Darkness is falling on Dubai's golden era

Missed bond payment likely to set off battle with foreign investors

By Howard Schneider

Washington Post Staff Writer
Monday, December 14, 2009

DUBAI, UNITED ARAB EMIRATES -- The leaders of Dubai have been accustomed to an easy ride when it comes to raising money, with bank and bond investors around the world willing to pump tens of billions of dollars into increasingly grandiose projects on the premise that, if anything went bad, the emirate and its oil-rich neighbor, Abu Dhabi, would stand behind the debt.

That era of easy money -- and a presumed government guarantee -- has been grinding to a halt for months now and officially ends on Monday, when the government of Dubai has said that one of its main government-owned companies will skip a scheduled $4 billion bond payment.

Although a negotiated agreement is still possible, analysts say that the uncertainty raised by Dubai's recent actions -- the government said last month that it was suspending payments for six months on a total of $26 billion owed by government-owned companies -- could put projects at risk throughout the region, bring closer scrutiny from banks and investors, and raise borrowing costs.

Dubai "could well be the tip of the iceberg in terms of over-leveraged nations," analysts at India's HDFC Bank wrote in a report, as indicated by recent fears about a possible Greek default.

Monday's scheduled bond payment by Nakheel PJSC -- and the possibility of a default -- is the opening wedge of what could be a precedent-setting fight with foreign investors over the methods used to finance Dubai's breakneck development.

"We are in completely uncharted territory" that could redefine the relationship between Western investors and the government-backed companies often set up to develop projects here and in other emerging markets, said Chavan Bhogaita, head of credit research at the National Bank of Abu Dhabi.

The superlatives have run thick around Dubai for more than a decade as the ruling Maktoum clan helped unleash plans for the world's tallest skyscraper, the world's largest beachfront development, and a series of other grand and glitzy projects.

What that wrought over the past year is a more ignominious event: the world's biggest real estate crash. Housing prices have fallen nearly 50 percent so far this year, putting Dubai below Estonia for the biggest decline, according to a recent report by the London-based Knight Frank real estate group.

The bond due on Monday was issued to help finance Nakheel's Dubai Waterfront development, a massive effort to fashion "empty desert and sea" into a city of 1.5 million people. The project is now stalled in its initial phases because of the real estate collapse.

A brief panic ensued after officials announced last month that Dubai would suspend payment on $26 billion owed by Nakheel and other ailing government-owned companies, a reminder to markets of the excesses still to be worked out of the global financial system.

When the debt standstill was first announced, some analysts saw it as a difficult new stressor on banks, particularly British firms that lent to or invested heavily in Dubai; others conjectured that Dubai was the leading edge of a new crisis, this one among overextended governments.

But "such fears say more about the still-fragile nature of global financial markets than about the contagion potential of Dubai, which is limited," Eckard Woertz, program manager in economics at the Gulf Research Center, wrote in a recent analysis.

Darkness is falling on Dubai's golden era

What could be damaged is Dubai's ability -- and by extension, that of other local governments in the Persian Gulf region -- to raise money at the competitive prices they have become accustomed to for real estate and other development projects.

These are nations where the distinctions between government, ruling family and government-owned entities are often difficult to discern, where clan ties can help acquire virtually open-ended credit, and where bankruptcy and finance laws are not well tested.

In Dubai's case, "one could in fact argue that the state is its corporations," Woertz wrote.

Government-owned companies such as Nakheel have done well selling their bonds in part because of the perception that oil and clan wealth stood behind them -- an "implicit guarantee" that helped raise the tens of billions of dollars needed to turn Dubai, which lacks the oil resources of its neighbors, into a regional hub for shipping, a playground for the world's elite and a sort of aspirational suburb for hundreds of thousands of Southeast Asian workers.

Officials in Dubai -- and, more significantly, in Abu Dhabi, with which it is federated in the United Arab Emirates -- have now made it clear that there is no such guarantee in practice.

Dubai may well have the cash to pay the bond due on Monday, as well as others coming due in the near future, said Jean-Francois Seznec, a Persian Gulf expert at Georgetown University's Center for Contemporary Arab Studies. But the downturn is so deep and the recovery for Dubai so uncertain, he said, that Mohammed bin Rashid al-Maktoum, Dubai's emir, wants to spread the pain outside the country.

Nakheel devalued its holdings recently and posted a loss of roughly $3.5 billion for the first six months of the year.

