DUBAI, United Arab Emirates – DUBAI has been let off the hook for now over its imminent debt thanks to a hefty lifeline from Abu Dhabi, but the price it may have to pay its deep-pocketed neighbour for the favour remains to be seen.

The city-state surprised the markets on Monday when it said it will pay US$4.1 billion of maturing bonds issued by its troubled Nakheel giant property developer after it had requested a standstill on payments.

A US$10-billion cash injection from Abu Dhabi buoyed Dubai and allowed it to calm creditors who were reportedly refusing to freeze debt payments by Dubai World group — the parent firm of Nakheel, and planning to push the company towards default.

“Abu Dhabi is not running

a philanthrophic investment agency,” said John Sfakianakis, chief economist at the

Riyadh-based BSF-Credit Agricole Group.

“Dubai will be forced to yield some autonomy to Abu Dhabi, which is likely to be heavily involved in the restructuring of Dubai World and could seek strategic equity stakes in key assets held in Dubai,” he added in a report.

Sfakianakis said that Abu Dhabi, the leading sheikhdom of the United Arab Emirates (UAE), is also likely to make political gains over Dubai, bringing it in line with the

Abu Dhabi-dominated federal policies, namely customs control and foreign policy.

“Greater Abu Dhabi influence over Dubai is likely to extend into the foreign policy space, where discrepancies have existed on such crucial issues as dealing with Iran,” he said, pointing out that Iran is the biggest trading partner of Dubai which hosts around 350,000 Iranians.

The UAE claims that Iran occupies three of its islands in the Gulf, and has long urged Tehran to start talks to resolve the dispute.

Abu Dhabi’s intervention was the third since Dubai said it needed to sort the debt problem of its corporates back in February, after being hit by the global financial crisis.

Two Abu Dhabi-controlled banks bought US$5 billion worth of Dubai government bonds late November, while the Abu Dhabi-based federal central bank fully subscribed to a US$10-billion Dubai bond issue in February.

Abu Dhabi’s timely assistance to Dubai, however, does not necessarily have strings attached, according to a senior Dubai businessman.

“In the UAE culture, when your brother is down, you help him up,” he told AFP requesting anonymity.

“Culturally, people in the UAE unite when they feel under siege,” he added, claiming that Dubai was subjected to an attack by media which “blew its debt problem out of proportion”.

“I am extremely confident that there are no strings attached as assumed,” he said, boasting that he now sits on 85 per cent return on multi-million-dollar Dubai bonds which he bought after Dubai said it might need to freeze debt repayments by Dubai World.

“Dubai has put the UAE on the map. It brought wealth to the whole nation… while over the past 10 years, it did not cost the nation (federal budget) a penny,” he said.

Dubai, which — unlike Abu Dhabi — has little oil, had financed its rapid economic growth over the past few years through amassing a mountain of debt, mainly by its state-run corporates. It has a minimum of US$80 billion in debt, with some estimates putting it at US$100 billion.

EFG-Hermes investment bank said the move by Abu Dhabi could have been due to the unexpected severe response by investors and credit-rating agencies to Dubai’s debt alert, which has also affected Abu Dhabi companies.

“Dubai and Abu Dhabi governments under-estimated the scale and severity of the reaction from markets,” said Iqbal Fahd, vice president of research at EFG-Hermes in

a statement.