MG — Robert Fisk: A glittering palace that's built on shifting sands

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Robert Fisk: A glittering palace that’s built on shifting sands
Our man in the Middle East finds Abu Dhabi’s opulence undermined by the
encroaching financial crisis
Friday, 11 December 2009
The architecture is Delhi, I suppose, Mogul-Gothic Lutyens with just a hint
of Saddam and, if you forget the marble on the floor, a dangerous hint of
Titanic. The Emirates Palace Hotel is now one of the best-known symbols of
egregious affluence in the capital of the United Arab Emirates and even if
you can forget that the gold on the walls and doors and fittings is indeed
real gold and that 1,002 crystal chandeliers haunt the ceilings there’s
the guest list of kings and princes and Hollywood-Bollywood glamerati who
have taken rooms that run up to £10,000 (repeat: ten thousand) a night.
It was only when I glanced at my menu that I became a trifle concerned. Was
I really being offered “rustic” French pâté? I would certainly have been
happier to be offered veal hand-carved rather than “hand-cut”. Didn’t that
have rather an executioner’s flavour about it? “Garlicky spinach” was even
odder. It wasn’t a bad try. Who am I to quibble? But amid all this opulence,
the menu sounded like the ice that made the Titanic’s huge bulk ever so
slightly tremble as it scraped fatally along its side.
Trembling is what the United Arab Emirates have been doing these past few
days, the iceberg having struck Dubai and now troubling the headquarters of
the great liner in Abu Dhabi. Will Sheikh Khalifa bin Zayed bin-Sultan
al-Nahyan sail to the rescue of Sheikh Mohamed bin Rashid al-Maktoum? Dare
Dubai World the White Star Line of the brasher emirate be allowed to
sink, not to mention all those rich bankers who might go down with her? Such
metaphors can be taken to extremes but the Titanic was supposed to be
unsinkable and Dubai was meant to sail through the waters of the world’s
economic collapse even if the real-estate market had already foundered.
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Alas no. As the hordes of international bankers now examine the great
liner’s hull, they are finding some serious flaws in the metal. Everyone
believed that Dubai World was guaranteed by Sheikh Khalifa’s government but,
as international financial consultant John Sfakianakis of Bank Saudi Fransi
put it with devastating thoroughness in Abu Dhabi this week, this was an
assumption; it was implied, it was imagined, it was taken on trust. But
unless there is proof to the contrary it does not appear to be true. It
was all very well for Dubai’s rulers to tell the press to “shut up” after
the iceberg struck, but such arrogance breeds more arrogance and thus
uncertainty and the key word, this further lack of clarity. Why didn’t
the man in the crow’s nest tell us much earlier that the iceberg was on its
Mr Sfakianakis is too shrewd a soul to use such journalistic clichés, but
“transparency” was what was on his mind this week, a steady questioning of
where the money goes in the Emirates. What about the airline of the same
name which appears to be a sound and growing business venture? Where do its
profits go? Are they ploughed back into the airline? Or do they go to the
family of the ruler? How much goes to the family of the ruler? We don’t
know, of course. What we do know is that all our favourite banks thought
that a government guarantee had been “implied” and that their money was as
safe as well houses.
Now familiar cries are being heard from the boat deck. The banks themselves
were to blame for over-exposing themselves. The media was to blame His
Excellency Engineer Sultan bin Saeed al-Mansouri, the Abu Dhabi Minister of
Economy, made this very point on Monday, casting a beady eye on The
Independent’s all too innocent correspondent. How could such distortions be
avoided, he asked me, how could we avoid newspapers being so foolish as to
mistake the Gulf for the Arabian Sea?
This wasn’t quite the problem, I tried to explain. Most folk know where
Dubai is. It was a little matter of the truth, transparency which no cry of
“shut up” could clarify. And within 24 hours, the appeal for a notional
$26bn “restructuring” of debt the Emirates newspapers and television
obediently avoid all talk of default looked like turning into a princely
(or perhaps kingly) $46.7bn. The Dubai Financial Market index fell by 6.1
per cent. UBS said Dubai state-run companies may have to repay the
equivalent of 43 per cent of the emirate’s GDP within two years.
It didn’t help when Abdulrahman al-Saleh, the director general of the Dubai
Department of Finance, announced that “we would like to emphasise the
difference between support and guarantees it was clear since the
companies’ establishment that it’s not guaranteed.” Was it? Who else thought
that? Certainly not the captains of industry who poured their wealth into
the emirate’s outrageous plans for holiday islands visible from outer-space
or for individual investors who put down an initial half a million dollars
for a villa that does not exist. And as they asked themselves when they
turned up to look at the books on Tuesday may never exist. Morgan Stanley
even suggested and here’s a real blow to the unsinkable Titanic that
Dubai’s total funding needs may be far greater than the emirate’s overall
debt of $84bn.
Abu Dhabi is watching all this with a creditor’s concern, assuring customers
of confidence in its own gargantuan projects a new arts centre, for
example, that will be a branch office of one of the largest museums in the
world, the Louvre but no one knows what private agreements exist between
Sheikh Khalifa and Sheikh Rashid. As one European diplomat said bluntly here
this week, the relationship between leader and tribe in the Emirates is more
important than the relationship between state and citizen (or, he might have
added, between bank and state). Abu Dhabi is for aluminium, steel,
petrochemicals based on its massive gas deposits, alternative energy fields,
tourism on the newly created Yas Island, culture on Saadiyat Island.
But the Emirates are still not a modern state and matters are not settled by
laws but rather “in front of the tent”. Strategic decisions and control of
money is kept inside the tent. People from outside banks, for example
are asked to come and do the job. No, it’s not “Goodbye Dubai”. Foreign
investors use the place primarily as a hub and, I suppose, pub from
which to do business in India, Iraq, Saudi Arabia, Kuwait, Qatar. And if
real-estate continues to sink, foreign companies even the movie world
could find Dubai an even more attractive place to be based.
After all, didn’t Hollywood make millions from Titanic?