Record Gold Imports by India

Gold imports by India, the biggest bullion consumer, likely reached a record last year driven by investment demand, according to the World Gold Council.

Purchases were about 800 metric tons, compared with 557 tons in 2009, Ajay Mitra, managing director for India and the Middle East at the producer-funded group, said today in a phone interview from Dubai.

Imports at that level “would be the highest for India in its history,” he said. The group hasn’t released final data for last year. Purchases in 2010 may exceed 750 tons, Mitra said Nov. 17. The Bombay Bullion Association said Jan. 3 imports probably totaled 700 tons in 2010. More...

World on brink of social unrest over food prices

Violence in Algeria could be the start of protests over rising costs of essential commodities such as grain and meat.

Dubai: Protests by angry youths in Algeria are just one example of the alarming signs on the horizon with regard to rising food prices.

Food inflation in many Asian countries, including China and India, is in double digits. The Kenyan government has issued a drought and famine alert after reports of several people having died from hunger-related causes.

International organisations are talking of "a food price shock" hitting the world.

With food supplies and prices making headlines around the globe for the second time in less than three years, experts are warning of the possibility of social unrest sweeping through poor countries. More...

More Dead Afghans: Franken is “Cautiously Optimistic”

Kurt Nimmo
Infowars.com
January 17, 2010

Turn them upside down and they all look alike. Democrats and Republicans that is. When Bush and the neocons ruled the roost, Democrats complained about the invasions of Iraq and Afghanistan. Now that their man is in office, Democrats support Obama’s criminal expansion in Afghanistan.

For the average Afghan on the ground, however, there is zero difference between Bush or Obama. It is a continuation of butchery.

“Fresh from a tour of Afghanistan, Sen. Al Franken expressed modest support this week for the president’s plan to drastically expand America’s presence in the war, now in its eighth year,” reports the Star Tribune in Minnesota, where Franken is a senator. “The Minnesota Democrat previously was uncommitted on whether the U.S. should deploy 30,000 more troops to the region. Speaking to reporters Wednesday from an airport in Dubai, Franken said he will back Obama’s plan and is ‘cautiously optimistic’ about the war’s progress.”

He wasn’t necessarily opposed to illegally invading Iraq and killing over a million people. “Al Franken has had many positions on the Iraq war. Franken supported the war at the outset, although in a much more ambivalent way than [Norm] Coleman did. He says he felt, at most, ‘53 percent’ in favor. There were reasons to be for the war, and reasons to be against, but ‘all the reasons to be for the war turned out to be false,’ Franken said during our interview,” the Minnesota Post wrote in 2008.

Al Franken was more than half in favor of committing war crimes. As for what many of us knew in 2002 as Bush’s neocons dreamed up lies in preparation for invasion — the lies were so transparent as to be absurd — Franken was clueless along with a lot of other Democrats.

“I do support the president’s plan,” Franken said, adding that he will vote for additional funding. “I may have done it a little bit differently myself but I … came away from this trip feeling that we already have momentum from the president’s speech.”

Al Franken and your garden variety Democrat — and Republican for that matter — are completely clueless about the reality on the ground in Afghanistan. Somebody needs to tell them about the Afghan code of Pushtunwali, their honor-to-the-death code.

“Afghans have their own agendas, which are inevitably local, and exist only at the town and village level. Their loyalties – indeed their sense of manhood and honor – are based on promoting the well-being of their families, their clan, their tribe and their Islamic sect,” writes Robert P. Pearson. “The paradox is that the more American troops we send, the more resistance we will create. Neither the British (three tries) nor the Russians (a 10-year war) has succeeded in controlling Afghanistan, and after eight years there, we are failing too.”

Franken’s boss Obama will fail like Bush, the Russians, and everybody else who tried to invade and hold Afghanistan, including Alexander the Great.

