Omani Spy-gate: Multiple Omanis arrested for spying for Abu Dhabi??

Yes, talk of the town is the case of the Duqm spy ring.

It seems around 15 (or 17 or 19 or...) Omani nationals were busted a couple of weeks ago, apparently for operating as spies for the Abu Dhabi crown price's outfit.

Why?

Well, Oman's Government, led by the Ministry of Finance, is investing heavily in a new industrial mega-port complex in Duqm, a previously sleepy coastal town in the middle of nowhere between Muscat and Salalah.



This is also where the technocrats wanted to put a huge coal fired power station (there is no coal in Oman to speak of, BTW). The Omanis have (cunningly) secured the partnership of the port of Antwerp, a really really big mega-port in Belgium, who will be able to bring a whole heap of expetise in the port business to Oman.

As part of that complex, the obvious play for Oman was to add a 'free trade port facility', where goods can be shipped in and out without significant duty or paperwork. The goods can be processed too, and 'value added'. It seems the Abu Dhabi crowd were concerned that the strategic location of the port* would impact the outlook for the UAE's planed free trade zone in Abu Dhabi, and indeed were concerned about the impact on the existing Jebal Ali Free Trade port in Dubai [note: now also effectively owned by Abu Dhabi, post Dubai-meltdown].

So it seems the foreign intelligence arm of the Abu Dhabi Royal family had managed to bribe several Omanis to betray their country and provide intel on the goings on in Duqm. They got caught, in a pretty impressive victory for Omani intelligence.



It's not in the papers.

Why all the talk about such a secret situation, you may ask. The word is the UAE, as a demonstration of their petulance, have blockaded all pork shipments from the UAE to Oman. This is why there is a drastic shortage of nice American and other land imported pork product in Oman right now.

Did you notice? No pork folks. The Oscar Myer ship is not trapped at sea, but her cargo is apparently stuck at the border. A Bacon blockade. Swine sanctions.


Porcine Petulance, if you will. Why retaliate with a bacon ban? I have no idea. The UAE has always been insane, so, why not? Maybe it's difficult for Oman to complain about it?

Despite this side effect, Well done ISS.


*The Duqm port is on the Indian Ocean, close to all major E African/Indian trade routes, and OUTSIDE the straights of Hormuz and the confines of Gulf. A free trade zone would attract Indian, Pakistani, and most critically Iranian business, aided and abetted by the Chinese and the Koreans. Closer to the rest of the world, safer and cheaper wrt fuel and labour, this could have a serious impact on the UAE ports.

Rumours of another cyclone not yet based on facts; Abu Dhabi royal family confirm they got 99%+ Blue City bonds

Bit of a quiet week.

First, the Abu Dhabi Royal family confirmed this week that Essdar Capital, one of their many investment arms, were successful in acquiring more than 99% of the outstanding A class secured Blue City 1 bonds at about 63 cents in the dollar - quite a premium for a seriously distressed sale, but I guess they can afford the risk. (thanks for all the emails too)

Dubai company gains control of Blue City
Bradley Hope, The National

Last Updated: June 09. 2010 9:06PM UAE / June 9. 2010 5:06PM GMT

Essdar Capital, an investment company based in Dubai, said yesterday it had obtained almost all of the senior debt of the struggling Blue City property development in Oman and would take control of the project.

“What it gives us is significant control over decision making on the project,” said Suketu Sanghvi, the senior managing director of structuring and investments at Essdar. “If any restructuring needs to be done, the project needs to be revived or business plans need to be changed, we can manage that as the owner of the Class A bonds.”

...

Essdar is majority-owned by Sheikh Tahnoon bin Zayed and Sheikh Hazza bin Zayed, members of Abu Dhabi’s Royal Family.

Mr Sanghvi said the project was not yet out of difficulties. The first move Essdar would make would be to meet with management about the project’s future, aiming to focus on its hotel and tourism components earlier than planned in the original business strategy.

