ABU DHABI (Reuters) – Abu Dhabi, wealthy capital of  the United Arab Emirates, will “pick and choose” how to assist  debt-laden neighbour Dubai, a senior official said yesterday,  after fears of a Dubai default sent global markets reeling.

“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 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 per cent of its worker  remittances from the UAE, said yesterday it would keep a close  watch on the situation in Dubai but did not expect much impact  on it.

In the Gulf itself, details of local banks’ exposure to  Dubai have begun to emerge.

Years of chasing business in Dubai’s property boom means Abu  Dhabi banks have built up an exposure to Dubai-based companies  worth at least 30 percent of their loan books, senior bankers in  Abu Dhabi said on Friday.

In most investors’ minds, the question is not whether Abu  Dhabi will support Dubai but when and how.

Abu Dhabi, which pumps 90 per cent of the oil that make the  United Arab Emirates the world’s third-largest oil exporter, has  already provided $15 billion in indirect support for Dubai  through the UAE central bank and two private Abu Dhabi banks.

How much more support the emirate provides for its  cash-strapped neighbour, however, will depend on how Dubai  clarifies its stand on unresolved issues.

“Until things become clearer, it is very difficult to make  any further investment decision on the bonds. Many things have  to be clarified by Dubai,” the official said.