The United States is not in Afghanistan to save the people of that country from the Taliban and al-Qaeda. The United States created both. The Pentagon is in Afghanistan at the behest of Wall Street and the bankers. Orwell said War is Peace. It is also immensely profitable.

“The counter-insurgency strategy McChrystal advocates will never work. There is no way we can provide long-term security to tens of thousands of villages throughout the country. Even if security is the main Afghan preoccupation, they know the Taliban are a far surer path to that end than American soldiers whom they know will eventually leave. At present, the Afghan government can barely keep Kabul safe, and has little influence in the countryside, which is under the control of numerous warlords or the Taliban, none of whom are eager to have their power taken away by American or NATO forces,” Pearson concludes.

In the meantime, we will have to suffer Mr. 53 Percent, Al Franken, the former comedian who is now an apologist and facilitator for mass murder.

In Germany at the end of the Second World War, war criminals were tried and summarily delivered to the gallows for invading small defenseless countries and killing countless people.

In America, they retire and write books.

Dubai May Trigger Major Sovereign Default

Alex Messenger
Dubai’s announcement on Wednesday that it would be delaying by “at least” six months the maturity date of $59 billion in bonds issued by the city-state’s largest state-owned company, Dubai World, has sent global shares tumbling. The market reaction to Dubai’s massive debt default is partly explained by the exposure of European and Asian banks to DP World and its tourism subsidiary, Nakheel.

The real reason for the falls, however, is that Dubai’s apparent insolvency confirms that default by hyper-indebted government borrowers is now a real risk right across the globe, especially in the Middle East and Eastern Europe. Such a default would not only mean an immediate worsening of the already brutal post-crash conditions suffered by millions of workers in defaulting countries, but would usher in a second, and probably worse, phase in the global financial crisis.

A note published by Bank of America strategists warned of the possibility of a major sovereign default. “One cannot rule out—as a tail risk—a case where this would escalate into a major sovereign default problem, which would then resonate across global emerging markets in the same way that Argentina did in the early 2000s or Russia in the late 1990s,” the note said.

An editorial in today’s Financial Times noted that while markets were not expected to return to the panic of September 2008, because the financial sector had state backstops, “fearful investors have started to worry about how safe sovereign debt is,” citing Ireland and Greece as two examples.

The Dubai meltdown represents only a small sum in terms of total global indebtedness. Nevertheless it indicates that despite talk of global economic recovery, the world remains on a knife-edge. Attempts at reassurance by British prime minister Gordon Brown indicate that financial and government elites are already fearful. Brown this morning acknowledged the risk that Dubai posed to the global economy but, with careful understatement, told reporters “I think we will find this is not on the scale of the previous problems we have dealt with.”

Market falls on news of the Dubai crisis were sharpest in Japan, where a number of banks (including Mitsubishi UFJ and Semitoro Mitsui) are directly or indirectly exposed. Japanese shares plummeted 3.2 percent yesterday—the market’s largest one day decline in 8 months. A 2.9 percent fall in Australia the same day reflected the fact that a Dubai World subsidiary, stevedoring company DP World, carries one third of Australia’s sea cargo. In New York, the share index opened 2 percent down and only partially recovered those losses. Forty-four billion British pounds has been wiped off the London market, the largest single day loss since March. Shares in UK bank HSBC fell 7 percent. HSBC is reported to have lent Dubai $17 billion. Other UK banks with a Dubai exposure are Standard Chartered, Citigroup UK, Lloyds and Royal Bank of Scotland, an institution now majority-owned by the UK government, which has received more bailout money ($67 billion) than any other bank in the world.

Dubai World accounts for three quarters of the $80 billion borrowed by Dubai’s state-owned companies to fuel the emirate’s property boom. That boom—which came to an end when property values halved in a period of weeks from October 2008—was an expression of the global elite’s fantasy of endless wealth, with Dubai’s ruling family creating a desert playground for the global rich. Its most notable features were the world’s tallest building, a giant indoor ski slope and a series of vast man-made islands in the shape of palm trees and stars. Dubai World, which manages billions in construction projects, also used its foreign borrowings to diversify into global transport, especially ports and shipping. DP World is the largest port operator in the Middle East.