Maktoum "wants investors to realize that the total debt of Dubai is a huge amount for a small state," by some estimates well over 100 percent of gross domestic product, including the government proper and government-owned companies, Seznec said. "He wants to put the banks and the hedge funds in the frame of mind that they will have to take a haircut."

As of Sunday, the markets seemed to be predicting a negotiated deal. Stock indexes were higher in the region, and the price of the Nakheel bond had been moving up before trading was suspended last week.

If the bondholders choose to fight, it could be a messy feud, likely challenging tenets of Islamic finance in London courts, and hinging on whether Dubai -- even as it disavows the debts claimed by bondholders -- seeks sovereign protection for assets held abroad by its companies. Nakheel's debt was set up to be governed by British law, under which bondholders could stake their claim. Though the bond was to be used to develop property in Dubai, Nakheel's parent company, Dubai World, owns an array of ports, hotels and other assets around the globe that investors could try to collect against.

And when the next proposal comes along -- to wrest hundreds of miles of beachfront from the sea or build a mile-high skyscraper -- the promises from the government may have to be more explicit, or the cost of borrowing that much higher for Dubai.

"The whole question of implicit guarantee has been thrown into doubt massively," said one local analyst who spoke on the condition of anonymity because of the sensitivity of the issue.

Pakistan to Brainwash Taliban Militants

Pakistan to Brainwash Taliban Militants

By Aamir Latif, IOL Correspondent

“We are going to set up a special cell for the detained militants in line with Saudi Arabia, where they will be psychologically treated by senior physiatrists,” Malik told IOL. (Google) ISLAMABAD – As the country is gripped by Taliban insurgency, the Pakistani government is planning to brainwash hundreds of militants in cooperation with Saudi Arabia. “We are going to set up a special cell for the detained militants in line with Saudi Arabia, where they will be psychologically treated by senior physiatrists,” Interior Minister Rehman Malik told IslamOnline.net Monday, December 14. “We have 2000 militants in our custody. Many of them were in initial stage of training and have not been converted into hardcore militants. We will try to de-radicalize them. “We will consult the Saudi officials in this regard and will take advantage from their experiences.” A senior interior ministry official confirmed that the government has planned a two-pronged strategy to de-radicalize the Taliban militants. “The hardcore militants, including their top leadership, will be tried in military courts, comprising a brigadier and two colonels,” he told IOL on condition of anonymity. Pakistan's Future (Special Page) “The low-ranked militants will be sent to the proposed jail, where they will be brainwashed by senior psychologists.” Pakistan is in the grip of a fierce insurgency, with more than 2,680 people killed in attacks since July 2007. In April, the government launched an offensive into the Swat Valley to uproot Taliban militants from the region. Months later, the army launched a deadly offensive into South Waziristan, the hub of Tehrik-e-Taliban Pakistan (TTP), a conglomerate of different Taliban groups in the northern tribal belt. Malik, the interior minister, insisted that the government would make no concessions to hardcore militants. “They are being tried. There is no concession for them,” he said. “However, there will be leniency for those who have been misguided by these criminal elements. “That is why we are going to set up an exclusive cell for those misguided youths in line with Saudi Arabia, where they will be reformed through psychological treatment.” Tough Task But psychiatrists see the effort time-consuming. “It is a good move, but we should not expect results within weeks or months,” Dr. Haider Rizvi, a veteran psychiatrist, told IOL. “It is a time-consuming process, particularly in this case, whereby the patients (detained militants) are deeply brainwashed on religious grounds.” He, however, seems unconfident that the fruit of the brainwashing process. “US authorities used psychologists to mentally torture the prisoners at Guantanamo Bay in the name of brainwashing. But actually, it was not brainwashing and it didn’t work either,” he said. “However, if this phenomenon is used in a positive way, it can produce results.” Dr. Rizvi sees some hurdles in de-radicalizing the Taliban militants. “The first and foremost hurdle will be the availability of experienced and specialist psychologists, which unfortunately are not there at the moment,” he said. “There are four or five clinical male psychologists in Pakistan, who, I am afraid, won’t be sufficient to deal with such a huge numbers.” He opines that failure to tackle the root causes of the Taliban insurgency would nip the effort to de-radicalize the militants in the bud. “Psychologists can make a difference, but cannot change the things from black to white,” he said. “For this, you have to address the root cause of the problem,” he said, in an indirect reference to US and Pakistani policies vis-à-vis war on terror. Abdul Khalique Ali, a Karachi-based analyst, agrees. “These steps are mere waste of time. I don’t know what does the government want to earn from this idea?” “Till, the war is over in the region, no such step would work, no matter how much sincere the governments of the US and Pakistan are. “The blood of innocents will continue to create more and more militants. How many will be treated by the government?”

