Dubai Wobbles - What Does It Mean?

Two authoritative bloggers, Robert Peston and Stephanie Flanders on the BBC site have given the conventional view that the Dubai debt repayment blip is merely that.

They also argue that if push comes to shove then the European banks which are estimated to be exposed to around 50% of the total $80bn that Dubai owes, then they can absorb those losses well within their stride. In reality, they say a big Sugar Daddy in Abu Dhabi is on hand to pick up the tab anyway and they are just toying with Dubai.

It sort of shows just how punch drunk we have become to big numbers. This is a sovereign state - and a rich one at that - delaying loans because of excessive debt.

Hello!

Substitute any rich nation having trouble repaying their loans - and there may be a fair few soon - and you have the real picture. Countries all across the globe, with few exceptions, have vastly increased their borrowing to support the bank meltdown. In doing so, they have burdened their taxpayers with extraordinary new debts and, for the most part, they have underwritten the future debts of the entire global banking system. And we are in the final throws of a recession so there is no growth to offset these debts.

To my mind, Dubai is a stark reminder of how precarious the global economy has become and how interdependent we all are on one another. The butterfly wings beating in Dubai could have a dramatic effect on the world economy and particularly if we remain unimpressed by the magnitude of the numbers involved.

A sovereign state has found repaying its debt hard. It's a wake up call for us all - you don't need many more countries announcing the same for the world to become a pretty shaky place.

It's a real reminder to our Government - plan to repay those debts and take action now. Delay, and we could be in the same boat with no Sugar Daddy oil state locally to bail us out. It should make us think hard.

Very Sharp Reminder

Just when we were believing we were free of recession and the financial crisis was all but over, Dubai has shocked the world.

We were busy worrying how to curb bankers' bonuses and when the economy would show growth again - then we had a day of turmoil as stock markets reacted badly to the news that Dubai World, the state owned investment company, delayed payment on its quarterly debt repayments. Almost unnoticed, book store group Borders slipped into administration following the Thresher off licence chain, making a further 1,000+ people unemployed in the UK.

Dubai has enjoyed a six year period of unprecedented growth as it has invested enormously in property, both commercial and private and the market for it has been buoyant. As an Emirate state it is not blessed with a rich supply of oil but its strategic location makes it compete with Hong Kong as one of the great ports in the world for international freight transport. Dubai has been Western-friendly and inward investment has been enormous but Dubai World itself has clocked up astronomic debts of $59bn.

It's another tragic example of a total belief that asset values can only go up and that all debts can be repaid. The mind boggles to try and work out how many times that vast debt has been chopped up, repackaged and sold multiple times around the globe as part of derivative trades and credit default swaps upon which banks and their trading employees have pocketed enormous profits and bonuses.

This is a stark and sharp reminder of the folly of the global banking system. The total belief that any debt is good and that asset values will always rise has been the bedrock of the financial system that has turned into the sands of the Arabian desert. The creation of structured products to trade around these debts is like a terrible cancer ravaging the financial system and this shows how very easily the whole system can get a critical blow. This kind of catastrophic failure in debt servicing threatens to have a domino effect and I am sure there are many bank executives who are nervously watching and hoping that the oil rich Government of Abu Dhabi steps in to bailout Dubai World - Dubai has total debts of over $80bn.

There is a good reason why everyone is nervous. Dubai World is not the only entity in Dubai which owes incredible amounts of money. If the Dubai economy fails, the fallout could be felt all over the world and snag us all just when we believe we are recovering. As an eminent economist, Nouriel Roubini, has asserted, there is more bad news about debts to come and banks have not yet revealed the full picture on this yet.

Dubai is reminder of how bad things can get very quickly.

Oil And Terrorism Don't Mix

You don’t have to be a chemist to realise that a solution of oil and terrorism doesn’t mix. But politicians are would-be alchemists and in their eyes the two are intertwined, particularly when the goal is vast financial gain.

