Seemed like a good idea at the timeThe United Arab Emirates—of which Dubai is one of seven constituents—is going out of its way to stand behind its all-important financial-services sector. By contrast, Dubai itself is running from its own company as fast as it can.

The emirate has gone on a spending spree in recent years, building such total necessities as the world’s largest building (in a city with a population roughly equivalent to that of Queens) and largest man-made island (in palm-tree form). Much of this has been done through Dubai World, the state-owned company with its hands in everything from shipping to real-estate to golf to investing. But now that Dubai World has hit the skids, the emirate wants everyone to know that the country merely owns the company, and the relationship goes no farther than that now that Dubai World is on the brink of default.

Lenders “have deemed Dubai World as part of the government and that is not true,” the Argentine Dubai Finance Dept. chief said. It may have implied that the government would guarantee its debt, maybe even hinted strongly to that effect, but the days of easy money are over.

The whole matter is very clear in the prospectus for the soon-to-be-worthless debt of Nakheel, the Dubai World property developer which asked the Nasdaq to suspend trading in its securities today.

Certain strategic government-related entities of the emirate have significant borrowings which are not direct obligations of the government of Dubai.

Read between the lines, people, and get ready to pony up.

Dubai World’s Debt Not Guaranteed by Government [Bloomberg]
U.A.E. Eases Credit After Dubai World Debt Delay Plan [Bloomberg]