15 MARCH 2010

Less than one year ago, Sheikh Mohammed Bin Rashed was so confident that Dubai offered to safeguard New York Harbour. He would hold seminars where former U.S. Presidents would reportedly receive $400,000 -- for a day's chatter and handshake. They had an artificial ski slope, skating ring, and a special metro rail.

Dubai controlled Emirates Airlines, $55 billion worth of airplanes, the investment arm of HSBC Bank, 21% of the London Stock Exchange, $1.85 billion in Deutsche Bank, 5% of Sony, 13% of Airbus Holdings, $1.25 billion in Allied Medicals, $1 billion in Standard Chartered Bank, $5 billion in Las Vegas MGM Mirage, $100 million to buy Leisure Corp., which owns Turnberry Golf in Florida, $942 million in Barney's New York, 20% of Cirque de Soleil acrobatic entertainment, $100 million in the QE2, billions in Dubai Ports, to mention a few examples. It spent $50 million on fireworks at the launch of the Atlantis Casino.

Suddenly, a few months ago, Dubai officially accrued a minimum of $80 billion in debt and had difficulty in refinancing a $3.8 billion loan. Its only hope was in getting cover from its sister Emirate, Abu Dhabi, which has the largest sovereign wealth fund in the world. Dubai, everyone forgot, is actually one of six sheikdoms composing the United Arab Emirates.

There is the point. Sheikh Mohammed had become too big for his own good. He had started receiving heads of state, granting media awards, even writing books about his vision of the world and good governance. His emirate has no oil. But the enterprising Sandhurst graduate managed to open a new world in the Gulf, with European tourists and world businesses filling fancily built hotels on acquired Gulf sea sand. Even with a breaking crisis, it was announced that the tallest tower in the world will be inaugurated in January 2010. The only difference was in the name. Dubai Tower was suddenly renamed Khalifa Tower, after the swiftly helpful ruler of Abu Dhabi and Emirates President, Sheikh Khalifa Bin Zahed.

Again, there is the point. There are Sheikhs and there are Sheikhs. As the Arab proverb goes: "The eye can't go higher than the eyebrow!" There is a pecking order among Sheikhs, and don't you forget it!

There is also the question of Iran. The use of Dubai as a political, financial and intelligence backchannel for Asia generally and Iran particularly, was well known and tolerated by all concerned. It was in everyone's interest to have an Arab Gulf Hong Kong-style breathing space. Half of the wealth of the Afghanistan current government is in Dubai. The sons of Azerbaijan's President are familiar faces there. So is Pakistan Prime Minister Zardari, and Indian, Yemeni, Iraqi, Chinese, Israeli and American operators.

Dubai has over 15 daily flights to Iranian cities -- a very short hop -- let alone boat rides. It is not unusual for U.S. companies to deal through middlemen -- sometimes "former" diplomats posing as middlemen. That seemed to be tolerated. Except that, perhaps, matters were getting out of hand and/or there is a new need to pressure Iran more firmly, indicating that time for serious sanctions was near unless Tehran displays a reasonable attitude -- which is very unlikely in the immediate future.

Hence the need to shake the unsuspecting Sheikh, who upon smelling the bitter coffee took the first flight to meet Her Majesty the Queen, the original source of blessed protection. Gradually, the powers that took the camel to the top of the minaret will most likely help bring it down to earth.

Meanwhile, Sheikh Mo is really shaken. Pissed off, as they say in London.