Tightening of credit in the Middle East region – a likely consequence of Dubai crisis

02-Dec-09

Asian petrochemical players seem cautious of the consequences of the Dubai financial crisis. A likely consequence would be a tightening of credit confined to Dubai and, to a certain extent, the Middle East region, as per ICIS. However, the debt default is not expected to precipitate another major global credit squeeze. Also, as Asian banks are quite conservative, so the impact on businesses in Asia will be limited. The small size of the debt default indicates that it will not develop into a global credit crunch and business will carry on as usual after the issue settles down. However, petrochemical players are keenly watching developments in Dubai, which could again lead to a demand collapse as the global economy is treading a fragile and unsteady path to recovery. Players in the Middle East have a lot to be concerned about because of Dubai World's debt restructuring. The effect of the global financial meltdown had already prompted Dubai banks to tighten credit terms in the past year. The latest financial crisis will make it even tougher for smaller traders and converters to obtain long term credit. Iranian petrochemical suppliers who have been channelling their exports through Jebel Ali in Dubai to sidestep Iran’s stringent banking regulations may face trade constraints if Dubai banks also tighten their procedures.