Developing nations return to climate change talks: EU

Last Updated: Monday, December 14, 2009 1:55 PM ET

The European Union said developing nations have ended their Monday boycott of United Nations climate change talks in Copenhagen, allowing negotiations to continue towards a new global treaty on responding to global warming.

EU environment spokesman Andreas Carlgren says informal negotiations have resolved the impasse and said the developing nations have found a solution to their dispute with rich nations, although it's unclear what brought them back to the table.

China, India and poorer nations walked out of the talks with demands that developed countries discuss deeper reductions of greenhouse gas emissions.

Formal working groups were cancelled at the 192-nation conference after developing countries called for the 1997 Kyoto Protocol to be extended past 2012, when it is expected to expire.

Kyoto imposed penalties on rich nations that did not comply with its strict emission limits but made no such binding agreements on developing nations. As well, Kyoto would not apply to non-signatories such as the United States.

Observers suggested the move was an attempt to put pressure on world leaders, many of whom are expected to arrive in Copenhagen on Tuesday.

"They are trying to put the pressure on", said Gustavo Silva-Chavez, a climate change specialist with the Environmental Defence Fund. "They want to make sure that developed countries are not left off the hook."

Canada's Environment Minister Jim Prentice told reporters on Monday the decision to boycott negotiations was "not particularly helpful" and said "we lost some important time today."

More than 100 world leaders, including Prime Minister Stephen Harper and U.S. President Barack Obama, are expected to arrive at the summit for a leader's conference.

The dragging negotiations have spurred protests from environmentalists in the Danish capital, with hundreds of police keeping a close eye on a demonstration that attracted over 3,000 activists.

More than 1,200 people were detained in weekend protests, although almost all were released after questioning.

British Airways cabin crew vote for Christmas strike

Len McCluskey on the reasons behind the strike action British Airways cabin crew have voted overwhelmingly in favour of strike action in a dispute over job cuts and changes to staff contracts. The strikes are set to begin on 22 December and run until 2 January. Cabin crew voted by nine to one in favour of the strike action, with an 80% turnout. BA's chief executive Willie Walsh said the decision was "cynical" and betrayed "a lack of concern for our customers, our business and other employees". Len McCluskey, assistant general secretary of the Unite union, said: "It goes without saying that we have taken this decision to disrupt passengers and customers over the Christmas period with a heavy heart." He stressed that the union was keen to continue negotiations. "We will wait, ready to meet, anytime, anywhere, 24 hours a day, to try to see if we can resolve the dispute." Contacting passengers Customers who are booked to travel between 22 December and 2 January, and 48 hours either side of those dates... can change to another BA flight departing in the next 12 months at no charge BA's chief executive Willie Walsh said the company would be doing everything it could to limit the effect of the strike action. "We are going to look at all our options [to minimise disruption]; operational, legal and industrial relations options," he told BBC News. BA offered passengers who are booked to travel during the strike period - or 48 hours either side of it - the chance to rebook their flights at no extra cost. Otherwise it said it would inform customers of changes to its schedules by email or SMS text. "We will use the contact details supplied at the time of booking, so we ask customers to please ensure these are correct and up-to-date," BA said in a statement. Mr Walsh said he had told the Unite union he was available for talks, but was uncompromising on the central issue of the dispute. "The changes that we introduced in the middle of November will not be reversed. Those changes enabled us to offer voluntary redundancy to 1,000 cabin crew and those people have left the business." Cuts concerns BA's Chief Executive Willie Walsh: "It's a cynical exercise" Unions are unhappy about job cuts and changes to staff contracts, which they say they have not been consulted on. BA has reduced the number of cabin crew from 15 to 14 on all long-haul flights, and has frozen pay for two years. Unite said that the cuts involved imposing "significant contractual changes" on cabin crew employees, resulting in extended working hours, and reduced wages for new starters. BA says it urgently needs to cut costs to ride out its dire financial situation. Last month it revealed it had lost £292m in the first half of the year - the worst period in its history - and said it would have to cut a further 1,200 staff. On Monday it emerged that the financial position of the loss-making airline had taken a sharp turn for the worse. The trustees of its two pension schemes have told the company that the schemes now have a combined deficit of £3.7bn. Holiday woes It is not yet clear how serious the disruption will be or which flights will be cancelled, or what compensation will be available to affected travellers. Simon Calder, travel editor of the Independent said that those affected might find it difficult to arrange alternative travel plans. "This is going to cost one million people their Christmas trips," he said. "The travelling public are going to be absolutely appalled that so close to Christmas they have been left with no other options. "There are no seats available on most other airlines, if you do find alternative seats it is going to cost you a fortune," he told BBC News. Shares in BA ended Monday trading down 0.2% or 0.3 pence to 201p.

