps we should be watching the Indian stock market ...


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Ouroborus's avatar

By Ouroborus, November 30, 2009 at 4:53 pm Link to this comment

Khalid Yusuf, November 30 at 9:09 am #

Thanks, always good to have another POV.

Report this

By Khalid Yusuf, November 30, 2009 at 5:09 am Link to this comment
(Unregistered commenter)

Ouroborus,

In response to what you raised below….the ruler of
Hyderabad, India used to get a 19 or 21 gun salute
while these Sheikhs got 1 or 2 during the time of the
British empire. In 1962 they used the Indian rupee
for trade. Their air force, army and Navy where
partially set up by Pakistan. Same goes for Emirates
Airlines and their banking system. Many Indians whom
the Indian government consider to be terrorists or
mafia operated out of Dubai where their smuggling
networks were based. Yes there are lots of Indian
merchants, but like I said before, they are not the
biggest by any means and they certainly don’t have
any political clout. The expatriates of other
countries have just as much presence and I don’t
believe the whip is in anybody’s hand except Abu
Dhabi….they are the one’s bailing Dubai out.
Indians are in the gold markets, but then again they
are also the slave labor…neither of these two is of
any consequence one way or another.

“What is the truth of Fisk’s comment below
and wouldn’t this be a concern?”

Robert Fisk;
The biggest merchants in Dubai are Indian—they run
the gold market, even the bookshops in Sheikh
Mohamed’s playpen—and west India is only two hours’
flying time away. In fact, until 1962—and you have to
be an oldie to understand the emirates’ economic
world—the Indian rupee was the currency for most of
the Gulf, including even Kuwait.

Report this
Ouroborus's avatar

By Ouroborus, November 30, 2009 at 4:30 am Link to this comment

Khalid Yusuf, November 28 at 5:26 pm #
Interesting comment, and, not being well informed
about this; What is the truth of Fisk’s comment below
and wouldn’t this be a concern?

Robert Fisk;
The biggest merchants in Dubai are Indian—they run
the gold market, even the bookshops in Sheikh
Mohamed’s playpen—and west India is only two hours’
flying time away. In fact, until 1962—and you have to
be an oldie to understand the emirates’ economic
world—the Indian rupee was the currency for most of
the Gulf, including even Kuwait.

Report this

By gerard, November 29, 2009 at 5:23 pm Link to this comment

India reminds me of Pakistan nextdoor—and of nukes on both sides.  If members of the powerful, much-bowed-down-to financial world want a future they can count on, they had better be about healing the tensions between India and Pakistan and working on the strict control and immediate reduction of nuclear weapons. This area, as much as Iran versus Israel, is definitely a flash-point. Money doesn’t mean a thing when you are fried by nuclear bombs or live and burn for 40 years of radiation sickness thereafter. As “power follows trade,” death follows what is so deceptively called “a nuclear (stock)exchange.” (Interesting how the vocabularies are often grimly interchangeable!)

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By prgill, November 29, 2009 at 2:59 am Link to this comment

It is interesting to be reminded that “power follows trade”, and that the largest trading partner in South Asia also happens to be the largest consumer and industrial market in that region: India. This confirms a geostrategic fact that India has a vast hinterland with only marginal competition, and that from China.

Markets work by interaction, through networks of merchants. The fundamentals of the Persian Gulf markets (not to be confused with the “Middle East and Turkey”) are not particularly brilliant, given their small and ultimately, less oil revenues, poor populations.

If one were to look at the economic fundamentals in these sub-markets, one would very quickly see that they have little or no manufacturing base, their native populations are “swolen” by hordes of immigrant laborers working in marginal conditions, and that their “influence” is at best a product of their mineral wealth.

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By syvanen, November 28, 2009 at 7:00 pm Link to this comment
(Unregistered commenter)

Great background, Fisk is the best.

This sounds like nothing more complicated than a family dispute.  Namely the rich uncle is putting the screws to his irresponsible nephew, Sheik Muhhamed, before agreeing to cover the vig on the Sheiks irresponsible borrowing.  The Sheik tries to take the pressure off by getting a 6 month interest free moratorium, not realizing he is setting off a possible international financial panic.  But I don’t get the headline:  what does India have to do with any of this?

