Monday, December 14, 2009

QVT, the t-shirts you ordered have arrived.

Wow, what an extraordinary series of events have unfolded in the United Arab Emirates today. Many in Dubai will consider this a victory for the Emriate as it has avoided default and humiliation at the hands of its international creditors. At the same time, it has shown that Dubai can by no means stand on its' own and requires the charity of its' stronger neighbor. Though it will come out of this chapter still solvent the credibility of the Emirate and the Ruler have been severly undermined. Not only in the eyes of the international financial community but also in the eyes of the many sukuk investors who would have sold in panic to the international vulture funds who successfully stonewalled the debt standstill request and intimidated the UAE into a full payment.

This is by no means the end of the game. This is chess not rock scissors paper. If Dubai is to recover from this it will not be on the back of grand plans and outlandish schemes but rather on the back of a pragmatic approach to winding up the various GREs that remain in trouble and through forthright dealings with creditors. The new decree proposed today is a step in that direction but it is only a step and the path will yet be long and hard, with more painful admissions ahead.

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