Dubai, a sleepy kingdom of sand dunes just 30 years ago, blossomed into a tax-free business haven, a magnet for celebrities like Brad Pitt and Hilary Swank and a showcase for record-setting skyscrapers.
Today, it’s also a debtor state that has the world’s stock markets shuddering.
Word that the emirate could default on the $80 billion it borrowed during the boom years of the past decade sent the Dow Jones industrial average plunging 155 points yesterday.
The bad news also hinted that Dubai’s ruler, Sheik Mohammed bin Rashid al Maktoum, listed by Forbes as the world’s fourth-richest royal, was in serious money trouble and may be forced to sell off some of his prize acquisitions, such as the Queen Elizabeth II cruise ship and hundreds of golf courses around the world.
It wasn’t supposed to be this way. Dubai, a Persian Gulf emirate about three times the size of New York City, was supposed to be the spectacular success story of the Arab world.
After oil was discovered in 1966, the crafty Maktoum family, which has ruled Dubai for more than 170 years, used the revenue to turn the bone-dry land into a financial capital and a tourist destination.
The family billed Dubai a tax-free, low-inflation financial paradise where — unlike in much of the Mideast — business was welcome. To show how serious the Maktoums were, Dubai went on a vast building spree that led at one time to its using a quarter of the world’s cranes.
Among the royal family’s monuments:
* The Burj Dubai, an office tower due to open in January that will be the tallest man-made structure ever built.
* The Palm Islands, a string of atolls formed out of sand dredged from the Persian Gulf and shaped to look like palm trees. Soccer star David Beckham bought one of the first island villas put on the market, for a reported $16 million.
* The Dubai Mall, which became the world’s largest when it opened last November. It has more than 1,200 shops and draws 750,000 visitors a week.
* The World, an archipelago of man-made islands in the shape of a world map. Individual islands sell for up to $50 million apiece. Among the rumored buyers are Pitt and Angelina Jolie, Rod Stewart and Sir Richard Branson.
* The Rose Tower and Burj Al Arab, two of the three tallest hotels in the world.
* Ski Dubai, an indoor ski resort that features 242,000 square feet of artificial snow-covered slopes and recreation areas.
The mega-expansion was accompanied by heavy promotion. And it didn’t hurt that celebrities seemed to be flocking to Dubai.
Swank and Demi Moore were photographed attending a film festival there. Donald Trump and state-owned developer Nakheel planned a skyscraper hotel on a Palm island.
The financial world watched the emirate’s transformation with curiosity. Could Sheik Mohammed really be that rich?
He was known to have extensive family connections in the Mideast. One of his wives is a half-sister of King Abdullah of Jordan, for example.
But even with the sheik’s personal nest egg, estimated at $16 billion, there were questions about what else was fueling Dubai’s boom.
One answer was Abu Dhabi, another member of the United Arab Emirates — and the one holding most of its oil reserves. Abu Dhabi was lending Dubai money, and that helped explain how Dubai emerged unscathed from the credit crunch of 2008.
Analysts speculated yesterday that Mohammed would be forced into a huge fire sale of assets.
Among properties that Dubai owns wholly or in part are the QEII, which was to be turned into a floating hotel, the Chris Evert tennis centers and such golf courses as Turnberry, host of the 2009 British Open.
Dubai’s ruling family also has interests in the Barneys clothing stores in New York, Madame Tussaud’s and the Snomass resort in Colorado.