The Dubai government refused to guarantee the huge debts built up by its conglomerate Dubai World, dashing investor hopes that the latest episode in the global financial crisis might be swiftly resolved.
The comments were made as the region reopened for business after the Eid holiday and local stock markets fell sharply.
Creditors, including several British banks, had been eagerly awaiting some clarification from Dubai officials since the brief announcement ahead of the long weekend on Wednesday night that Dubai World was seeking to defer repayments on its $59bn (£36bn) debt pile, but there was no comfort on offer. British banks have a $50bn exposure to the United Arab Emirates and high street names including Lloyds, HSBC and Royal Bank of Scotland have formed a creditors' committee seeking urgent meetings with Dubai officials.
In an interview on local television, the director general of Dubai's department of finance, Abdulrahman al-Saleh, appeared to suggest that investors only had themselves to blame for the unfolding crisis. "Creditors need to take part of the responsibility for their decision to lend to the companies," he said.
"They think Dubai World is part of the government, which is not correct. Dubai World was established as an independent company; it is true that the government is the owner, but given that the company has various activities and is exposed to various types of risks, the decision, since its establishment, has been that the company is not guaranteed by the [Dubai] government."
Dubai World is the largest of a handful of state-controlled companies and owns assets such as a profitable ports business that includes the former P&O, the QE2 liner, and the property firm behind some of the more outlandish developments of the last decade.
Fears that it could potentially default on its debts sparked turmoil on world markets at the end of last week and concerns that other heavily indebted states could be affected as investor confidence eroded, with much of the focus on Greece, Ukraine and the Baltic states.
The central bank of the United Arab Emirates yesterday sought to restore some calm by providing an emergency facility to shore up local banks, and foreign banks operating in the Emirates.
The International Monetary Fund today welcomed the move and said it continued to monitor the situation.
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