It is testimony to the anarchy and irrationality of the global financial system that although the scale of the Dubai crisis has been apparent for months, the government’s default announcement still caught global markets unawares. Banks had apparently assumed the existence of an implicit government guarantee of DP World’s debt, if not by the Dubai government, then by Dubai’s sister emirate, oil-rich Abu Dhabi. But there was no guarantee—Dubai World is a limited liability company owned by the Dubai government. The expectation that Abu Dhabi would rescue foreign investors was just idle hope.

Along with worldwide share market falls, the immediate effect of the Dubai default has been a surge in the insurance costs for national borrowings, especially by poorer countries. That cost is represented in the price of credit default swaps (CDS) on government bond issues. Greek CDS costs in particular have skyrocketed, raising fears that Greece, with public debt levels at a staggering 130 percent of GDP, will follow Dubai within weeks. CDS costs for Hungary have also soared since Wednesday, and there have been CDS price increases of about 11 percent for Malaysia, South Korea and Qatar.

These developments are by no means unforseen. Rather, the Dubai default is a lit match for ready-to-burn tinder, namely global sovereign debt levels. The key response of capitalist institutions to the global financial crisis has been to transform the toxic debts and unsustainable borrowings of private institutions into public debt via bail outs, guarantees and other stop-gap mechanisms. According to new estimates by Moody’s, the credit rating agency, the total stock of sovereign debt worldwide will have risen by nearly 50 percent between 2007 and 2010 to $15.3 trillion.

This ballooning of sovereign debt has been so fast and so immense that there is little chance of debtor governments, mired in unemployment and low growth, repaying either in the short or long term. As borrowing costs increase because of the perception of increased default risk (also called ‘long tail’ risk), the situation for indebted countries becomes worse. Global funds available for such borrowings are also drying up. While Greece, Hungary, Latvia, Estonia and Turkey are at the top of the global watchlist, default is also an eventual likelihood for the United States, which has public debts of $12 trillion. The key difference between the United States and smaller states, in this regard, is that the US is currently deemed by its bondholders, including the Chinese government, as ‘too big to fail’.

The Dubai default also pierces claims that allegedly well-managed and well-regulated national portions of the world economy can escape the effects and aftershocks of the financial crisis. Government and the corporate press have claimed that Australia, for example, is immune. But it is now likely that DP World’s Australian ports—a substantial piece of that country’s infrastructure, currently worth $1.5 billion—will have to be sold in the near future. Early reports indicate that there is unlikely to be strong interest and there may be no buyers. Few local companies have funds of that scale to invest in what is now, in the context of an uncertain future for global trade, a very risky asset.

Dubai Govt owns 21 per cent of London Stock Exchange

Image via Wikipedia

timesonline
Dubai World, the state-owned corporation that began the panic on Wednesday by demanding a standstill on its interest payments, worsened the mood when it postponed a teleconference for its bond holders, saying the phone lines were overwhelmed.

Gerard Lyons, chief economist with Standard Chartered, said: “The market reaction shows how vulnerable some economies are to the aftermath of the debt binge. This highlights how fragile confidence is.”

The Eid al-Adha religious holiday in the Middle East, and the closure of financial markets in the United States for Thanksgiving, exacerbated the sense of uncertainty in markets that were open for business.

A computer crash at the London Stock Exchange, which by coincidence is 21 per cent owned by the Dubai Government, left dealers unable to trade for three and a half hours.

Shares in HSBC slumped by 5 per cent, wiping £6.2 billion from its value. According to the United Arab Emirates Banks Association, HSBC has £11 billion of loans outstanding to the UAE, of which Dubai is one of seven emirates. HSBC declined to comment.

