Dubai debt crisis

It was the most subtle of gestures, but looking back, many in Dubai now see it as a sign of their salvation.

At the grand opening of the Dubai Air Show, the crown prince of Abu Dhabi, Sheik Muhammad bin Zayed al-Nahyan, placed his hand over the hand of Dubai's ruler, Sheik Mohammed bin Rashid al-Maktoum. That was widely viewed among people in DUbai as a sign that Abu Dhabi, by far the largest and richest member-state of the United Arab Emirates federation, would take care of Dubai. (AFP Photo)

The question is whether that means Abu Dhabi will use its wealth to bail out Dubai, the deeply indebted city-state that shook world markets when it announced that its chief investment arm would not be able to pay its debts on time.

Dubai is famous as the brash, secular upstart of the Emirates, and Abu Dhabi is known as the religious and conservative big brother. (AP Photo)

"Only a few decades ago, this country was nothing, just a desert," said Thani al-Falaasi, a 31-year-old Emirati businessman who was shopping with a friend in the Dubai Mall on Sunday night. Referring to Dubai's leader, Sheik Mohammed, he said: "He built it up. Even if there is a crisis, he can solve it. We have great confidence in him." (AP Photo)

The secondary effects could spread to Greece, Britain and the Baltics, all heavily indebted nations, or to India and the Philippines, where foreign workers in Dubai send back millions to support family each year, or to any corner of the market for credit that individuals, companies and countries all rely on. (AFP Photo)

With reports of an imminent collapse of the the Dubai economic miracle, lakhs of Indian workers in Dubai are worried about their future there. Just last year 1.5 million workers had returned to India from Dubai last year due to recession. Now thousands more are feeling trapped in the city. (NDTV Photo)

Dubai, one of the seven members of the United Arab Emirates, on Wednesday said that it intended to ask all lenders to Dubai World, the government’s main investment vehicle, and Nakheel, the conglomerate’s property development unit, to sign on to a so-called standstill agreement and extend repayment deadlines until at least the end of May. The terse statement came in the middle of negotiations between creditors and Dubai World, the corporate arm of Dubai, which has led many of its most ambitious real estate projects, but is now struggling under the burden of $59 billion in liabilities. (AP photo)

A Royal Air Force Typhoon flies over the Jumeirah Palm, Dubai’s signature palm-shaped islands built by Nakheel. The Palm Jumeirah is built in the shape of date palm tree and consist of a trunk. The bonds Nakheel, dropped sharply and the cost of insuring against a Dubai government default soared. The decision for a stay on debt repayments comes just weeks before Nakheel, the developer of Dubai’s signature palm-shaped islands was scheduled to make payment on its $3.52 billion of Islamic bonds. (AP photo)

People pass by a giant poster of Sheik Mohammed bin Rashid Al Maktoum, UAE Prime Minister and ruler of Dubai in Dubai, United Arab Emirates. In separate moves that could portend longer-term instability, Standard & Poor’s downgraded Dubai-based banks with heavy exposure to Dubai World, and the Saudi-backed Gulf International Bank postponed a bond auction that was scheduled to be priced this week. (AP photo)

Asian stock markets fell sharply on Friday as investors weighed the impact that Dubai's trouble with $60 billion in debt would have on the global financial and economic recovery. That stoked fears of a potential default and contagion around the global financial system, particularly in emerging markets. (AP photo)

Buying at low levels helped the Sensex stage a big intraday recovery to end 222 points lower on Friday. At its day’s low, the Sensex was down nearly 650 points after the Dubai debt crisis cast a shadow over global equity markets.

A majority of big real estate developers in India have said they are insulated from the financial crisis in Dubai and it will not have any impact in the country's property market. DLF, Unitech, Parsvnath Developers and Emaar MGF all said they have no exposure in Dubai, while Omaxe said it has an investment of Rs 40 crore which it has asked for refund. (AP photo)

Leading software exporters TCS, Infosys and Wipro have said they have little exposure in Dubai and do not see any adverse impact due to the emerging financial crisis there. While the country's largest software exporter TCS said it has a small operation in Dubai and the exposure is minimal, Infosys, the second largest software exporter, said it does not have any 'material' exposure to Dubai.

The Reserve Bank India on Friday said it is examining the impact of the Dubai government's decision to suspend debt payments by Dubai World, which led global stock markets to tumble amid fears of widespread default.

Governor Duvvuri Subbarao said he has asked his officials to study the impact and 'if necessary make recommendations.'

"We shouldn't react to instant news like this. One lesson that we learnt from the (global financial) crisis is that we must study the developments and measure the extent of the problem and hence study the impact on India," said Subbarao, who attended an interactive session with the students of Indian School of Business in Hyderabad.