Saddam's lawyers seek Blair prosecution over Iraq war

Saddam's lawyers seek Blair prosecution over Iraq war
December 14, 2009 - 11:24

LONDON - Lawyers for the overthrown Iraqi leadership have asked England's attorney general for consent to prosecute Tony Blair, claiming a new interview revealed offences contrary to the Geneva Conventions. Giovanni di Stefano, representing former Iraqi deputy prime minister Tareq Aziz, wrote to the British government's chief legal adviser on Saturday with a "request for consent to prosecute" former British prime minister Blair. Di Stefano's Studio Legale Internazionale law firm represented Iraqi president Saddam Hussein, who was deposed by the US-led invasion of Iraq in 2003. Britain, under Blair, backed the invasion. In comments released from a BBC television interview due out Sunday, Blair said he would have backed the invasion of Iraq even if he knew that it had no weapons of mass destruction, the main justification at the time. "In summary the allegation against... Blair involves a violation of offences within the Geneva Conventions Act 1957 which without doubt and by his own admission can only but be deemed 'not justified by military necessity and carried out unlawfully and wantonly'," said di Stefano's letter, quoting the conventions. Aziz "is but one in millions affected by the actions (taken by) Blair and others... whom we seek your leave to issue proceedings (against) as per above forthwith." The attorney general's office was not immediately available for comment.

New row over burned Khomeini photo

New row over burned Khomeini photo
December 14, 2009 - 11:24

TEHRAN: Police surrounded the campus of Tehran University on Sunday, trapping hundreds of students protesting what they said were fabricated government images showing the burning of a photo of the revered founder of the Islamic republic. State television has repeatedly shown images, ostensibly taken during opposition protests on Dec. 7, of unidentified hands burning the picture of Ayatollah Ruhollah Khomeini — a grave and illegal insult against a man who remains widely respected in the country. The students protesting on Sunday contended the images were fabricated by government agents and are being used to justify further crackdowns on the opposition. Iran’s supreme leader, Ayatollah Ali Khamenei, called for calm but indirectly accused the opposition of creating a hostile environment. “Some have converted the election campaign into a campaign against the entire system,” Khamenei said without naming any opposition leaders. “We call on those who are angry to remain calm.” Reformists, including former presidential candidate Mir Hossein Musavi, maintain that their supporters had nothing to do with the burning of the picture, which they say is being used by the regime to discredit the opposition. The Dec. 7 rallies, the largest protests in months, did see numerous attacks on the current supreme leader of the country, Khamenei. Students chanted slogans against him, burned and trampled his photos in unprecedented acts of defiance in a country where Khamenei has final say in all state matters. Dozens of police surrounded the campus of Tehran University again on Sunday as inside hundreds of pro-reform students protesting inside denied accusations they had any connection with the images. The elite Revolutionary Guard called on Sunday for the trial and punishment of those responsible for burning the photo as it continues to pressure the opposition. “The Revolutionary Guard ... won’t tolerate any silence or hesitation in the immediate identification, trial and punishment of those carrying out this ugly insult and the agents behind them,” it said in a statement posted on its website. Under the law, insult to the late or current supreme leader can lead to two years of prison. The Guard, which is tasked with defending the clerical regime that came to power in Iran in 1979 under Khomeini’s leadership after the pro-US shah was overthrown, was at the forefront of squashing Iran’s post-election unrest. Reformists contend that President Mahmoud Ahmadinejad was re-elected in fraudulent June contests and for months protested against the government before widespread crackdowns.

