Middle East defaults

Duabi built its future on sand. Recently that was found not to be such a smart move. UAE got stung and will get stung some more to bail things out.

But the rest of the Oil states are not looking too happy either. Now this is a relative thing of course. Oil will assure none of these states go bankrupt. But ‘entities’ in those states may not get the state backing those in the West seem to enjoy.

According to Kuwait’s largest investment firm, about half of the Kingdoms 100 other firms are expected to go bankrupt this year alone. Should we care? Well most of these firms invested in commercial property in London, europe and the US. Most of these firms have large loans from european banks. One of them owns a chunk of HSBC. If they have to have fire-sales then these assets plop on to the markets pulling prices down just when our banks would really like them to go up.

Zain mobile of Saudi – a large company- may have to file for bankruptcy of its Kuwait subsidiary. These are details, but telling ones. Saudi’s Saad conglomerate will collapse I think. But Saudi itself is top of the pile. It is Kuwait which is in more trouble. The point is not that these countries will collapse. Oil assures that. But if companies within those countries start to suffer and sell it will not help the US or Europe.

1 thought on “Middle East defaults”

  1. A large part of the problems with the middle east are the large controlling stakes held by a few families who all vie for power. The firms held by the connected families will get the money to keep going, anyone else forget it.

    These large firms backed by rich royal family money use this as a game of monopoly just to turn over someone they dont like. Witness Dubais bailout reluctantly by UAE, they couldnt care less about the money that might be lost by the european and american banks, theyd just much prefer to see the whole lot go down. But having someone from the west owning some other arab nation is too much, they will reluctantly have to keep pouring in money.

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