More than £2.6 billion was slashed from the value of Barclays, while Lloyds and Royal Bank of Scotland, both partly owned by the taxpayer, saw their values fall by £1.7 billion and £1.5 billion respectively.

Citibank loaned $8 billion in bailout money to Dubai

http://www.7days.ae/

Wednesday 11 Mar, 2009

US outrage over Citi loan to Dubai

The US public will be “outraged” by Citibank’s $8 billion loan to Dubai just six weeks after the bank was bailed out, US House of Representatives domestic policy subcommittee chair-man has said. Dennis Kucinich commented on the Dubai loan and other US banking investments as a congressional panel released a report that strongly questioned Citibank’s actions. The report, shown to 7DAYS, cites the Dubai loan as the largest of the “questionable transactions” by banks after the US government bailed them out. It notes that the loan to Dubai’s public sector came on December 14, just six weeks after the US government gave Citibank a $25 billion bail-out.

The report quotes Win Bischoof, then chairman of Citi, as saying the bank agreed to the Dubai loan because “we continue to place the Gulf region among our globally most significant markets”. The report also questions JP Morgan’s $1 billion investment in India and Bank of America’s $7 billion investment in China. “When the American people find that their tax dollars, which were supposed to be used to get us out of this financial crisis, are instead being used to ship jobs and investments overseas, there will be outrage,” Kucinich said. The report notes the loans were not illegal and that it is not known if they were directly funded by bail-out funds. A Citibank official was quoted at the time as saying the $8 billion came from the bank’s own funds and third party sources. The report was released as the committee prepares to question banking chiefs about their use of bail-out funds.

If Dubai is the sovereign debt equivalent of Northern Rock, then Greece might be its Bear Stearns and Japan its Lehman Brothers

Image by Getty Images via Daylife

Jeremy Warner
telegraph.co.uk
As one financial crisis recedes, another may be beginning. In Dubai this week, we've had a foretaste of what may be to come as governments around the globe seek to grapple with the explosive growth of fiscal deficits and public debt.

Like everyone else, my regard for the miracle of Dubai's fast-evolving skyline has always been tempered with a high degree of scepticism. As a monument to the vanity and hubris of Sheikh Mohammed bin Rashid al-Maktoum, Dubai has long looked like an accident waiting to happen. Such has been the pace of development that nobody could have been surprised by the debt default now threatened. Only the assumed support of Dubai's richer neighbour Abu Dhabi, which is now far from certain, has prevented it happening sooner.

Yet the important question for markets today is not whether Dubai and Sheikh Mohammed can survive the sandstorm; in fact, that is almost irrelevant. Dubai's debts of $80 billion (£48 billion) are a tiresome and unwelcome irritant which will cause further write-downs among western banks, but in the scale of things not of great significance: Britain is planning to raise more than three times that amount in the debt markets in this financial year alone.

Rather, the issue is whether this folie de grandeur of a desert kingdom is just an isolated, and therefore containable, incident, or a more worrying outrider for a wider sovereign debt crisis which might eventually engulf major, advanced economies. Everyone thought the financial implosion of the last two years was largely behind us – yet Dubai has reminded us that if nations start defaulting, then it may be about to enter a new and even more frightening phase.

Think of Dubai not so much as the hors d'oeuvre as the pre-dinner canapé, with the starter reserved for larger economies with distressed fiscal positions, such as Greece and Ireland, moving for the main course on to Japan and possibly even Britain and the US.

Already, there are rumblings. The cost of insuring sovereign debt against default has risen across the board, and for countries thought particularly at risk, bond yields are on a firm upward march.

Across the developed world, public debt is set on an explosive course. According to new estimates by Moody's, the credit ratings agency, the total stock of sovereign debt worldwide will have risen by more than 50 per cent between the start of the financial crisis in 2007 and the end of next year, to $15.3 trillion.

