Intercultural Business News

The Government of Dubai said today that it will not stand behind its wholly-owned subsidiary Dubai World, prompting fears that the company’s creditors could lose billions of dollars.

Today’s comment, from Abdulrahman al-Saleh, the director general of Dubai’s Department of Finance, effectively confirms that country does not have enough money to repay Dubai World’s $60 billion of liabilities. Deloitte, the accountancy firm, has been called in to restructure the giant business.

Last week, the state-owned conglomerate sought a six-month standstill on repaying its debts.

Shares Tumble As Dubai World Defoults On Debts

Dubai World’s borrowings include a $3.5 billion Islamic bond that was due to be repaid by Nakheel, the property developer behind the Palm Jumeriah islands, in two weeks.
 
Many creditors had assumed that the structure of Islamic bonds implied there was state backing for this type of financing and Dubai’s failure to support the Nakheel debt could have damaging implications for the wider Islamic market.

UK banks are among 70 institutions to have loaned Dubai World money in recent years as the company grew rapidly and bought foreign assets such as the Turnberry golf course in Scotland and P&O ports. Dubai’s Department of Finance said creditors will be affected in “the short term” by the Dubai World’s restructuring.

Royal Bank of Scotland (RBS) has arranged $2.3 billion of loans for Dubai World since 2007, although it is not known how much the bank could lose if the company defaults.

Read More>Times Online

The Dubai financial crisis continued to send shares and commodities falling around the world this morning, despite efforts by the emirate’s ruling family to calm the panic.

Shares were down again across Europe, although there was an air of calm in London following yesterday’s plunge. This came after a bout of heavy selling in Asia.

Today, the mood in the City is that traders are trying to catch their breath following the shock on Wednesday when Dubai World – the government-owned conglomerate that has led the dramatic growth in the emirate – asked to defer repaying some debts for six months.

Building Work Unfinished Due To Crisis In Dubai

Sheikh Ahmed bin Saeed al Maktoum, the uncle of Dubai’s ruler Sheikh Mohammed bin Rashid al Maktoum, attempted to calm the situation last night.

“Our intervention in Dubai World was carefully planned and reflects its specific financial position,” he said in a statement.

“The government is spearheading the restructuring of this commercial operation in the full knowledge of how the markets would react. We understand the concerns of the market and the creditors in particular. However, we have had to intervene because of the need to take decisive action to address its particular debt burden.”

It is still unclear whether Dubai will default on some of its estimated $80bn (£48.8bn) debts, which would be a major blow to the banking sector, or be bailed out by the United Arab Emirates.

Read More>The Guardian

Emirates has offered flights from Germany to South Africa and Singapore for less than competing German airlines. Germany has demanded they increase their fares, which some say gives Lufthansa an advantage.

A branch of the German Ministry of Transport, Building and Urban Development has forced Dubai-based airline Emirates to raise its ticket prices on flights from Frankfurt to Johannesburg, and from Hamburg and Berlin to Singapore.

Other airlines from outside the European Union are affected by the action, but ministry spokesman Ingo Strater did not say which ones. Emirates has complained about the action and claims to have brought its case to the European Commission in Brussels.

Will Lufthansa Benefit From Forced Price Hike?

German air traffic law does not allow airlines based outside the EU to offer flights destined for non-EU countries at lower prices than their European competitors. Neither does European law. The action was a result of random spot checking of prices, according to Strater.

“EU airspace is liberalized, but that doesn’t apply to non-EU airlines,” he said.

One function of the Ministry of Transport, Building and Urban Development is to ensure there are no “market disturbances” or “lasting impairments” to the interests of public transportation.

Read More>DW-World

The British oil giant BP will today take control of Iraq’s biggest oilfield in the first important energy deal since the 2003 invasion. The move has created uproar among local politicians invoking resentful memories of their nation’s colonial past.

The agreement to develop the Rumaila field, near the southern city of Basra, will potentially put Iraq on the path to rivalling the riches of Saudi Arabia within a decade — if the Government can fend off corrupt officials, continuing terrorist attacks on pipelines and political uncertainty.

BP Aims To Bring Iraq On A Par With Saudi Arabia

Many Iraqi MPs say that the deal is illegal, and that the constitution should give them, not the Oil Minister, the final say over the country’s vast resources.

BP will develop the field, believed to hold about 17 billion barrels of oil, with CNPC, a Chinese oil producer and supplier. Along with other agreements to be signed this year, BP’s presence is forecast to increase Iraqi production from 2.5 million barrels a day to 7 million in about six years.

Read More>Times Online

A wealthy Russian oil financier is set to scoop a £138 million payout after the takeover of Emerald Energy by China’s Sinochem.

Michael Kroupeev, Emerald’s biggest shareholder, will receive the cash in exchange for his 29 per cent stake in the Syria and Colombia-focused oil explorer, which was acquired by Sinochem, a Chinese state-controlled company, for £532 million.

Mr Kroupeev’s stake in Emerald is held through Waterford Finance & Investment, his Guernsey-based holding company.

Michael Kroupeev set to make £138m from Emerald Takeover

Sinochem’s offer of 750p a share for Emerald represents a 34 per cent premium on the group’s share price before July 10, the date the company announced the takeover approach. But Mr Kroupeev bought much of his stake in 2004 for less than one sixth that level — or 120p per share.
Yesterday, Mr Kroupeev indicated that he intended to support the takeover, which Alastair Beardsall, Emerald’s executive chairman, said represented “fair value” for shareholders

Read More>The Times Online