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The Trucial States of the Persian Gulf coast granted the UK control of their defense and foreign affairs in 19th century treaties. In 1971, six of these states - Abu Zaby, 'Ajman, Al Fujayrah, Ash Shariqah, Dubayy, and Umm al Qaywayn - merged to form the United Arab Emirates (UAE). They were joined in 1972 by Ra's al Khaymah. The UAE's per capita GDP is on par with those of leading West European nations. Its generosity with oil revenues and its moderate foreign policy stance have allowed the UAE to play a vital role in the affairs of the region.

On the surface, the United Arab Emirates seems immune to the financial crisis plaguing the global economy.

But as recession looms in the West, cracks are appearing in the oil-fueled boom that has made Dubai, with its futuristic skyscrapers on the turquoise waters of the Persian Gulf, a global byword for unfettered growth.

Banks are reining in lending, casting a pall over corporate finance and building plans. Oil prices have been dropping. Stock markets across the region have been falling since June. After insisting for days that the oil-rich Persian Gulf region was fully "insulated" from financial troubles abroad, the Emirates' Central Bank made about $13.6 billion available on Sept. 22 to ease credit problems, in an echo of bailout measures in the United States. Already, some bankers are saying it is not enough.

Some of Dubai's more extravagant building projects - the ever-bigger malls, islands and indoor ski slopes - are likely to be dropped if they do not already have financing lined up, bankers say. The credit crisis could also reduce demand from buyers, who will have a harder time getting mortgages.

The shrinkage will be more severe if the financial crisis worsens in the West. Property prices and rents, which have remained steady until now, are widely expected to start dropping soon.

At the same time, investor confidence has been harmed by a long string of high-level corporate scandals, jeopardizing Dubai's long-term ambition of becoming a regional financial capital.