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Abu Dhabi's $10 billion bail-out of Dubai came late, but intentionally so

Abu Dhabi rode to fellow emirate Dubai’s rescue at the very last moment on Monday, writing a check for $10 billion that enabled Dubai to avoid a humiliating default on a $4 billion Islamic bond that was to come due in a matter of hours.

From the beginning it was clear that Abu Dhabi, which has a sovereign wealth fund variously estimated to be worth $400 billion to $800 billion, could easily cover Dubai’s debts.

And that’s what Western investors seemed to be counting on.

But for weeks, Abu Dhabi, by far the wealthiest of the seven statelets that make up the United Arab Emirates, stood quietly on the sidelines and watched as Dubai struggled to fend off a swarm of creditors.

Abu Dhabi’s silence was interpreted as a stern rebuke to free-spending Dubai, and also as a pointed message to Western investors: We didn’t make this mess; don’t expect us to clean it up.

It’s true, Abu Dhabi had little to do with the highly leveraged property binge that is it at the root of Dubai’s troubles, but the fallout from Dubai was threatening to undermine Abu Dhabi’s rock solid financial foundation.

Last week, after Moody’s Investors Services said it was reviewing the status of several of Abu Dhabi’s prime state-backed companies, Abu Dhabi could no longer afford to stand aloof.

The price that Abu Dhabi might extract from Dubai for coming to its rescue is now Topic A among Gulf political analysts.

Would Abu Dhabi demand control of Dubai’s crown jewel, the highly profitable Emirates airline? Or perhaps Dubai’s lucrative container port business?

There has even been some talk of "regime change," mainly in the British media, but insiders here quickly dismiss anything of the sort. At most, socially-conservative Abu Dhabi may try to curb Dubai’s rampant Westernization and consolidate a bit more federal power around itself.

The Al-Nahyans, who rule Abu Dhabi, and the Al-Maktoums, who run Dubai, may be rivals but they are not in the habit of cutting each other down in public, and what goes on behind closed palace doors is simply unknowable.

But Monday’s $10 billion rescue points to an acute awareness on the part of both Abu Dhabi and Dubai that they need each other, and that if they don’t work together, they imperil the viability of the entire U.A.E. Inc.