I don’t know about you but I have watched the whole saga of the Lockerbie Bomber’s release and the subsequent series of revelations totally aghast yet knowing that I should not be surprised. The whole genre of the current Government has been based on spin, deception, double dealing, incompetence, cronyism and sleaze and yet we still seem to accept it all well within our stride. In fact, it some ways it would still not surprise me much if Gordon Brown not only survives his own leadership battle but actually wins the next election – it is that perverse.

You see, we could have all bet our shirts that there was some sort of deal involved in letting a mass murderer go that involved oil and money. It is just so unpleasant how people try to lie about it, try to make it sound as if it is good for us all and that everyone was acting in a straightforward way.

But what came as a huge surprise to me, given the appalling history we have with Libya – the Yvonne Fletcher shooting, the Lockerbie Bomb, the IRA semtex and training grounds - is that Libya has been so welcomed back into the international mainstream and the speed at which the reconciliation has occurred, let alone its totality. For any minister to think that the public would swallow Gadaffi’s new bonhomie as being a good reason to forgive the nation for the atrocities we have all been told they perpetrated enough to show a jot of compassion - dead, alive or nearly dead - to a man who was convicted of blowing 270 innocent people out of the sky and onto the rooftops of Lockerbie is verging on the insane.

But Straw, Brown, Milliband and, no doubt, Mandelson seem to think that ‘All is fair in love and terrorism’.

Now we have the equal farce of the pursuit of compensation for the victims of IRA bombs which contained Libyan semtex. I had to admit, I had no idea that such compensation was being asked for and I was a little surprised. Not least, such claims cannot be viewed in isolation. I mean if IRA victims are to be compensated by rogue states who sell raw materials willingly, then where does it stop? Do Loyalist victims have similar claims? Moreover, do suppliers of money like the US, where Noraid was the front for the influx of considerable sums of money to purchase such weapons for the IRA, also have to be stood up and be counted? The question then extends to what people would like to think is the ‘ethical weapons trade’. Should we pursue all those manufacturers of weapons who allow their products to end up in the hands of terrorists and insurgents? I don’t know.

What I do know is that we have the idiotic sight of Gordon Brown openly telling relatives of the victims of IRA bombs that it was not in our interests to pursue claims for compensation from Libya in one sentence, then to say that he actually did support it in another and now for him to say support, yes, but directly against Libya, no. And then he has the complete chin to say that there are no background deals going on – maybe he is right, perhaps it is so obvious that there are deals but that he can deny that they are background or underhand as they are real and right in our faces.

I have been disillusioned with this Government for a long while and never, ever trusted them on an economic policy that I knew was flawed although even in my wildest nightmares could I have even guessed what havoc and cost it would cause. But while I am pro-free trade, I have a strong social conscience and it’s why, I think, a lot of people got sucked in by Tony Blair and his spin-merchants. The messages appealed to our sense of personal wealth status while answering our concerns on the social things around us. While the dream seemed real, the reality has been the opposite and pretty hurtful for a great deal of people. There has always been a lack of trust of the integrity of several individuals in the Government, not least Blair himself. But the one guy we all thought was too straight, sombre, cerebral and downright boring to be crooked was Gordon Brown. Full of his own economic importance, and incompetent at that, yes - crooked, no.

Well the whole affair over the Lockerbie Bomber and the subsequent shenanigans has changed all that. Brown is just as crooked as the rest of his sleazy ministers and he finally has proved that the Government is absolutely morally bankrupt.

The High Price of Oil

You will notice, over this Bank Holiday Weekend, that prices at the petrol pumps are around £1.05 per litre, the highest price for fuel since October 2008. The price of oil has over doubled since that time and retailers would have us believe that they are merely passing on the rises. In fact, they will go higher as a new fuel duty increment is due to come into effect at midnight tonight, adding a few more pence per litre.

