Abu Dhabi's last minute $10 billion lifeline for Dubai on Monday was the climax of a power struggle between the two Gulf emirates, but it is hard to tell who blinked first.
Did Dubai, the brash commercial hub of the Gulf with its pharaonic construction projects, successfully call the bluff of its conservative oil-producing neighbour in the United Arab Emirates by threatening to let its giant conglomerate go bust? Or did Abu Dhabi leave the glitzy financial centre dangling long enough to soften it up for concessions before throwing it a short-term life-saver for which the political and financial price has not been publicly spelled out?
There may be a more prosaic explanation: bumbling governance in a secretive region with opaque leadership.
"It could be that Dubai was playing a game of chicken: 'If you think that we're not going to default and we're not going to take everybody with us, you're mistaken,'" said a Dubai-based analyst, who asked not to be identified.
The cheque from Abu Dhabi may have saved Dubai for now, but confidence in the emirate is in tatters as investors wonder whether the past two weeks was a test of investor tolerance or just poor management.
Conglomerate Dubai World sent global markets tumbling on November 25 when it asked creditors for a standstill to restructure $26 billion in debt mostly linked to its property units, including an Islamic bond, or sukuk, maturing on Monday.
When the Dubai government said it would not necessarily take responsibility for Dubai World's debts, the news prompted fears of a second wave of global financial turmoil. That triggered a flurry of ratings downgrades, including of Abu Dhabi entities, and dealt a big blow to Dubai's reputation as a financial hub.
Less than three weeks later, Dubai said it had received funds from richer Abu Dhabi and planned to use $4.1 billion to repay the Nakheel sukuk, while the rest would support Dubai World until April, assuming creditors agree a standstill.
Investors had hoped that Abu Dhabi, the largest member of the UAE and holder of most of its oil resources, would ride to the rescue of its heavily leveraged neighbour.
When Abu Dhabi did not open its chequebook, speculation mounted that the more conservative emirate was leaving its prodigal neighbour to twist in the wind.
Among prices it could exact are curbs on Dubai's booming trade with Iran, with which Abu Dhabi has a long-running territorial dispute, control over its Emirates airline or a crackdown on Dubai's freewheeling lifestyle, which jars in a traditional Muslim region.
"At the end of the day, at the 11th hour, Abu Dhabi came to the rescue," said Jawad Ali, deputy head of the Islamic finance at law firm, King & Spalding. "One could argue that the reaction to the (November 25) announcement prompted the decision.
"I think Abu Dhabi realised that a default by Dubai World will not only affect Dubai, but the entire UAE and beyond." Analysts said Dubai, famous for its lavish spending and elaborate infrastructure projects, had simply underestimated the magnitude of the problem and the nature of Gulf politics had further delayed a resolution.
"This is not a grand master plan, this is a result of clumsy governance," said Khuram Maqsood, managing director of Emirates Capital. "It's very much a vertical management system.
"Decisions are concentrated right at the top, and because of the way decisions get made, to get a response is difficult unless a crisis happens."
Each emirate in the seven-member UAE federation has its own ruling family and local government. The relationship between federal and local authorities is murky and, according to the UAE government website, "continues to evolve".
"It's a system of decision making which is more wrapped in palace intrigue than it is in professional management," Maqsood said. "For the decision to reach the leadership of Abu Dhabi takes a long time. It isn't as easy as picking up the phone."
Abu Dhabi has been overshadowed as its glitzy neighbour grabbed the international spotlight with eye-catching projects such as its man-made palm-shaped islands, but Dubai's rapid debt-fuelled development has proved its undoing.
"This is a situation that could have been handled better," said Mohieddine Kronfol, managing director at Algebra Capital.
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