* UAE federal govt stands ready to aid Dubai - minister
* Abu Dhabi aid will come but reluctantly and with strings
* Dubai has not asked federal government for aid - minister
Rania Oteify and Rachna Uppal
DUBAI, March 9 The United Arab Emirates pledged its support for Dubai on Tuesday but said the emirate had yet to ask for federal help, which analysts said would come reluctantly and with strings attached.
The UAE finance minister said the federal government would support the emirate as it negotiates a plan to restructure $26 billion in debt and said he expected a deal to be finalised soon.
State-owned conglomerate Dubai World [DBWLD.UL] is holding informal talks with major creditors, which include HSBC and Standard Chartered, in London this week as it finalises a deal.
Asked whether the federal government would support Dubai, Sheikh Hamdan bin Rashid al Maktoum said: "Of course. Dubai is part of the federation." Sheikh Hamdan, who is also deputy ruler of Dubai, said the emirate had not yet approached the federal government for aid.
"The federation hasn't reached that far, but the Emirates are one entity and things will be resolved soon, God willing," he told reporters on the sidelines of a conference.
Dubai's stock market .DFMGI was up for a fourth day on Tuesday, while Abu Dhabi's .ADI was up for a third on hopes a debt deal might come soon. Five-year Dubai CDS prices stood at 487.4 from 479.6 at the close, according to CMA DataVision.
Abu Dhabi, the wealthiest and largest of the seven members of the UAE federation, bailed Dubai out in December and has an active role behind the scenes in current debt negotiations.
But the emirate, a pivotal player at the federal level, has been pointedly silent on its plans regarding Dubai's debt restructuring. Analysts expect it to help again but in a modest way, with little fanfare, and in exchange for more centralised control.
"It will be calculated interference, and it will come with some conditions," said a prominent Emirati businessman in Abu Dhabi."Abu Dhabi does not want to give the impression that big brother will always be there."
Bankers familiar with the matter said the size of any financial help from the Abu Dhabi government would determine the size of the "haircut" creditors would have to take.
Abu Dhabi has already put limits on its aid.
Last year's $10 billion bailout -- which included $5 billion from two Abu Dhabi-linked banks and came through a Dubai bond issue -- is conditional on Dubai World reaching a satisfactory deal with creditors. About $5 billion of those funds have yet to be released.
Abu Dhabi government officials declined to comment.
The fallout from Dubai's debt crisis is being felt in Abu Dhabi, with Moody's downgrading seven government-related entities late last week as they did not have an explicit, formal guarantee of government backing.
Abu Dhabi, home to most of the UAE's oil, dismissed the downgrade, but analysts said it would not be pleased about the impact Dubai's debt problems were causing.
"Abu Dhabi is aware of the consequences and I suspect it is working out the best thing for the UAE as a whole," said the head of a western bank in Abu Dhabi, who asked not to be identified.
Dubai World shocked global markets in November, when it requested a standstill on debt linked mainly to its property developers, Limitless World and Nakheel, builder of Dubai's palm-shaped islands.
Bankers have said the restructuring plan is being delayed by efforts to value the assets of the Nakheel unit. [ID:nLDE6271QB]
There is widespread expectation among creditors that Abu Dhabi will ride to the rescue, as it did in December when it helped Dubai avert an embarrassing default on an Islamic bond linked to property developer Nakheel.
"Abu Dhabi will come in," said a banker at a Gulf-based creditor. "If anything goes wrong with Dubai World or Dubai, it affects it directly. It may spill over in the region as well and for three, four years who will come and invest in the Gulf?"
But others said Abu Dhabi would only show its hand if it appeared creditors would drag Dubai World into default.
UAE Economy Minister Sultan bin Saeed al Mansouri said on Tuesday that creditors should reach an agreement with the conglomerate.
"If there is any plug pulling (by the creditors of Dubai World), then Abu Dhabi will come in," said a Dubai-based risk analyst. "If lenders call default, then Abu Dhabi will want to prevent that from happening. One, there is the issue of the UAE reputation, and two, Abu Dhabi will want to say, if we can help Dubai, rest assured we will look after our own."
In a sign that Dubai entities were gearing to test the market again, state-owned utility Dubai Electricity and Water Authority (DEWA) said on Tuesday it planned to launch a $1.5 billion bond, to be completed in the first week of April. [ID:nLDE6281AQ]
DEWA postponed the issue after Dubai World's November announcement. (Additional reporting by Stanley Carvalho, Nicolas Parasie and Shaheen Pasha; Writing by Amran Abocar, editing by Will Waterman)
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