Abu Dhabi to aid Dubai on "case by case" basis

"We will look at Dubai's commitments and approach them on a case-by-case basis. It does not mean that Abu Dhabi will underwrite all of their debts," the official in the government of the emirate of Abu Dhabi told Reuters by phone.

Dubai's crisis exploded on Wednesday when the emirate, known for flashy lifestyles and the world's tallest building, said it would delay payment on debt issued by one of its flagship firms, angering investors and sending global markets sharply lower.

Selective assistance for companies in "Dubai Inc.," a network of quasi-sovereign industries, instead of blanket assistance, would serve a rude awakening to investors who for years assumed that the conservative Abu Dhabi provided a safety net for its racier neighbour.

"Some of Dubai's entities are commercial, semi-government ones. Abu Dhabi will pick and choose when and where to assist," said the official, who declined to be identified because he is not authorised to speak to the media.

At stake is the $59 billion (35.82 billion pounds) in debt held by government controlled holding company Dubai World and its property arm Nakheel, builder of palm-shaped islands for wealthy celebrities.

Dubai delayed payment on Nakheel debt by six months in a shock announcement, which came on the eve of a long holiday.

World leaders including Britain's Gordon Brown and French premier Francois Fillon said the global economy -- recovering from two years of financial crisis -- was now strong enough to deal with a shock of this magnitude.

And markets began to recover on Friday after banks outside the Gulf said they were not heavily exposed to Dubai debts.

India, which receives 10-12 percent of its worker remittances from the UAE, said on Saturday it would keep a close watch on the situation in Dubai but did not expect much impact on it.