Abu Dhabi in $10 billion Dubai bailout; Obama takes on Wall St; Turkmenistan and China complete pipeline deal; run-off now for Chilean presidency' and more
Top of the Agenda: Dubai Bailout
In a surprise turnaround, Abu Dhabi announced (WSJ) it will give United Arab Emirates neighbour Dubai $10 billion to help it pay off its debts, after the government tried to distance itself from conglomerate Dubai World's debts. Ten billion dollars will be used to repay a $4.1 billion bond that matures Monday, issued by Nakheel, a property developer owned by Dubai World. The rest will be used to finance Dubai World's needs until the end of April 2010. The bailout boosted local stock markets, with Dubai Financial Market's main index up 10 percent and Abu Dhabi's market up 7.9 percent. Dubai World began talks with banks to restructure its debt last week and said the new funds offer "a stable basis for the restructuring process." Analysts say Abu Dhabi's decision restored confidence in the federation. Dubai also announced a bankruptcy framework in case Dubai World is unable to resolve the restructuring of its $26 billion in debt.
Stock markets in Asia were lifted (NYT) by the announcement. The Japanese yen, which typically rises with perceived market riskiness, eased against the U.S. dollar and the euro. Growing fears that other indebted companies, such as Dubai Holdings, a conglomerate owned by Dubai's ruler Sheikh Mohammed bin Rashid Al Maktoum, would also be unable to meet their obligations compelled Abu Dhabi to take action. Abu Dhabi may also have been influenced by Nakheel's creditors, many of which are foreign hedge funds seeking to secure their valuable assets.
Analysis
In the New York Times, Claudia Pugh-Thomas says Dubai is facing a "midlife crisis" and may lose its meaningfulness on the world stage, but its sizeable population of expats may not find it easy to leave.
In the Washington Post, CFR's Sebastian Mallaby says the nonchalance with which global financial markets reacted to the Dubai crisis indicates a growing financial bubble in which investors "shrug off most bad news."
PACIFIC RIM: North Korean Cargo Seizure
Thai authorities seized (GlobalTimes) a cargo plane arriving from North Korea Sunday carrying thirty tons of weapons, including rocket-propelled grenades and components for surface-to-air missiles.
China-Turkmenistan: Chinese President Hu Jintao unveiled (BBC) a 4,300-mile-long gas pipeline running from Turkmenistan through Kazakhstan and Uzbekistan to China.
ELSEWHERE:
- Obama criticizes bankers ahead of talks.
- Chilean presidency moves to runoff.