But this is just the beginning. On current projections, that total is set to rise by at least a further 50 per cent, before finally peaking in four to five years' time, and then only if governments have by then taken remedial action.

These are uncharted waters, quite without precedent in peacetime. In seeking to address the financial and economic crisis of the past few years, countries have come close to bankrupting themselves. It is as if, in treating the patient, a physician has infected himself with the same deadly disease.

Perhaps oddly, financing these fast-growing deficits has not so far been a problem, at least for the major advanced economies. Risk-averse investors have spurred high demand for sovereign debt, in the possibly misguided belief that there can be no haven safer than assets guaranteed by taxpayers and the ability of their governments to print money.

More perversely still, the crisis in Dubai has caused a renewed flight to the perceived security of G7 government debt. Money is being withdrawn from the periphery and reinvested in US Treasuries, German bunds, and even British gilts.

But if the banking crisis is anything to go by, that's not where the story ends. There, too, the implosion began with smaller, obviously flawed bit-players, who had self-evidently grown too rapidly and overstretched themselves.

Markets dashed to withdraw funding from Northern Rock, but in transferring the money to the likes of the Royal Bank of Scotland found that they had invested only in something even more unstable. The Rock, it turned out, was just an outlier in a systemically unsafe sector.

If Dubai is the sovereign debt equivalent of Northern Rock, then Greece might be its Bear Stearns and Japan its Lehman Brothers. But why stop there? For Citigroup, think the US, and for RBS and HBOS, think Britain. Only there would be no one to bail out their creditors if America or Britain showed signs of defaulting.

Somali pirates are front men for syndicates in Dubai

Pirates: the $80m Gulf connection
Tuesday, 21 April 2009
Crime syndicates laundering vast sums taken in ransom from ships and their crews hijacked in Horn of Africa

Kim Sengupta, Daniel Howden
Organised piracy syndicates operating in Dubai and other Gulf states are laundering vast sums of money taken in ransom from vessels hijacked off the Horn of Africa.

Investigators hired by the shipping industry have told The Independent that around $80m (£56m) has been paid out in the past year alone – far more than has previously been admitted. But while some of this money has ended up in the pirate havens of Somalia, millions have been laundered through bank accounts in the United Arab Emirates and other parts of the Middle East.

The so-called "godfathers" of the illicit operations, according to investigators, include businessmen from Somalia and the Middle East, as well as other nationalities on the Indian sub-continent. There have also been reports that some of the money from piracy ransoms has gone to Islamist militants.

The security company Idarat Maritime, which specialises in maritime protection, is working with leading Lloyd's underwriters to formulate safeguards for shippers. Christopher Ledger, a former Royal Marine officer and a director of the firm, said: "There is evidence that syndicates based in the Gulf – some in Dubai – play a significant role in the piracy which is taking place off the African coast. There are huge amounts of money involved and this gives the syndicates access to increasingly sophisticated means of moving money as well as access to modern technology in carrying out the hijackings. This is an international problem and the shipping companies need to ensure that their crews learn how to deal with it."

Investigators have discovered that the pirate gangs are exploiting information available to the shipping industry to plan their attacks. Front organisations are believed to have signed up to the Lloyd's List ship movement database, and sources such as Jane's Intelligence, to ascertain protective measures being undertaken by the shippers. In addition they have bought equipment to monitor radio traffic.

A few well-funded pirate syndicates have experimented with a "stealth" paint such as AR 1, invented by a German scientist living in the UAE, which is credited with making boats difficult to spot via the long-range radar of cargo liners.

It is not clear whether the use of the paint has been effective in helping hijackings, but its use, say the security companies, shows that the pirates are seeking out advanced technology and have the means to acquire it.

Andrew Mwangura, a piracy expert in the Kenyan port of Mombasa, says the gun-wielding Somalis who are fighting and dying in the hijackings are the just the front men of larger syndicates. "They are just the small fish. The big sharks operate out of places like Dubai, Nairobi and Mombasa," he said.