But there is a much, much higher price to oil. The weekend papers have revealed, in shocking detail thanks to leaked letters, the suspicions I voiced on my blog last week that the Lockerbie Bomber's release was part of background negotiations by the Government in exchange for oil. The papers go into much detail about Blair's visits to Tripoli on behalf of a £15bn contract for BP and Jack Straw's letters to Kenny MacAskill about how the Bomber's name could not be excluded from a Prisoner Transfer Agreement (PTA) between Britain and Libya, effectively overruling any sentence imposed by the Scottish Legal System for his crimes, as negotiations had reached a 'delicate stage'. We all know what happened next - the bottleneck was removed, the contract was signed and BP had their oil.

This left the nasty issue of Megrahi and how to repatriate him under the agreement. Technically, the Government denials are right - Megrahi's release was not part of the PTA agreed with Libya under the terms of the BP deal. He was released on compassionate grounds, so they can all stand piously - Brown, Straw and Mandelson - and say they had nothing to do with it; it was a decision by Scotland's Justice System with no pressure from the Government. Indeed, any such inference was a heinous crime in itself - the Government 'Thought Police' were going into overdrive.

Everyone was at pains to point out to aggrieved American officials that this was not a prisoner transfer but a compassionate release, even though for many of us it was the first time we had ever heard of a Prisoner Transfer Agreement.

Medical experts have lined up to question whether Megrahi was 'terminal enough' as the grounds for compassionate release should be only 3 months left to live. I think many were pretty shocked at the rather healthy looking individual being hugged by Saif Gadaffi and his father, the Dictator. I may be being a little callous here as new pictures were released over the weekend of the Bomber in hospital in Tripoli, but I cannot shake the belief that Megrahi's release came as part of the price of agreed trade between Libya and Britain. All the leaked evidence now points to the fact that Megrahi's release was part of the deal and what is actually different about his release was that Britain (with Scotland very much part of it) used Megrahi's illness as a convenient cover.

Would the public mind if he lived longer than 3 months and show a miracle rejuvenation like the other compassionate release recently, Ronnie Biggs?

Oil is a demon of a commodity. The West rode roughshod over the Middle East to get it. When these states fought back by reclaiming their territory and voice, we have systematically split the Middle east into friends, foe and people we don't care about - the latter being those who do not have oil. Iraq was amongst the biggest of the foes. After 9/11, George W Bush famously labeled Iraq the 'Axis of Evil' suggesting that the 9/11 attacks emanated from there while asserting that Iraq had Weapons of Mass Destruction (WMD) and was refusing to comply with international law by handing them over. The Second Gulf war proved many things, the most poignant being that Saddam was a spent force, he did not have WMD and that 9/11 had nothing to do with Iraq.

What it did achieve was to rouse just about every would-be terrorist to rally around a cause and a visible enemy.

Oil has a very high price indeed. The few extra pennies of duty we will see tomorrow morning no doubt pays for the commission required by Ministers who helped negotiate the deal with Libya, the state responsible for shooting a Policewoman, Yvonne Fletcher, on a street in London and for blowing 270 people out of the air over the sleepy town of Lockerbie.

The British Government, in its infinite wisdom, went along with Libya's ruse to get us all to accept the country by telling us it was dismantling its nuclear program in return for the prize asset, oil. But there was a far greater price to pay as, somehow, Libya had all the negotiating chips in this international reconciliation process despite supposedly having a rogue capability to bomb us with nuclear devices.

No, we sat down in tents, listened to Gadaffi fart and burp and then did exactly as he wanted.

That is the price of oil. Several names in the Government will be slightly embarrassed about all this but as Jack Straw said about the leaks, they are 'academic'. You see, the clever ruse of compassionate release deflected the blame for such negotiations as the most helpful of all things made sure the Government could point its finger elsewhere - cancer. How convenient that has supplied a neat smokescreen, a disease you would be hard pushed to get consistent care for in Britain today.

The letters prove otherwise. The unhealthy relationship between Gadaffi's son and Peter Mandelson is another to be behold with splendour while the obsequious entourage of background negotiators made sure a British company gets the ability to continue to find enough oil so we can be taxed heavily on it.

Drinks all round - the Government could not have hoped for a better result.