FOCUS Dubai Debt Woes Remain Despite Abu Dhabi $10B Bailout

DUBAI:   Abu Dhabi's $10 billion bailout Monday of government-owned conglomerate Dubai World will go a small way to tackle the emirate's debt pile, experts say.

Although the much-needed cash injection provided a welcome boost to investor confidence on the region's stock markets, analysts warn that concerns over Dubai and its debt levels will linger.

"Fundamentally, little has changed for Dubai's outlook," said Fahd Iqbal, Gulf strategist at Egyptian investment bank EFG-Hermes, which estimates that Dubai's total debt, including bilateral loans for Dubai Inc. companies, could be as high as $150 billion.

Abu Dhabi pumped $10 billion into Dubai's financial support fund Monday, part of which will be used to pay off creditors of a $3.52 billion Islamic bond issued by Dubai World's real estate unit Nakheel.

Dubai rocked world markets in late November when it requested a freeze on $26 billion of debt payments by Dubai World, in order to restructure the group. This means that about a further $22 billion still needs to refinanced and creditors are expected to meet with Dubai World on Dec.21 to hammer out a deal.

International investment bank UBS AG said that although the bailout "may provide short-term market relief", an additional $32 billion in loans and bonds repayments still remain outstanding over the next two years.

"Moving away from the debt repayment uncertainty, we focus investors attention back to fundamental economic and systemic challenges which have not changed materially," said Saud Masud, head of research at UBS in Dubai.

RISK PREMIUM

Of the greatest concern to many analysts, is the debt levels of Dubai Holding, the personal investment vehicle of the ruler, Sheik Mohammed bin Rashid al-Maktoum and Dubai World's investment unit Istithmar.

"We continue to see risk of further debt problems emerging in the coming months and quarters, particularly from Dubai Holding and Istithmar and hence we are keeping our elevated equity risk premium," said EFG's Iqbal.

Dubai Holding, which includes investment arms Dubai International Capital and Dubai Group, has built up $9.7 billion in debt during a five-year buying spree, according to Barclays Capital. Of this, $1.9 billion matures next year.

"We believe that the Dubai Government's actions have introduced the risk that restructuring of other corporates could follow. We would focus on those with weak fundamentals and upcoming maturities and we view Dubai Holdings as being most at risk," it said in a note shortly after Dubai World's debt request late November.

Dubai's obligations extend much further than Dubai World and the rest of its government-related entities. It also owes billions of dollars to construction firms and contractors. In its statement, Dubai said it will use some of the $10 billion to meet the obligations of Dubai World's contractors, it is unclear how it plans to address the .

Earlier this week, Japan's The Nikkei newspaper reported that Dubai owes Japanese nonfinancial companies around $7.5 billion. On Friday, British consulting and business group Mouchel Group PLC (MCHL.LN) said it would close its Dubai operations, saying there was uncertainty over the recovery of GBP10 million it is owed.

"What now remains to be seen is how Dubai World, and the Government of Dubai will restructure their respective remaining liabilities," said Faisal Ghori at ME Ventures.

China's President Hu Jintao opens Kazakh gas pipeline

Chinese President Hu Jintao has unveiled the Kazakh section of a 7,000km (4,300 miles) natural gas pipeline joining Central Asia to China.

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Mr Hu was joined by Kazakhstan President Nursultan Nazarbayev during the inauguration in Astana on Saturday.

The pipeline is part of China's attempts to secure more energy sources worldwide.

On Monday, Mr Hu is due to head to a commissioning ceremony in Turkmenistan where the pipeline actually begins.

He is also expected to be joined there by President Islam Karimov, the leader of Uzbekistan - the fourth country involved in the project.

'Grand project'

Mr Hu and Mr Nazarbayev together pressed a symbolic button to open the 1,833km (1,139 mile) section before officials from both countries marked the new relationship with hugs and cheers, the Reuters news agency reported.

Mr Nazarbayev said: "This is a grand construction project that will in time resurrect the ancient Silk Route."

