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Goodbye to Dubai; Israelis not Affected

The Arab world’s refusal to recognize Israel helped Israelis to escape the fallout of the Dubai financial debacle. Most diamond firms stayed away.
By Tzvi Ben Gedalyahu
First Publish: 11/30/2009, 4:08 PM / Last Update: 11/30/2009, 4:24 PM

Israel was barely touched by the financial debacle in Dubai, where financial markets crashed 10 percent on Monday following reports of Dubai World’s debt crisis. The government-backed state conglomerate Dubai World last week asked creditors to wait another six months for repayment of billions of dollars of debt, setting on a near-global financial crisis.

Except for a couple of Israeli diamond firms, companies and individuals in the Jewish state have stayed away from the financial jewel of the United Arab Emirates, which does not have diplomatic relations with Israel. Only a fraction of Israeli diamond exports end up in Dubai, according to industry estimates.

Besides attracting investments in real estate, Dubai, one of the seven emirates of the United Arab Emirates (UAE), has been the source of export activity, much of which is actually the illegal smuggling of goods to Iran, according to Israeli financial publication Globes. One Israeli magnate who did conduct business in Dubai was none other than Lev Levayev, whose giant Africa Israel Investment company is struggling to continue in operation because of overloaded debts. Israeli billionaire Yitzchak Tshuva denied reports that he has investments in Dubai although he has discussed business propositions in the financial center. “I have not invested even one cent in Dubai,” Tshuva said Monday.

”Dubai has never been a successful target market for Israeli technologies, although there have been many attempts since 1996, when two Israeli economic representative offices were set up, one in Oman and the other in Qatar, on the initiative of Shimon Peres,” a diamond industry source told Globes.

Any fallout from the Dubai crisis will affect Israel only indirectly, according to economists. Finance Minister Yuval Steinitz said, "We don't see any macro-economic consequences for Israel, but the fear is from the aftershock.”

Dubai’s problems developed because of its need to diversify as its oil reserves diminish. It has marketed itself as a tourist and financial center, and Dubai World is building magnificent projects, including artificial palm-shaped islands, that have attracted curiosity seekers from all over the world but also have resulted in a bloated debt.