Gulf Arab leaders opened a two-day economic summit yesterday with Israeli air strikes on Gaza taking the spotlight as the oil-producing region looks to better coordinate policies to face the global financial crisis.
The key focus of the annual heads of state meeting is to approve a long-planned pact that could take them closer to issuing a single currency before a self-imposed 2010 deadline for monetary union.
But Gulf rulers were certain to focus at least initially on the bloodshed in Gaza before turning their attentions on how to tackle an oil price slump and a global financial crisis that has brought an end to a six-year regional economic boom.
"(Gaza) is the most prominent event on the summit," Abdel-Rahman al-Attiyah, secretary-general of the Gulf Cooperation Council (GCC), told reporters after an opening session of leaders in the Omani capital, Muscat.
"Gaza was discussed yesterday, has been discussed in the meetings today and will be discussed tomorrow at all levels. It will be reflected in the summit statement and therefore this issue is one of the hottest in the summit."
The Prime Minister of Qatar, the only Gulf state with an Israeli envoy, called the attacks "savage and unjustified".
Sheikh Hamad bin Jassim al-Thani told Israeli Foreign Minister Tzipi Livni in a telephone conversation that "Arabs feel that Israel had no intention of achieving peace," the official Qatar news agency reported.
An Arab foreign ministers meeting in Cairo tomorrow would discuss holding an emergency Arab summit on Gaza but Saudi Foreign Minister Prince Saud al-Faisal said: "There would be no benefit in attending an Arab summit for statements," suggesting that Riyadh was not in favour of such a meeting.
The GCC, an economic and political bloc, includes Saudi Arabia, the UAE, Oman, Qatar, Bahrain and Kuwait.
But Gaza violence is unlikely to derail the bloc's economic agenda as they seek to better coordinate fiscal policies to weather a global crisis that has sent major economies, including the US and Japan, into recession.
"It (the agenda) is going to be concentrated on domestic matters, on the economy," Omani Minister of Foreign Affairs Youssef bin Alawi bin Abdullah said.
"They will try to avoid any further damage from the international financial crisis. In that regard, they need very strong coordination."
Gulf states have so far adopted mostly separate monetary and fiscal policies to address the credit crunch that is derailing expansion projects and slowing economic growth prospects.
"The financial crisis will push us for coordination," Makboul bin Ali bin Sultan, Omani minister of commerce and industry, said, adding the collapse in oil prices to about a quarter of their July record level was a great concern.
"The Gulf is not comfortable at all at this level," he said.
Delegates, meanwhile, cast doubts about whether they would reach a compromise on the central bank's location, one of the political obstacles to the single currency plan.
Mr Attiyah yesterday said that approving the monetary agreement was a done deal, adding yesterday that applications to host the central bank were being discussed.
The UAE, Qatar, Bahrain and Saudi Arabia are vying to host the regional central bank, which will be independent from the governments of member countries, according to a final draft of the monetary union deal seen by Reuters last month.
Asked by Reuters if the summit may decide the location, Mr Attiyah only said: "Insha'Allah (God willing)".
Gulf states have given renewed emphasis to getting the project back on track this year after Oman decided in 2006 not to join monetary union, months before Kuwait severed a currency peg to the dollar that was intended to remain intact until the union.