Abu Dhabi is moving to bail out on a selective basis the state-owned Dubai World, whose debt default led to a sharp drop in global markets, a senior official has said.
The unnamed official told news agencies on Saturday that the United Arab Emirates' wealthy capital would "pick and choose" how to assist its debt-laden neighbour.
"We will look at Dubai's commitments and approach them on a case-by-case basis," the official told the Reuters news agency by telephone, adding: "It does not mean that Abu Dhabi will underwrite all of their debts."
Dubai's crisis exploded on Wednesday when the emirate, known for opulent lifestyles and the world's tallest building, said it would delay payment on debt issued by Dubai World, triggering panic among investors and driving global markets down.
Abu Dhabi's selective assistance for companies in "Dubai Inc", a network of quasi-sovereign industries, instead of blanket assistance, is likely to disappoint many investors who assumed the city would provide a safety net for its neighbour.
The official, who declined to be identified because he is not authorised to speak to the media, said: "Some of Dubai's entities are commercial, semi-government ones. Abu Dhabi will pick and choose when and where to assist."
On Friday, stocks from Tokyo to Mumbai reacted badly to news of lenders' exposure in the firms that built artificial island housing developments in the Gulf emirate.
Banks in Asia and Europe were quick to distance themselves from Dubai, and shares on the Hang Seng Index in Hong Kong plunged 3.45 per cent after the morning session, down 765.28 points to 21,445.13 as a result of the panic.
European stocks fell to lows not seen since May and bonds jumped after the restructuring was announced.
Dubai, part of the oil-exporting UAE, said on Wednesday it would ask Dubai World creditors and Nakheel to agree to a standstill on billions of dollars of debt as a first step towards restructuring.
Alia Moubayed, a senior economist at Barclays Capital in London and author of the Dubai Debt Problem report, said the "challenges Dubai is facing are considerable".
"The sources of financing, however, at this stage are ... the extent of the Abu Dhabi support that's likely to come through," she told Al Jazeera.
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