Considering what is moving the markets today, I thought that it would be a good time to review a little history of the UAE (United Arab Emirates).   According to Wikipedia, the UAE is made up of a federation of seven emirates. 

 Abu Dhabi – The Capitol and second largest city.

1. Dubai – The largest city where all the huge buildings and beautifully shaped artificial islands were formed where hotels and resorts are being built.
2. Sharjah
3. Ajman
4. Umm al-Quwain.
5. Ras al-Khaimah.
6. Fujairah.

 These sheikhdoms in the Persian Gulf are known at “Trucial states”.  The Trucial coast of the Persian Gulf is the area between Saudi Arabia and Oman, which is directly across the Arabian Gulf from Iran.

 These seven sheiks control their particular small territories.  The ruling family over the UAE is the Al-Nahyan family who were descendants of the Bani Yas Tribe.  So, these sheiks are all related to each other.

 Between the 17^th and 19^th century, this area was a major shipping route.  There was a lot of indirect influence by the Ottoman Empire and many different pirates that attacked the shippers and affected international trade, so the nine emirates that also included Bahrain and Qatar enlisted the United Kingdom to provide military protection in the Perpetual Maritime Truce of 1853. 

In the early 1960’s, crude oil was discovered in the area and there was a call by all the sheiks for unification.  They suddenly came into great wealth.  In the late 1960’s into 1971 they formed a union called the United Arab Emirates, but because all couldn’t agree to the agreement, Bahrain and Qatar chose to become independent and separate from the UAE.  The whole region became independent of the UK protection in 1971.

 So, today, the above listed seven sheikdoms make up what is known to us at the United Arab Emirates.  The UAE has the world’s 6^th largest oil reserve.  They are a member of the Arab Leaque, the UN, OPEC and the WTO (World Trade Organization).

 Over the past many years, as you know, Dubai has been on a building binge.  They have built what looks like a modern day Manhattan including the tallest building in the world that ironically will open in January 2010.  30% of the local economy is now real estate driven and all built on debt.  There are 70 banks around the world that have loans out to Dubai, of which the Royal Bank of Scotland is the largest creditor.

In the last couple of days it has become known the Dubai has about $60 billion dollars.  Prior to now, sister city Abu Dhabi has been helped meet Dubai’s debt issues, buy apparently now are saying that they will no longer help.  Dubai is asking creditors for a six month moratorium on debt payments.  $60 billion doesn’t seem to me to be a big deal when it comes to Middle East money, so this may only be a short term problem, but no one really knows what those sheiks will do and what systemic effects to the world’s banks will be.  Again, considering what the world’s banks went through over the past year, $60 billion doesn’t seem to be that big of a deal.  Or is this just the tip of the Middle East iceberg?    So far, this event has caught everyone around the world off guard and is creating some major market jolts this morning.

 If you are interested in the UAE and its history, just put UAE in your search widow and click enter.  You will be referred to many sites like Wikipedia for information.  The internet is a wonderful thing to get information and education.

 David Hall

 The information and opinions contained herein comes from sources believed to be reliable, but are not guaranteed as to accuracy or completeness. The risk of loss in trading futures and/or options can be substantial. Each investor must consider whether this is a suitable investment. When trading futures and/or options, it is possible to lose more than the full value of your account. All funds committed should be risk capital. Past performance is not necessarily indicative of future results.

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