The government was finally forced to bail out the beleaguered Blue City real estate and tourism project to avoid the site being sold by the current owners of the project's debt bonds, Essdar, a Dubai investment company part-owned by Emirati royals. According to an Emirati newspaper, The National, Onyx Investments, a wholly owned subsidiary of the state-owned Oman Investment Fund, has bought nearly all of Blue City's senior debt from Essdar. Essdar bought US$655m of the struggling project's debt at a considerable discount in 2010. It originally intended to restructure the project using the powers designated to the senior bond holders. As legal complexities prevented this, Essdar was planning to sell the land and foreclose on the project. The Omani government stepped in at this point, presumably to maintain some control over the fate of the 25-sq km site.

Blue City, or Medinat al-Zarqa, was to have been a town for 200,000 people, 45 minutes' drive from Muscat, incorporating hotels, a marina and a golf course. No details have officially been released about how much the government paid for the debt bonds, or its plans for the project, but sources have suggested that it was in excess of US$500m. The end result of this sorry story is that a huge amount of government money has been used to buy back the land, which was no doubt sold to the developers at a considerably discounted price in the first place. Those in charge blamed the 2008 downturn in the Gulf property market for the foundering of the project's fortunes. The Omani company behind the project is Cyclone LLC, the co-owners of which are Anees Issa Mohammed al-Zadjali, who is also the company chairman, and Sayyid Haithem bin Tariq al-Said. Sayyid Haithem is the heritage and culture minister, a cousin of the sultan's, who has in the past been tipped as a possible successor. The project instigator and developer was a Bahraini, Ahmed Abubaker Janahi. An early ownership dispute between Cyclone and Mr Janahi's company, AAJ Holdings (AAJH), saw Cyclone take control of the 70% of the project owned by AAJH. A series of lawsuits brought by Mr Janahi failed to overturn the decision. However a substantial amount of debt financing, amounting to over US$900m, has been raised towards the project.