Israel Okays New Funds For Settlements

Israel Okays New Funds For Settlements
December 14, 2009 - 11:24

OCCUPIED JERUSALEM – Defying the international community on the illegal settlements in the West Bank, the Israeli government voted millions of dollars Sunday, December 13, to Jewish settlements in the occupied Palestinian territory. "With this, we want to send a message (to the settlers) that we understand their difficulties and want to support them," Finance Minister Yuval Steinitz told public radio. The government of hawkish premier Benjamin Netanyahu voted to pump 2 billion shekels (about $530 million) to Jewish settlements designated as "national priority zones". The credits will benefit 110,000 settlers and can be used for vocational training programs and other educational or cultural activities. "This map is intended to close rifts and this time, also to bring in our security concerns,” Prime Minister Benjamin Netanyahu said. “We will determine the future of settlements only within the framework of a permanent agreement [with Palestinians]." The government also decided to create a commission that will decide within 30 days on whether to include other communities. The new funds are seen as a gesture to Jewish settlers furious over a government decision for a 10-month moratorium on settlement expansions. "It is a step in the right direction, but the route remains long," said Yishai Hollender, a spokesman for the main settler organisation, Yesha. There are more than 164 Jewish settlements in the West Bank, eating up more than 40 percent of the occupied territory. The international community considers all Israeli settlements on occupied Palestinian land illegal. Outrage But the plan sparked outrage for giving greater influence to right-wing Jewish settlers, reported Haaretz. “I don't think that we need to award them a prize in the form of including them in the national priority map," Labor Party leader and Defense Minister Ehud Barak said. He said the funds gave some settlers “greater proportional representation than their numbers". "There are some small settlements who consistently constitute a source of extremists activity," he said, citing the weekend vandalism of a mosque in the West Bank village of Yassouf. Extremist settlers burst into the mosque and burned prayer carpets and copies of the Noble Qur’an. The settlers also scrawled graffiti in Hebrew calling the attack "the price tag," a similar slogan left by settlers after other acts of vandalism. The left-wing Meretz party also submitted a motion of no-confidence over the funding plan for the settlements. The European Union on Friday expressed concerns about the Israeli plan. "If I understand it rightly, it is a rather serious step," Swedish Foreign Minister Carl Bildt, whose country holds the EU's rotating presidency, said. "If that is the decision that will be taken by the Israeli government, we will most certainly express our views on it."

Kuwait urges Gulf unity to face economic crisis

Kuwait urges Gulf unity to face economic crisis
December 14, 2009 - 11:25

KUWAIT CITY - Kuwait issued an appeal on Sunday to its energy rich Gulf partners to work together in order to contain ongoing fallout from the global financial crisis. "We stand before a phase that requires all of us to exert double effort after the global financial crisis that is still impacting the Gulf economies," said Kuwaiti Finance Minister Mustafa al-Shamali. "Global economic indicators in the second half of the current year require us to work together to avert any additional consequences of the crisis," Shamali told a meeting of Gulf finance ministers. Shamali made no implicit reference to the Dubai debt crisis at the gathering ahead of a two-day summit of leaders from the six-nation Gulf Cooperation Council (GCC), which starts in Kuwait City on Monday. The oil-dependent GCC economies have been hit hard after a sharp fall in oil revenues when oil prices slumped to slightly more than 30 dollars a barrel from peaks above 147 dollars a barrel in July last year. Oil prices have since recovered and are hovering between 70 and 80 dollars a barrel. Shamali urged his counterparts to decide on a number of "outstanding" issues like finalising the implementation of the GCC customs union and resolutions related to the GCC common market. The minister called for fully implementing the customs union at the beginning of next year, which would mark the end of a seven-year transition period. He also sought the approval of a GCC railway authority to start implementing a 2,000-km (1,250-mile) rail network linking member states at an estimated cost of up to 25 billion dollars. The GCC consists of energy-rich Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates.

