RIGA/DUBAI: The United Arab Emirates held the door open yesterday to rejoining the Gulf Arab monetary union, a day after pulling out of the project, although it said it was not interested in participating for the moment.
Foreign Minister Sheikh Abdullah bin Zayed Al-Nahayan said his country had withdrawn from the project to create a common currency because Gulf Cooperation Council (GCC) heads of state had decided against basing the joint central bank in the UAE.
The UAE’s decision to opt out on Wednesday from the euro zone-style plan marked the latest in a series of political disagreements that have held up the common currency under negotiation for almost a decade.
“I would not say the door is closed, there is nothing that is an end game in politics,” Sheikh Abdullah told reporters on a visit to Latvia, signaling the UAE may reconsider its position. “But I am saying that for the moment we are not interested.”
The UAE withdrawal came two years to the day after Kuwait dropped its dollar peg, breaking a deal to keep it until union. Just months before, Oman had opted out of monetary union.
Sheikh Abdullah spoke out against the decision on May 5 to base the joint Gulf central bank’s headquarters in Riyadh arguing the UAE was a regional financial center and the Gulf’s most-transparent economy.
“(Opting out) was a political decision. We did not see that it would be wise for the UAE to participate in a union which does not recognize the strength of the UAE economy,” Sheikh Abdullah said.
Analysts said economic benefits of a common currency are limited due to the small amount of intra-regional trade, but union would give the Gulf a better negotiating position with the world and afford greater monetary policy options.
Most Gulf states peg their currencies to the dollar and get the bulk of their revenues from oil and gas exports. The UAE economy minister said yesterday the UAE was committed to other areas of integration in a region which is also working on a common market and customs union.
“I believe that the union will happen,” said John Sfakianakis, chief economist at SABB bank in Riyadh.
“The Gulf would be perceived as an oil-trading bloc, which is especially important for the smaller countries in the region. The UAE is a big economy in the region, but not to the world.”
Qatar reaffirmed its support yesterday for the plan. A top adviser to the Qatari emir told the Doha-based daily Al-Arab that the UAE’s withdrawal was “regrettable.”
“We believe in the common currency for the GCC and we will forge head with the work,” Ibrahim Al-Ibrahim said. The comments echoed those of Kuwait’s finance minister on Wednesday.
“Progress on the monetary union has been very slow and given the tasks central banks have ahead of them I don’t see it happening in the next five years,” said Monica Malik, a regional economist at EFG-Hermes.