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By hunkerdown, November 28, 2009 at 4:59 pm Link to this comment
(Unregistered commenter)

The people who really built the city can be seen in long chain-gangs by the side of the road, or toiling all day at the top of the tallest buildings in the world, in heat that Westerners are told not to stay in for more than 10 minutes. They were conned into coming, and trapped into staying. In their home country – Bangladesh or the Philippines or India – these workers are told they can earn a fortune in Dubai if they pay a large upfront fee. When they arrive, their passports are taken from them, and they are told their wages are a tenth of the rate they were promised.
http://www.independent.co.uk/opinion/commentators/johann-hari/johann-hari-a-morally-bankrupt-dictatorship-built-by-slave-labour-1828754.html

Perhaps their god is demanding accountability??

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By Khalid Yusuf, November 28, 2009 at 1:26 pm Link to this comment
(Unregistered commenter)

I was also wonder why Dubai took this step
considering that it had just raised US$ 5 billion
from two Abu Dhabi banks earlier in the same week and
the payment due on the 14th is less than US$ 4
billion. I suspect it has more to do with the fact
that the entity owing the money is Nakheel and a
restructuring away from real estate is in progress.
Dubai will likely also differentiate between
commercial entities and government entities so as to
leave creditors to Shaikh Mohammad’s “privatized”
companies holding worthless paper bonds. In the mean
time, this money they have will be used to pay all
sovereign debt including for the train to the airport
that doesn’t carry luggage.

As far as the whole issue relating to the importance
of India….I just don’t see it. Mr Fisk hasn’t
proved that by pointing out the known fact that
expatriates make up an overwhelming proportion of the
population, including the business centers. Indians,
Pakistanis, Iranians, Lebanese, Iraqis and others all
are big businesspersons in the UAE…this article is
giving the false impression that Indians are larger
than anyone else…they are not…most certainly not
larger than the local Arabs within Dubai. I think
this part of the article was more artistic liberty
taken for entertainment value rather than a statement
of fact…it don’t add up.

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Night-Gaunt's avatar

By Night-Gaunt, November 28, 2009 at 10:49 am Link to this comment

I thank dedicated people like Rbt. Fisk for uncovering the little known for us to see just a bit more of the complex arcana out there that impacts on us every day even if we never hear of it. I was illuminated.

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By liecatcher, November 28, 2009 at 7:58 am Link to this comment

India May Hold the Whip Hand in Dubai Power Game
By Robert Fisk
Posted on Nov 27, 2009

My first thought when I saw the headlines was that
Dick
Cheney would be beheaded.

As far as being unable to pay the bankster when debt
comes due,
I thought of the cover of “WEB OF DEBT”  which shows
the FED
SPIDER ensnaring the world, which obviously included
the tallest
building in the world & the debt created to build it.
The banksters
are unbiased predators. Debt=s control =s enslavement
& leads
to World domination & genocide.

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Ouroborus's avatar

By Ouroborus, November 28, 2009 at 7:53 am Link to this comment

This adds a new twist to the news currently being
reported. India is truly a wild card in this economic
crash. There is far more here than meets the eye, so to
speak. This will play out in the coming weeks; do not
expect a quick resolution in this.

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By “Disgustipated”, November 27, 2009 at 9:51 pm Link to this comment
(Unregistered commenter)

What Fisk so romantically forgets are the British (Indian rupee) and their heir apparent and their absolute control of this energy rich, family run operations up and down Persian Gulf and how impossible that booksellers could be whipping their imperial cash cow. Casablanca style can you help a fellow imperial reporter with a story? Whatever this “Three… ring …. Circus…. Sideshow…. of Freaks” is. The well fed princes, Sheikhs and imperial studs will get the best of the biggest little whorehouse in Middle East and the Indians too, period

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By Tim, November 27, 2009 at 9:10 pm Link to this comment
(Unregistered commenter)

I hear you, Ed. It might be time to forgo financial understanding when Dubai exhibits sudden moves like this. I smell another oil crisis on the horizon. Any slight failure of that family’s ability to rule is going to be a sure revolt. This is a strong primer.

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Ed Harges's avatar

By Ed Harges, November 27, 2009 at 7:10 pm Link to this comment

I must confess, I had no idea of the centrality of India in this mess. I’m fascinated,
even entertained, but I also feel even more hopelessly at the mercy of financial
forces I’ll never understand—and I did not think it was possible for me to feel
more hopelessly at the mercy of financial forces I’ll never understand.

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