Things may take a few months to sort out, with the legal complications, and the battle between Cyclone owners HH Haitham and Anees Zedjali and AAJH still going through the courts. (although AAJH did get an injunction from the high court in their favour a couppe of weeks ago, albeit with no legal implications either way for eventual judgement). Watch this space.


Meanwhile, the sky is not falling
Rumours and panicked emails are doing the rounds, alleging another cyclone is coming to Oman. This rumour is just not true, and is a regular Gonu anniversary phenomena, especially given the recent cyclone Phet.

What is true is that some computer models indicated a possibility for the elevated sea temperatures to generate a tropical cyclonic (this just means a low pressure spinning thing) storm of the west coast on India, but so far that hasn't happened.

Who knows? I'll keep an eye on it. The rains and hail in the Oman Mountains these past few days are not related in any way to another secret cyclone, BTW. The latest sat image from the professionals at the JTWC is reassuring.

Abu Dhabi relent and bail out Dubai World with yet another $10bln

The words 'piss-up' and 'brewery' come to mind. First we had the stream of official announcements this year that everything was OK, of course Dubai would meet its obligations, stop criticising us, etc. Then the reshuffle at the top levels of Dubais various semi-commercial entities, followed by the shock announcement of a debt default and that Dubai would not stand by the debts of Dubai World and Nakheel, and now... they've bought some more time.

Today Abu Dhabi relented and agreed to lend the cash-stapped ruler of Dubai yet another $10bln specifically for sorting out Nakheel's Sukuk bond (due today $3.52bln + 15% interest) which will, apparently be paid in full.

Bondholders - especially those who bought the bond in the market at steep discount earlier this year - will be very happy that Abu Dhabi finally came to the rescue. I would imagine that a lot of those bond holders actually happen to live in Abu Dhabi.



Photo: Who you gonna call Sh. Maktoum?

Dubai's Sh. Maktoum naturally talked his usual schtick about Dubai being committed to being a Global Financial Leader, 'good governance' etc etc etc. (see below) Yawn. I think even those that still think Sh. Maktoum a financial genius and visionary must get uncomfortable with the unrelenting bullshit he pumps out in direct contradiction to the facts. (Orwell would love Dubai).

Dubai has realised it at minimum needs a comprehensive corporate Bankrupcy law (although the Dubai Government are calling it a "reorganisation law") to enable creditors to at least know what the minimum rules are. A personal bankruptcy law would also be a tremendous improvement.

So in the past 12 months Maktoum has got $25bln from Abu Dhabi, probably borrowed long term at around 4%. And there will be haircuts required by some creditors no doubt. But big brother obviously was worried about the impact the sudden default announcement had caused on the wider UAE economy and their own aspirations: shares down heavily, several country's Governments complaining about Dubai's other billions in unpaid bills to their contractors [Japan, UK, Turkey, Greece, US,...], plus obvious embaressment at the GCC conference (on-going in Kuwait) with the Dubai crisis causing all the regions' Governments to experience more expensive borrowing costs and tightening credit lines. Everyone must have been asking Abu Dhabi to get a grip. As Maktoum himself said today:

...Recently, Dubai World announced that it might not be able to commercially support its obligations. Since that time, the Government of Dubai has worked closely with the Abu Dhabi Government and the UAE Central Bank addressing and assessing the impact of Dubai World on the UAE economy, banking system and investor confidence.

Dubai is now confirmed as a vassal of big brother Abu Dhabi, with Maktoum being made to learn a lesson and come to heel. Cash is king. I wonder when we'll see a merger between Etihad and Emirates...

The bailout is good news for Oman. The pressure on our own access to credit will ease, and perhaps there will be more sophistication in the market in not assuming Sovereigns will stand behind debt. Who knows, maybe Sama Dubai will even get off its arse and do something with the Yeti development.

I do wonder what's happening with the Blue City bonds... The Omanis might have noticed that defaulting on one's international obligations does not go unnoticed in the international financial community...

Extract from Statement by Sheikh Maktoum Chairman of the Dubai Supreme Fiscal Committee (published in The National)

... Today’s actions, taken together, demonstrate our strong commitment as a global financial leader to transparency, good governance, and market principles.