The pipeline, which begins near a Turkmenistan gas field being developed by the China National Petroleum Corporation concludes in Xinjiang in western China.

It has an estimated capacity of 40bn cubic metres a year and will mean the central Asian countries are less dependent on Russia buying up their supplies.

This is Kazakhstan's first export route that does not go through Russia. This segment cost $6.7bn (£4.12bn) and was completed within two years.

Most of the finance for the project came from the state-run China Development Bank.

The whole pipeline is expected to be finished by 2013.

Iran vows to strike Israel's nuclear sites if attacked

BEIRUT: Lebanon television channel says Iran's defense minister has warned that his country will strike Israel's nuclear sites if the Jewish state attacks Iranian nuclear facilities.

The Wednesday report says Gen. Ahmad Vahidi made his comments to reporters while visiting Damascus, capital of neighboring Syria.

Lebanon television is the mouthpiece of Hezbollah, an Iranian-backed Lebanese guerrilla group and political party. Iran's English language Press TV also carried Vahidi's comments.

Israel has not ruled out a military strike against Iran's nuclear facilities. Israel, the United States and other Western nations say Iran is seeking to acquire nuclear weapons.

Iran denies the charge. It says its nuclear program is only for peaceful purposes.

Europe presses US, China on emissions cuts

COPENHAGEN:  The European Union (EU) put pressure on the US and China to do more with their emission cut targets and called on the two countries to take a leadership role as the Copenhagen climate talks continued on the second day.

"The US and China have not offered to go far enough to combat climate change," CNN quoted a top EU official as saying Monday.

Final negotiations at the conference "will be mostly about what will be delivered from the US and China," said Andreas Carlgren, Sweden's environment minister, who pressed US President Barack Obama to do more than he promised in a statement before the conference.

The so-called "G2" concept, frequently mentioned in G20 summits this year, reappeared in many media to refer to the responsibility the two countries should assume.

China and the US together cover half of the world's emissions so what they can deliver is very decisive, Carlgren said.

Jin Canrong, a professor from Renmin University of China, told the Global Times in an interview that it is undeniable that China and the US are two major emitters, but the motive behind the EU’s statement is its intention to shift the burden to China and the US; in which case, they will bear the final result of the climate talks, be it good or bad.

Last month China announced its plan to reduce 40 percent to 45 percent of its carbon dioxide emissions per unit of the GDP in 2020 compared with 2005 levels. This target was followed by the US' commitment of a 17 percent cut by 2020 below 2005 levels.

Egypt starts building steel wall on Gaza Strip border

Egypt has begun constructing a huge metal wall along its border with the Gaza Strip as it attempts to cut smuggling tunnels, the BBC has learned.

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Cairo:  When it is finished the wall will be 10-11km (6-7 miles) long and will extend 18 metres below the surface.

The Egyptians are being helped by American army engineers, who the BBC understands have designed the wall.

The plan has been shrouded in secrecy, with no comment or confirmation from the Egyptian government.

The wall will take 18 months to complete.

For weeks local farmers have noticed more activity at the border where trees were being cut down, but very few of them were aware that a barrier was being built.

'Impenetrable'

That is because the barrier, made of super-strength steel, has been hidden deep underground.

The BBC has been told that it was manufactured in the US, that it fits together in similar fashion to a jigsaw, and that it has been tested to ensure it is bomb proof.

It cannot be cut or melted - in short it is impenetrable.

Intelligence sources in Egypt say the barrier is being sunk close to the perimeter wall that already exists.

They claim 4km of the wall has already been completed north of the Rafah crossing, with work now beginning to the south.

The land beneath Egypt and Gaza resembles a Swiss cheese, full of holes and tunnels through which the Palestinians smuggle the everyday items they are denied by the blockade.

But the Israelis say the tunnels are also used to smuggle people, weapons, and the components of the rockets that are fired at southern Israeli towns.

The wall is not expected to stop all the smuggling, but it will force the Palestinians to go deeper and it will likely cut the hundreds of superficial tunnels closer to the surface that are used to move the bulk of the goods.