Hamas holds anniversary celebration

Hamas holds anniversary celebration
December 14, 2009 - 11:25

The Palestinian movement Hamas is celebrating its 22nd anniversary with a ceremony in the Gaza Strip, an area it took control of more than two years ago. Thousands of supporters wearing green, the party's colour, and waving Hamas flags flocked to Gaza City where Ismail Haniyeh, the group's leader, was expected to speak on Monday. A male singing troupe dressed in military camouflage shouted: "Gaza is free. Gaza is steadfast," as they marched in procession. Ashraf Zayed, one of the rally's organisers, said a parade of cars, motorcycles, horses and camels would travel through Ash-Shati refugee camp, ending at Haniyeh's residence. Organisers said they expected this year's anniversary rally to be a unique event commemorating the foundation of Hamas. "The Palestinian people's trust in the Islamic Resistance Movement, Hamas, increases day by day," Abu Talha, head of popular activities in Hamas, told the Reuters news agency. "Through this large participation we expect the numbers to be significant this year, during the commemoration of the foundation, God willing," he said. Sherine Tadros, Al Jazeera's correspondent in Gaza said it was "incredibly important" for Hamas that significant numbers turn up at the rally, with ongoing hardships in the strip threatening to affect the movement's popularity. "People have come here today and they are still supporting Hamas' control over Gaza," she said. Poverty struggle The celebrations are taking place as Gaza continues to struggle with poverty and attempts to recover from Israel's war on the territory earlier in the year. Hamas has been unable to rebuild homes, sewage lines and water pipes destroyed in the offensive because Israel and Egypt continue to enforce a border blockade. Basic goods, such as food and some medicines are allowed into Gaza, but construction materials are not. Israel first sealed Gaza in June 2006 after fighters captured Gilad Schalit, an Israeli soldier. It was tightened a year later, when Hamas took control of the coastal strip, ousting forces loyal to Western-backed Mahmoud Abbas, the Palestinian president. Hamas, an offshoot of the Muslim Brotherhood, was formed in 1987 at the beginning of the first intifada against Israel's occupation in the West Bank and Gaza. The group, which has carried out dozens of suicide bombings since the 1990s, is considered a terrorist group by Israel, the US and European Union. The group aims to establish an Islamic state in the region and does not recognise Israel's right to exist. It has also opposed plans by Mahmoud Abbas, the Palestinian president, to seek a permanent deal with Israel.

Sudan parties agree on referendum

Sudan parties agree on referendum
December 14, 2009 - 11:25

The two main political parties in Sudan's north and south have agreed to hold a key referendum promised over four years ago. The deal on Sunday resolves issues that had threatened to undermine the 2005 peace accord - signed after decades of civil war and millions of deaths. The south's dominant Sudan People's Liberation Movement (SPLM) will now remain in a coalition government with President Omar Hasan al-Bashir's northern National Congress Party (NCP). Relations between the former foes had been strained, most recently last week when authorities in Khartoum arrested two senior SPLM officials and scores of their supporters during a protest. Analysts have warned of a risk of a return to conflict if the parties could not agree terms for laws supposed to pave the way to elections, due in April, and a referendum on southern independence in 2011. Both were promised under the original peace deal. "We have reached agreement on three very important laws which have been grounds for serious disagreements between the two parties," Pagan Amum, the SPLM secretary general, told reporters. Crucial meeting He was speaking after a meeting between President al-Bashir, who heads the NCP, and south Sudan's president and SPLM leader Salva Kiir. Amum said the laws covered the national referendum, a consultation exercise for people living in boundary areas between north and south Sudan and a referendum on whether the oil-producing region of Abyei should join the south. NCP official Nafie Ali Nafie also confirmed a deal on those issues had been reached during the meeting. Amum said the two sides also agreed to form a committee to discuss remaining issues, including differences over a security bill which the SPLM has argued gave too many powers to security services. Both sides have met repeatedly over the past year to try to break a deadlock on the bills. The parties have announced breakthroughs before, but failed to end long-term wrangling over the details of the peace accord.