There will certainly be challenges periodically, just as there are challenges in other major financial centers around the globe. We believe today’s actions will best serve the interests of all stakeholders.

We are here today to reassure investors, financial and trade creditors, employees, and our citizens that our government will act at all times in accordance with market principles and internationally accepted business practices.

Dubai is, and will continue to be, a strong and vibrant global financial center. Our best days are yet to come. The Government of Dubai remains committed to its high standards and its obligations. We are confident in our economic model, and we are confident in the long-term health and outlook for our economy.

The actions taken today are consistent with our market development, and we believe they are the actions that will best serve the interests of all stakeholders.

Dubai starts to pay the piper - heads rolling

In a great tip off from JustCurious, this story in the FT a couple of days ago about the recent replacement of the head of Dubai International Financial Center.

The story* describes, in perhaps as direct a way as could be possible given Simon is based in the UAE, the fallout in the upper levels of Dubai Inc. management following the impact of the recession there.

Dubai have grown increasingly touchy over any negative press as their real estate lead boom, aka Never Never land bubble of hype, was pricked by the liquidity crisis, and their HUGE debts were exposed. The laws recently passed their make it difficult to differentiate fair criticism of whats going on in Dubai or Abu Dhabi from illegality, especially because the whole thing is fundamentally based on confidence that this massive bet the Maktoum family has made will actually be sustainable and pay off. It right now, is very much a confidence .... situation.





Anyone who - even (or especially) with some justification - questions the bets being made, or the economics, or the debt problems, or the resulting governmental and administrative problems, or those crazy insane artificial islands, or the treatment of expatriots or women, or the nature of the financial relationships within the ruling elite of the UAE, can be accused of being an economic traitor to the bubble economy.

For example. Ownership of the Dubai airline Emirates was 'transferred' in Dec 2008 from the Government of Dubai to the Investment Corporation of Dubai (ICD). Rumours have abounded since the big $20bln bond issue that big brother Abu Dhabi (perhaps via the UAE National bank) took an effective 51%-78%-100% (you pick) mortgage, along with other collateral, for underwriting the loan to [not illegal to say in Oman, but in Dubai) technically insolvent Dubai [in hock for ~$85 bln(?) and nowadays a net oil and gas importer remember].

But publically, far as I can tell, the Maktoum family owns it, personally. And of course a handshake agreement, or even the right sort of glance, would probably be enough, if you're Abu Dhabi's ruling family. (Abu Dhabi strill pumps about 2mln barrels a day. Nice. That F1 circuit cost probably less than a week's production). There also seems to be a correlation between Abu Dhabi's control on Dubai's money and increased repression within Dubai of 'loose morality' i.e. scantily dressed Expats and consumption of alcohol...


Photo: from www.wearmeoutkids.com - Made for Dubai?


I'm afraid I was never a fan of the Dubai business model even before the crash, but I'll admit I do enjoy the restaurants and pubs. Meantime, Abu Dhabi have little choice but to support Dubai with their huge SWF and the still robust oil revenues.

As for those readers within the bubble of Dubai, who buy the Maktoum claim that everything's OK, should note that before Abu Dhabi kicked in the $10bln, the market prices for Dubai's Credit Default Swaps*** (a sort of insurance against a loan to Dubai going bad) exceeded those for famously insolvent Iceland, reaching 1,175 'basis points' earlier this year, equivalent to having to pay 11.75% per annum for a 5 year default insurance on Dubai Inc's Sovereign debt...

Dubai ousts financial chief over debt troubles
By Simeon Kerr in Dubai
Published: November 20 2009 20:38 | Last updated: November 20 2009 20:38

Dubai has removed the high-profile governor of the Dubai International Financial Center as a political power struggle caused by the emirate’s financial troubles continues to build.

Omar bin Sulaiman, governor of the centre since 2004, has been replaced by Ahmed al Tayer, a former finance minister. He is chairman of Emirates NBD, Dubai’s largest bank, and a member of one of the merchant families that helped build the foundations of the emirate’s economy.

