This little oil state, which enjoys the world's highest income per capita, is gripped by a business crisis and severe economic stagnation which in almost any other country would be called a recession. The main, big, oil-financed infrastructure projects are moving ahead, but development in the private sector has slowed to a snail's pace.

In sharp contrast to the pell-mell, boomtown scramble following the oil price rise four years ago, the indicators of slump are everywhere here. Construction work has ceased abruptly on scores of sites in Sharjah, where cranes silently over half-finished buildings.

In Dubai, For Rent signs are sprouting from apartments and offices whose landlords used to turn away businessmen desperately trying to bribe their way into accommodation. Some shipping berths are idle in Abu Dhubai where waiting time for vessels last year ran as long as three months. Bankers report letters of credit for imports have declined substantially, land prices are dropping and rents are being cut. While the impact varies among the seven sheikdoms in this federation - oil-rich Abu Dhabi is least affected - payments have been delayed indefinitely throughout the United Arab Emirates.

The jolting economic turndown - a slump which has more than a year to run, according to Mehdi Tagher, Abu Dhabi's most prominent tycoon - is creating a tough commercial squeeze which has bankrupt some small businessmen. It has raised questions about how fast a better-rounded economy can take shape in these oil states.

In the financial establishment, the mood is undismayed. "Nothing can go too wrong, no economic mistake is irretrievable when a country has $9 billion in annual oil revenue," a local ruler's chief adviser points out.

Most bankers here believe the United Arab Emirates will emerge with a stronger, healthier economy form this crisis, which they describe as growing pains of this small, newly rich single-export state.

Diagnosing the malaise, most analysts here point to a cluster of factors. The oil state experienced a construction boom with its vastly increased oil earnings, and the economy now is settling down to more normal activities. An unprecedented banking boom - this country of fewer than a quarter-million citizens has 55 banks with 350 branches - got out of control and triggered a panic last spring. The Ajmanarab Bank, which involves Cuban exiles' interests in Florida, closed and still has not reopened.

Easy-money policies encouraged by the emirate's only central fiduciary authority - whose British managing director has been let go - encouraged rampant speculation on land and buildings until a crisis of confidence left everyone owing everyone else. Abu Dhabi's campaign to strengthen the central government of these seven sheikdoms delayed the 1977 federal budget, which is 98 per cent financed by Abu Dhabi, and this lag also bled money and confidence out of the commercial circuit.

The entire syndrome can be traced to the central mechanism for redistributing the oil wealth accumulating in conservative Arab states emerging in the Gulf. Land ownership is the key to prosperity for private individuals, particularly tribal members with little or no commercial experience. On applying to their local rulers, natives get grants of land, and the deed then enables them to obtain bank loans to construct apartment and office buildings to be rented expensively.

At the height of the boom, investors were doubling their money in 18 months, businessmen here recall. Accompanying the scramble, small businessmen - including lots of Lebanese who moved here during the civil war in Beirut - launched themselves into speculation on building materials and other goods, which went up in price as the ports clogged. "Hairdressers were importing steel bars, fashion boutiques were speculating on rice. People were building skyscrapers everywhere. The situation got out of hand," Tagher recalls.

When the building boom eased as more housing was completed, the accommodation pinch eased as contractors reduced staff. Simultaneously, the bank crisis hit the Emirates: Banks which had been under pressure to make profits by borrowing short and lending long term, suddenly found they had lost their liquidity, and some have had to suspend their financing of buildings under construction.

One impact has affected some emirates more than others. Least affected is Abu Dhabi, which has the oil wealth. The situation gets worse as one moves north to Dubai, when Sharjah and the other oil-poor sheikhdoms. The most visible paralysis is in Sharjah, which has only a little oil and has ambitious plans of becoming a service center for the whole United Arab Emirates. Because it has a policy of allowing all Arabs - not just locals - to buy land, Sharjah attracted an influx of refugees from Lebanon, the kind of amateurs whom well-off businessmen like Tagher say are the only permanent victims of the current crunch.

British and American bankers concur with Tagher's verdict that small entrepreneurs are being forced out of business. Citizens will have their investments protected and their income made up in other kinds of patronage and social services, they say, but these local landlords also will "learn to have more realistic expectations" as the banks force them to reduce rents in order to meet interest payments.

International companies - notably American and British firms - are rarely affected directly. "The American firms here are mainly involved in oil drilling or in finance, trying to snare some surplus funds, and those businesses go on," a business analyst says. A giant gas-gathering contract has just been signed with Bechtel and Fluor.

While the property market and private sector generally is bearish throughout the Gulf, an element of deliberate government policy also appears to be involved in the present slowdown. In neighboring Saudi Arabia, the leadership has imposed a deflationary campaign. In the less developed United Arab Emirates, officials' reluctance to leap into a rescue operation reflects similar thinking about the need for a pause.

The most significant result may well be the emergence of a central bank, which would be a stronger authority to regulate commercial banking and also the biggest step forward towards effective unity since the merging of the seven emirates' military forces.

By letting market forces take their toll before starting any rescue operation, Abu Dhabi's money men may be able to overcome the political opposition in other emirates which has blocked creation of an effective body to oversee where the money goes.