Abu Dhabi expected to prop up smaller brother

Since the full scale of Dubai’s huge debt mountain hit home late last year, many investors who have sunk billions of dollars into the emirate’s extravagant projects have been turning their heads to the UAE’s capital for reassurance.

For years, as Dubai built one grandiose scheme after another there was the assumption – unwritten but widely believed – that Abu Dhabi would be on hand to pick up the pieces if the emirate’s bubble burst.

But with Dubai raising the possibility that one of its flagship entities may default, attention is now focusing on just how far Abu Dhabi is willing to go to bail out its smaller brother. Underlying the uncertainty, it is thought that Abu Dhabi officials were caught unaware by Dubai World’s dramatic statement, which came just hours after two Abu Dhabi-controlled banks had agreed to subscribe to a $5bn Dubai bond.