The US-educated Mr bin Sulaiman appears to be the latest victim of Dubai politics as the emirate seeks to redress the excesses of the supercharged growth from 2003 to 2008 that created an $80bn debt pile and a burst real estate bubble. The ruler’s court, the traditional root of the sheikh’s power base, has assumed increasing powers, including controlling a $20bn (€13.4bn, £12bn) fund that will support cash-strapped state-linked businesses.

The ruler on Thursday also reshuffled the board of the Investment Corporation of Dubai, a government company overseeing the government’s stakes in commercial companies such as Emirates airline.

The ICD board reshuffle has removed three of his lieutenants: Mohammed Gergawi, head of Dubai Holding; Sultan bin Sulayem, head of Dubai World; and Mohammed Alabbar, chairman of Emaar Properties, the government-linked real estate giant.

This triumvirate was instrumental in Dubai’s transition from a regional trading centre to global business hub over the past decade.

The replacement of Mr bin Sulaiman with an old school government official from an established Dubai merchant family could be another signal of a back-to- basics policy.

“This is all about projecting a more conservative image to the bankers, to show that Dubai will be more careful in the future,” said one observer.

Dubai is trying to renegotiate billions of dollars of debt with bankers while also raising the finance needed to meet other obligations, such as the $4bn that becomes due in mid- December on an Islamic bond issued by Nakheel, the government-owned developer that built the city’s Palm Islands.

An anti-corruption campaign against executives who abused their positions of power for personal gain during the real estate boom has recently stepped up a gear.

The authorities are now said to be investigating the bonus culture and real estate holdings of many executives at the state- linked companies that helped propel Dubai to global prominence during the boom.

Yet some local observers are also scratching their heads at the arbitrary nature of the reshuffles, with some executives responsible for ballooning debts and bad investments apparently escaping retribution.

* I've ripped the online segment below (get a blogger option FT!) because, as JC pointed out, its just so nice to be able to run a story on the UAE that is not being reported in the UAE. Bad Dragon, sorry FT and Simon. Please do and register online with the Financial Times immediately readers!

** Credit default swaps, or CDS, are contracts in which a buyer pays a series of payments to a seller, and in exchange receives the right to a payoff if a credit instrument goes into default, or on the occurrence of a specified credit event, for example bankruptcy or restructuring. One basis point on a contract protecting $10 million of debt from default for five years is equivalent to $1,000 a year. An increase signals a deterioration in the perception of credit quality.

Breaking News: Blue City make big sale of Golf Course apartments

Just a quick breaking news story.

My sources tell me Blue City have just (this morning) managed to sell 120 individual units of the golf course apartments to .... Abu Dhabi Pension fund, and have received a crisp $20 million cheque as a deposit.

Nice one. Discount and price were not available, but it is a good source of confidence in the deal by a major external player (albeit one with shedloads of cash).

Blue City it may never become, well, unless the Government decide to decamp the Ministries to Al Sawadi in some future high oil price world... But Blue City resort will obviously be a go: i.e. some villas, apartments, hotels, marina and golf course. I hope they're sensible and don't cut the golf course down to 9 holes, as that would be penny wise-pound foolish as they say.

National Day Holiday period, slow times in Muscat

Its been hard to find any real news lately, as Oman settles down for a long period of holidays (National Day and Eid coming in early December).

First: Occidental and the Abu Dhabi government's Development investment company Mubadala were awarded rights to a piece of Oman to explore and produce gas. The Omani Government took a 20% percentage via Oman Oil Company. The deal is good for Oman, especially in these tight credit times, because it will provide an effective loan of $500 million to fund development, money that will only be liable to be repaid from gas production. The area already contains some small undeveloped gas fields previously discovered for the Government by Petroleum Development Oman, and the area excludes fields already found and developed by the Government (like the Kauther field).

