UAE pulls out of Gulf monetary union project

The United Arab Emirates has pulled out of a proposed monetary union deal being negotiated by the six-nation Gulf Cooperation Council, a foreign ministry official said yesterday.

"The UAE has decided not to be party to the accord on Gulf monetary union," the spokesman said, as quoted by the official WAM news agency.

"The general secretariat of the GCC was officially informed today," added the official, who was not named by the news agency. The energy-rich GCC groups the UAE and Oman with Bahrain, Kuwait, Qatar and Saudi Arabia.

Yesterday's announcement comes in the wake of reservations expressed by the UAE after an informal GCC meeting in Saudi Arabia on May 5 decided that Riyadh would host the region's future banking authority.

GCC Secretary General Abdurrahman al-Attiyah told a news conference after the Riyadh meeting that the first step towards creating a Gulf central bank would be the establishment of a Riyadh-based monetary council, which would exist during a "transitional phase" in the move towards monetary union. The Emirates, in particular Dubai, is a major financial and commercial hub and had harboured ambitions of playing host to the region's banking authority.

WAM said the UAE was the first GCC country to have officially applied - in 2004 - to be the seat of any future Gulf central bank.

Bahrain had also been considered in the running to host the new banking authority for the region, which controls a large share of global energy supplies and has a population of more than 36 million.

In the end it fell to Saudi Arabia, which while not a banking centre like Bahrain, Kuwait or the United Arab Emirates, is by far the world's biggest oil supplier and the Gulf's largest economy.

A timetable for the next step of forming the monetary council has still to be decided.

Originally the goal was set for 2010, but analysts consider that unrealistic, given the global economic slowdown.

Oman announced in 2007 that it would not join the scheme for the planned single currency.