Mr Mwangura, who has observed the rise of piracy while running the East African Seafarers Assistance Programme, says that what began as a localised response to illegal fishing and dumping of toxic waste in Somali waters has evolved into organised crime.

A former merchant seaman, he has been involved in attempts to negotiate the release of hostages and is sought out by diplomats, shipowners and the pirates themselves. He says the profits have drawn in "high-ranking figures" from the semi-autonomous Puntland region and members of the now defunct transitional government of Somalia. "We strongly believe that Mombasa- and UAE-based Somali businessmen are also part of the network."

Neil Roberts, a senior official with Lloyd's Market Association, and the secretary of "the war committee" of Lloyd's and the insurance industry, said: "We are certainly seeing a lot of sophistication in the way piracy has developed. Attacks are being carried out 400 to 600 miles out at sea. This shows the pirates have access to pretty detailed information of ship movements. They certainly have access to the internet and information that is helping them. The question of UAE connection is certainly talked about in the industry and people have been looking into it."

There are also concerns that some of the piracy money may have ended up with Islamist militants both in Somalia and abroad. However this has not been acknowledged because shipping companies would be breaking laws on funding terrorism by paying ransoms.

Stephen Askins, senior partner with the law firm Ince & Co, which specialises in the subject, said: "Current anti-terrorist laws make it illegal to make payment to those who carry out such acts motivated by politics or ideology.

"This does not apply to victims of extortion in criminal cases. We know the US State Department is looking at upgrading piracy to a possible political act but this will make it very difficult for shipping companies to free the many members of crew who are still being held and the cargo being held as well. We know people are looking at those who are subsidising the pirates and we will have to see what happens."

Major General Julian Thompson, the chairman of Idarat and a former commander in the Royal Marines, added: "What we can say is that these people are not just fishermen who have taken up a bit of piracy as a hobby. The people in ultimate charge of some of the groups have access to some pretty good information and they are well organised. Dubai seems to be the place which has a part in this."

Dubai is just a harbinger of things to come for sovereign debt

Jeremy Warner
Telegraph
Watch out. This may be just the beginning. In the scale of things, the debt problems of Dubai are little more than a flea bite. Dubai’s sovereign debts total “just” $80bn, which counts for nothing against the trillions being raised by advanced economies to plug fiscal deficits.

Small wonder, though, that this minor tremor has sent such shock waves around the wider capital markets. The fear is that threatened default in this tiny desert kingdom is just a harginger of things to come for government debt markets as a whole. According to new estimates by Moody’s, the credit rating agency, the total stock of sovereign debt worldwide will have risen by nearly 50 per cent between 2007 and 2010 to $15.3 trillion. The great bulk of this increase comes not from irrelevant little states like Dubai, but from the big advanced economies – America, Europe, and Japan.

Perversely, they are for the time being beneficiaries of the “flight to safety” that trouble in Dubai has sparked. Government bond yields in the major advanced economies have fallen in response to the crisis in the Gulf. If experience of the banking crisis, when investors removed their money from one bank only to find that the one they had put it into looked just as dodgy, is anything to go by, this effect will not last.

Up until now, markets have assumed that the ruinous fiscal cost of addressing the financial and economic crisis was probably just about affordable to the major economies. That view may be about to be challenged.

I’m going to be writing more about the fallout for Dubai and its implications for the advanced economies in tomorrow’s paper.

Keiser on Dubai: the World is entering Phase Two of the global economic crisis

Fresh fears over the size of Dubai's debt have sent shock waves through international markets, with major stocks and oil prices falling sharply. Dubai World, the country's largest conglomerate, wants to suspend payment on its sixty billion dollar debts until next May at the earliest. RT's financial contributor Max Keiser says the World is entering the Phase Two of the global economic crisis.