Haven't heard if OOC's 20% piece is 'carried' (ie if they will have to pay their share of the costs or not), but as with all such deals for gas in Oman the key question is: who will pay market price for the gas? Another 2 more similar deals are being lined up for next year, one with Malaysian state oil company Petronas and another with a small US company called Hertitage Oil and Gas. [post press correction: that's Harvest Oil and Gas, not Heritage. Mis-remembered!] The terms of these deals are still being negotiated apparently. And word from my fiends in the Ministry is that the Occidental deal will be expanded to include oil, but the terms couldn't be finalised in time for National Day so only a gas deal was inked.

NEW YORK, Nov 24 (Reuters) - Occidental Petroleum Corp (OXY.N: Quote, Profile, Research, Stock Buzz) and Abu Dhabi investment firm Mubadala Development Co have signed an exploration and production sharing agreement with the Sultanate of Oman, the companies said in a joint release on Monday.

The agreement allows the parties to develop four existing gas fields and explore for new discoveries in a newly formed contract area in Northern Oman. The 20-year agreement covers an area of 2,269 square kilometers (876 square miles).

Occidental will serve as operator under the agreement and hold a 48 percent interest, with Mubadala holding 32 percent and the Oman Oil Company holding the remaining 20 percent.

Total capital investment in the contract area is expected to be about $500 million over the next four years.
...

Second, the infamous rape at PDO viral-email flurry.
I've been trying to track down any actual facts on the email, alleging a serious sexual attack in PDO on the fireworks night of Nov 6th, that ripped around the Muscat expat community. The email and PDO's official statement were posted on comments to an earlier post of mine on PDO. I had received the emails as well of course, from many sources, but I hadn't posted the story because, well, it was highly inflamatory and there was no independent evidence at all of such an attack, plus the email talked of a cover up by Senior Managers at PDO which did not ring true at all.

That lack of evidence continues to be the status. My sources tell me that there has been no actual complaint made, and no comment from the supposed source of the original email despite emails and public appeals, there remains just that original email. So, for now, my verdict is that its probably not true, and the email was either a case of Chinese whispers gone wrong, perhaps based on some real or imagined teenage underage sexual adventures, or a deliberate hoax. There are now hybrid rumours circulating, such as one I was forwarded that talked of the event being captured on CCTV. There are no CCTV cameras at PDO cub, BTW.

I'll keep a watch out, but the signs are not good for any more actual facts in this case.

Lastly, the mighty brain trust that is Oman's Majlis Al Shura apparently rubber stamped the 2009 budget drafted by HE Mr. Macki, Minister of the National Economy. The story is almost comical. The idea that the Majlis can effectively challenge someone as smart and well supported as HE Macki on something this important is a joke. Not only are the Majlis members elected mostly on local tribal grounds and are banned from forming political parties, but they have no effective independent civil service to back them up. As a result, they are as effective a challenge as a moist towelette to someone as well prepared as HE Macki. See Times of Oman story.

They do, however, serve as an important source of patronage and 'wasta' within Government for low level things. As a result of their close contacts within the Government, and their ability to kick up a fuss, they have bypassed the previously powerful system of local Walli. So if your drains are a problem, or your roads full of potholes, a complaint to your Majlis member is of more use than the Walli.

Majlis okays economic panel’s report on draft of 2009 budget
ONA
Monday, November 24, 2008
MUSCAT — The Majlis Al Shura yesterday held its second session of the second annual sitting of the sixth term under the chairmanship of Sheikh Ahmed bin Mohammed Al Isa’ee.

The Majlis discussed the report of the economic committee on its study on the state general draft budget for 2009 in the presence of Ahmed bin Abdulnabi Macki, minister of national economy and deputy chairman of the Financial Affairs and Energy Resources Council and a number of senior officials at the national economy and financial sectors. The Majlis approved the committee’s report on the draft budget, and decided to refer it to the Council of Ministers, in accordance with the Majlis internal regulation, issued by Royal Decree No. 71/2004 on principles of reviewing the state’s general budgets and plans.

Sheikh Isa’ee underlined the importance of cooperation between the Majlis and the government to achieve the national development goals at all levels and sectors. Macki briefed the Majlis on major aspects of the state’s general draft budget for 2009.