(Photo: Sheik Mohammed with junior wife, Princess Haya, and the colt, Truly Royal, in February 2007. Enlarge this photo.) 

Betting is not allowed at the Nad al-Sheba racetrack in Dubai. Gambling is illegal in the United Arab Emirates, so the thousands of race fans there spend the intervals between post times kicking soccer balls or buying trinkets from vendors who lay out their wares on the Bermuda grass. It’s a cool night in January—it gets too hot here to race during the day—and floodlights illuminate the five-story, glass-and-steel space-station-style grandstands.

In the distance are the skyscrapers Dubai is famous for; almost all have cranes on top, signaling that they’re only going to get higher.

Just after 9:30 p.m., the crowd suddenly starts moving, packing in tightly near the parade ring, where the winning horses and jockeys receive their prizes. Kufis brush against baseball caps as locals strain to get a view of Sheik Mohammed bin Rashid al-Maktoum, who has stopped by to take in the action.

Sheik Mohammed is the ruler of Dubai, the prime minister of the seven-state United Arab Emirates, and the most powerful man in the world of horse racing. At 57, he moves with an athlete’s quickness. At one point, while chatting with a jockey, he lifts the hem of his blue dishdasha, revealing a heavily muscled calf. On his head is a crisp white headdress. He turns to a slim British man standing next to him: “Who won?”

Simon Crisford manages Godolphin, Sheik Mohammed’s top racing operation. A onetime Racing Post writer, Crisford now spends half the year in Dubai and half in his native Britain.

“A German horse, sir,” says Crisford.

“That’s good!” says Sheik Mohammed, smiling broadly. “Very good.” The German owners not only beat Sheik Mohammed’s entry, which placed second, but walked away with $72,000—much, if not all, of it the ruler’s money. At most tracks, the house skims off a percentage of gamblers’ bets to cover costs and finance the winner’s purse. Here, the $31 million in prize money that Nad al-Sheba will pay out during its main 11-week season comes mostly from “the Boss,” as Sheik Mohammed’s employees refer to him out of earshot. So while the sheik is fiercely competitive, he’s fine with losing if it means the Germans will be back for more races, perhaps bringing friends and adding to Dubai’s ballooning tourist trade.

The sheik set out decades ago to broaden the public perception of Dubai from that of just another oil-soaked Arab nation to a country that happens to make a few bucks from the stuff. By 2005, only 5 percent of the emirate’s $37 billion G.D.P. came from petroleum sales, with most of the rest from shipping and international finance, as well as tourism. Just in case someone somewhere hasn’t noticed the new Dubai, Sheik Mohammed seems to target another international record each day: World’s tallest tower by 2008! Biggest mall by 2009! Largest airport by 2010! The horses fit right into that. The sheik has established the richest race anywhere, the Dubai World Cup, which is run every March and splits $6 million among the winners. He covers travel expenses for everyone who competes—as well as for their horses, trainers, and jockeys—and puts them up for nearly a week at one of Dubai’s luxury hotels.

But horses are more than a tourist draw for the sheik; they are a passion. Since the early 1980s, he and his brothers have spent more than $1.5 billion on horses, stud farms, and stables around the globe, including Sheik Mohammed’s 3,800-acre Darley America, in the heart of bluegrass country. The Maktoum family is the world’s largest collector of Thoroughbreds, maintaining a herd of nearly 3,800 on four continents and employing a staff of more than 1,400 to oversee the operations. Sheik Mohammed even had a 747 custom built to ferry his horses—the only plane of its kind. The brothers have purchased four of the five most expensive yearlings ever sold and spent enough at auctions in the States—last year accounting for 14 percent of yearling sales—to precipitate the greatest price increases the industry has seen. Some insiders describe the situation as an unsustainable bubble: In the past four years, sales of Thoroughbreds at auction in North America have increased 61 percent, to a record $1.2 billion. Yet total purses for the most competitive races in the U.S. have grown only 11 percent over that period. When the auction ring starts to generate more buzz than the track, horse people start to worry. But not Sheik Mohammed: He’s just looking to get the best horses, no matter the cost.