Could Dubai trigger another global crisis?

Everyone thought Dubai was past its debt problems after Abu Dhabi bailed out the leveraged emirate last February. Everyone was wrong.

Last Wednesday, the government of Dubai asked Dubai World's creditors for a standstill agreement on interest payments on the company's $59 billion in debt. Government-owned Dubai World controls many of the emirate's corporations, including DP World the world's fourth largest port operator, Emaar developer of the 160-storey Burj Dubai and Nakheel developer of the Palms.

Dubai, with sparse oil reserves, built its fortunes on real estate and financial services in recent years, borrowing heavily to finance mega projects, including three man-made islands shaped as palm fronds, said John Sfakianakis, chief economist at...