Could Dubai Worlds Debt Default Spark a Crisis in the Middle East and Beyond?
When Dubai World announced late in November that it wanted a six-month delay on payments on $26 billion in debt, the financial markets were thrown for a loop. The Dow Jones Industrial Average quickly fell 155 points, or 1.5%, European stocks dropped and oil prices plunged. The Dubai story is still unfolding — the emirate’s stock exchange fell for the third consecutive day on December 9 after Moody’s downgraded the ratings of six government-linked companies — though some investors believe Dubai does not provoke as much fear as other corporate collapses over the past couple of years. Is this response overly sanguine? Or are Dubai World’s problems somehow different or less severe? Certainly, the numbers are big enough to put the crisis in the major leagues. Dubai World, the emirate’s investment vehicle, has debts totaling about $59 billion. Were it to default, it would be the largest government default since the approximately $100 billion Argentine debt crisis of 2001. “Dubai, like Icel
