Robert Fisk: India may hold whip hand in this power game

Allah was kind to Dubai yesterday. Just when the emirate's unspeakable wealth appeared on the point of collapse – stock markets, of course, naturally 'trembled' – along came the feast of Eid al-Adha and sent all the kings and emirs and sheikhs off to their diwans to celebrate the decision by the father of monotheism – the Prophet Ibrahim himself – not to kill his son Ismail. But then again, Sheikh Mohamed bin Rashid al-Makhtoum, knew that the week-long holiday in Dubai would close down the local markets even if it couldn't stifle the rumours.

Among the latter came the old canard that Sheikh Mohamed will have to hand over his immensely profitable Emirates Airlines to his Abu Dhabi cousin, the ever-beneficent Sheikh Khalifa bin Zayed bin Sultan al-Nahyan, who seems to spend much of his time bailing out Dubai's outrageous tourist and oligarchical ambitions. Indeed, Dubai may have the tallest tower in the world and the largest man-made island but it would help if it paid off the Japanese company that has just built the emirate's first metro system – even if trains to the airport cannot carry passenger baggage.

There are, however, two basic truths about Dubai which, predictably, have not found their way into market speculation or newspaper analysis. The first is that Dubai may soon find itself a satellite not of its Abu Dhabi capital but of India. The biggest merchants in Dubai are Indian – they run the gold market, even the bookshops in Sheikh Mohamed's playpen – and west India is only two hours' flying time away. In fact, until 1962 – and you have to be an oldie to understand the emirates' economic world – the Indian rupee was the currency for most of the Gulf, including even Kuwait.

Sheikh Mohamed's angry dismissal of his three top executives a week ago will not change this, although it might curb those who took too much advantage of the Dubai boom. The ruler may indeed have to reflect upon the future of Emirates, not to mention the invalid Dubai World, if he is to appease his friendly cousin up the road in Abu Dhabi, but in the end the emirs all know that Dubai – like the US and British banks that crashed so spectacularly this year – is too big to abandon. If Dubai World really defaults, then the rating agencies will start downgrading the whole shebang and the sheikhs and financial elite of the UAE will find it hard to get money.

There's always been a cosy relationship, of course, between haughty, starchy old Abu Dhabi and playboy Dubai. Sheikh Mohamed likes tourism and foreigners and racehorses and even the Russian oligarchs whose henchmen apparently fought a gun battle in the world's tallest building a few months ago.

Abu Dhabi, holder of the world's sixth largest crude oil reserves, believes in industry and art, occasionally poking gentle fun at its bling emirate to the east; the creation of Ettihad Airlines – ever expanding in the face of Emirates Airlines' success – was both a joke and a warning.

But deep in their golden mosques, the ruling family are asking themselves some serious questions this Islamic holiday. Why was the call for a moratorium on debt so crudely and unprofessionally put together?

As one fine source – Independent readers must take on trust how high up the ladder he is, but he should have known of this announcement and didn't – said privately last night: "It came as a shock and a surprise to everybody, not only to me but to anyone I know. All the information I had till yesterday was that everything was in hand. We had the finding for everything coming due this year – there was the $10 billion [£6 million] issued back in February and then nearly $8 billion over the past month – the money's there.

"So it's a puzzle, particularly since it was very clear, to people who knew, that the bond coming due in December was a litmus test. Everyone was planning to repay it. The people of Abu Dhabi didn't know this was going to happen. The market did not expect anything like this."

Too true. If Dubai World and all the other conglomerates symbolising Dubai were already in the process of being restructured, why Wednesday's extraordinary statement? There was talk in Dubai last night of a "Diwan revolution" although you'd think this had commenced when Sheikh Mohamed started ditching his top guys seven days ago. As one financial journalist in the Gulf put it: "To get a six-month standstill on payments for creditors, you can't just announce it before you've talked to them. They're not going to get the creditors to accept this in a couple of weeks."

Unless, of course, Sheikh Mohamed planned the whole fandango with Sheikh Khalifa. Unlikely, since Dubai's decision to allow foreigners to buy property in the emirate was taken without any reference to the nation's laws – or warning to Abu Dhabi. Or, rather than worrying about London and Tokyo, perhaps we should be watching the Indian stock market...