Dubai Gets Surprise Bailout

Dubai Gets Surprise Bailout
December 14, 2009 - 11:25

DUBAI — Abu Dhabi government on Monday, December 14, offered indebted Dubai World $10 billion in a surprise aid that immediately took stock markets up. "The government of Abu Dhabi has agreed to fund 10 billion dollars to the Dubai Financial Support Fund that will be used to satisfy a series of upcoming obligations on Dubai World," Dubai government said in a statement cited by Agence France Presse (AFP). Dubai said it will pay 4.1 billion dollars to cover Islamic bonds issued by its Nakheel property developer which mature Monday. Nakheel said it would repay the bond over the next two weeks. The excess funds would be used to help government-controlled holding company Dubai World up until the end of April 2010. "The (agreement is) on condition of the company being successful in negotiating a standstill previously announced with remaining creditors," a government source said in a conference call with journalists. "The fund will also be used for the satisfaction of obligations to trade creditors and contractors and discussions with contractors will begin shortly." The bailout move was the least expected of all options on the table after Dubai World requested a standstill on $26 billion in debt on November 25. The once rapidly-booming economy of Dubai has been hit hard by the global financial crisis, which turned off the tap on easily-available foreign finance, leaving many of its companies high and dry with a heavy debt burden. The total debt of Dubai government and its state-run companies is a minimum of 80 billion dollars, and estimated to run into 100 billion dollars. Abu Dhabi, leading partner in the seven-emirate union that makes up the United Arab Emirates, appears unwilling to let Dubai sink. Two Abu Dhabi-controlled banks had subscribed last month to a five-billion-dollar bonds package issued by the government of Dubai. The UAE central bank had also fully-subscribed to a 10-billion-dollar bond issuing in February, earmarked to help Dubai sort its debt problem. Good News The good news coming from Dubai immediately took stock markets up in many parts of the world. "The Abu Dhabi support for Dubai World is good news and relieves some of the worries," Bernard McAlinden, market strategist at NCB Stockbrokers, told Reuters. "Banks will probably do better on the Dubai news." The Dubai Financial Market index gained 172 points to 1,867.01, with all sectors in the green and property giant Emaar surging by a full 15 percent, the maximum allowed in a session. The Abu Dhabi market also performed strongly and was trading at 2809.67 points, up 7.49 percent. Europe's main stock markets rallied at the start of trade on Monday effected by Dubai bailout news. The FTSEurofirst 300 index of leading European shares was up 0.9 percent at 1,018.71 points. HSBC, Standard Chartered, Banco Santander, Barclays and Lloyds Banking Group were up 1.6 to 5.3 percent. London's benchmark FTSE 100 index also gained 1.12 percent to 5,320.29 points. Frankfurt's DAX 30 won 0.81 percent to reach 5,803.20 points. In Paris the CAC 40 also climbed 0.81 percent to stand at 3,834.54.

Blair 'misled British over Iraq'

Blair 'misled British over Iraq'
December 14, 2009 - 11:25

Tony Blair, Britain's former prime minister, has been accused by a retired senior official of "sycophancy" towards the US administration and of using "alarming subterfuge" to lead the UK into the war with Iraq. Ken Macdonald, Britain's former senior prosecutor, made the comments after Blair admitted that the country would have backed the Iraq war even if he knew it did not have weapons of mass destruction. Blair, who backed George Bush, the former US president, in the 2003 invasion of Iraq, said he would "still have thought it right to remove" Saddam Hussein, the Iraqi president, because of the threat he posed to the region. Blair's comments to the BBC on Sunday led to calls for his prosecution for war crimes. Macdonald, the former Director of Public Prosecutions, accused Blair in The Times newspaper on Monday of committing "alarming subterfuge" to mislead the British people into supporting the war. "It is now very difficult to avoid the conclusion that Tony Blair engaged in an alarming subterfuge with his partner George Bush and went on to mislead and cajole the British people into a deadly war they had made perfectly clear they didn't want, and on a basis that it's increasingly hard to believe even he found truly credible," he said. "This was a foreign policy disgrace of epic proportions and playing footsie on Sunday morning television does nothing to repair the damage." Macdonald said that "Blair's fundamental flaw was his sycophancy towards those in power ... Washington turned his head and he couldn’t resist the stage or the glamour that it gave him". Iraq inquiry Macdonald, who works at the same law chambers as Blair's wife, challenged the head of a public inquiry into the war "to reveal the truth without fear." Blair is due to give evidence to the British inquiry, led by former civil servant John Chilcot, early next year. Reports suggesting Blair may back away from giving evidence in public were dismissed by an inquiry spokesman. The unnamed spokesman told The Times: "Mr Blair will be appearing very much in public and will be questioned in detail on a wide range of issues." Macdonald has suggested that the inquiry's performance has so far been generally unchallenging. He said: "If Chilcot fails to reveal truth without fear in this Middle Eastern story of violence and destruction, the inquiry will be held in deserved and withering contempt." Blair justified the war on the basis of Iraq's possession of weapons of mass destruction and long-range missiles and its non-compliance with UN weapons inspections, in defiance of numerous UN resolutions. The alleged chemical and biological weapons were never found.