Dubai World may be forced into a fire sale of assets

Image via Wikipedia

timesonline
The Government of Dubai said on Wednesday that it was seeking a standstill on debt repayments for Dubai World, the vast conglomerate that bought P&O (minus the American ports) for £3.9 billion in 2006.

Dubai World has liabilities of $60 billion (£36 billion) and the standstill announcement, made just before most of the Arab world stopped work for the Eid religious festival, has stunned stock and credit markets.

The standstill raises the possibility that Dubai World could default on its debt. The fear in Western markets is that banks risk losing billions, causing more paralysis in the lending markets. Dubai World’s difficulties also raise the prospect that it may be forced into a fire sale of its assets, which include some famous names in the UK. Leisurecorp, one of the many subdivisions within Dubai World, bought Turnberry, the golf course that hosted this year’s Open Championship, for £55 million last year. It also owns the Chris Evert tennis centres and more than 200 golf courses across the US — all assets that could be sold quickly to help to repay debt back home.

Dubai World’s Istithmar investment fund has $3.5 billion in businesses as diverse as Irish textbook publishers and aerospace companies. Last year Istithmar also bought a 20 per cent stake in Cirque du Soleil and the Canadian circus performers have since established a permanent base in Dubai.

In the less glamorous world of ports, DP World became the third-largest operator globally after its acquisition of P&O. It owns Dubai’s Jebel Ali port and various other container terminals around the world.

In Britain DP World operates container terminals at Tilbury, near London, and Southampton, and is building a port called London Gateway. Many of the goods that are imported into Europe are, therefore, transferred through ports owned or operated by Dubai — the source of US concern when the P&O deal was struck. The Arabian group bowed to pressure after buying P&O and sold the American ports to another company. Dubai World yesterday ring-fenced DP World from the rest of the company’s debts. This was seen as an attempt to protect the profitable ports division from potential creditors.

It is Nakheel, Dubai World’s property developer, that has been causing the difficulties. The company, which built the Palm Islands in the Gulf, was due to repay a $4 billion Islamic bond on December 14. Most investors had assumed that there would be no difficulty doing so as Dubai World, the Government of Dubai and Sheikh Mohammed bin Rashid Al Maktoum, Dubai’s billionaire ruler, were assumed to be supporting the developer. It now appears that nobody has the money to repay or refinance the bond and so the other $56 billion of Dubai World’s liabilities are also at risk.

This triggered a run on international bank stocks as investors worried about their exposure to Dubai World, which accounts for nearly three quarters of Dubai’s state debt. Falling share prices wiped £14 billion off the UK banking sector alone.

Credit Suisse has estimated that European banks could have €40 billion (£36 billion) in loans to Dubai and much of this could be at risk if the Gulf emirate defaults. Banks including HSBC and Royal Bank of Scotland have helped to finance Dubai’s acquisitions and are now on the hook if the state cannot repay its debts.

Dubai enjoyed a bubble that made the boom years in the UK seem like postwar rationing. But the boom was built on debt and when credit markets tightened and the emirate’s growth slowed the property bubble burst. Prices have fallen by up to 60 per cent and more than 400 construction projects worth more than $300 billion have been shut down or postponed.

Many expatriates facing negative equity and ballooning credit card bills have skipped the country rather than face debtors’ prison and Dubai’s reputation has taken a battering.

If Dubai is forced to raise money to meet its debt repayments, the impact will be felt far wider than Cirque du Soleil and Turnberry golf course.

In recent years, the various investment companies owned by Sheikh Mohammed and the Government of Dubai have been buying up numerous Western assets. Dubai International Capital, the $12 billion sovereign wealth fund, bought Travelodge, the budget hotel chain. It also has a 16 per cent stake in Merlin Entertainments, which owns the London Eye, Madame Tussauds, Legoland and Thorpe Park.

Sheikh Ahmed bin Saeed Al-Maktoum, of Dubai’s Supreme Fiscal Committee, said that the Government acted in full knowledge of how the markets would react and that further information would be given next week.