20 May, 2009

UAE rejects Gulf currency

http://www.gulfnews.com/business/Banking_and_Finance/10315315.html


This story - if true - is a bombshell. It is one thing for Oman to play the UK of the GCC and announce as it did a couple of years back that it will opt out of the Gulf common currency, but for the UAE to follow up the recent announcement that the GCC monetary authority will be in Riyadh with an announcement that it will not be a part of the common currency, now that is something else. Abu Dhabi had signalled it wanted to be the location, while influential voices in Dubai have been singing the praises of the putative "Khaleeji" currency of late.

Is the unnamed official source putting in an early bid for strong UAE representation among the eventual central bank board members, or just emphasising that, in such an unintergrated economy, the common currency is not that important when most trade and investment is with the west and Asia? It might be that the UAE genuinely wants maximum national financial flexibility, especially in uncertain economic times, but then Abu Dhabi and Dubai's long standing caution, even, historically speaking, outright opposition, toward Saudi Arabia has not gone away, just as periodically Abu Dhabi's unhappiness over their (oil-related) border delimitations gets a hearing. (Partly related to this, the announcements this year that Saudi and Qatar have "finalized" their border rang rather hollow to me at least, given that without Abu Dhabi's full and unreserved agreement, this isn't possible, quite apart from the issue of who has seen the Saudi-Qatari "final" map)...Any thoughts on what is going on ?

23 comments:

Al-ain Rose said...

Good. UAE finally took a serious action toward the Saudi rapacity. they like to act bossy & takeover everything.

BuJassem said...

I read this with amazement. This is a big blow. Basically it's a matter of time before Saudi Arabia pulls out and the project is put on hold.

I guess the UAE didn't want the currency issue to become Gulf Air II

Proud Emirati said...

It is obvious that the UAE wanted to stop acting like a peaceful lamb as it usually does with other GCC members, especially Saudi Arabia since it is the one who dictate everything in GCC.

I say good for the UAE and now that monetary union is dead what will Saudi Arabia do?

Media Junkie said...

I am glad UAE put a stand. I do not think the central bank should be on Saudi soil. Anywhere in the UAE, but not Saudi. It would be a big blow to alot more plans like sponsorship laws and the like if Saudi does become the HQ for the monetary union.

Unless of course, Saudi changes its mind about certain laws, but that's about as likely as finding out the moon is really made out of green cheese.

Dubai Jazz said...

As far as I could remember, the UAE has never made impulsive decisions, so I assume there is something wrong with this single currency policy that made them choose to stay out.

Dubai Jazz said...

anyone else is experiencing troubles viewing this blog? I keep getting an error message when I browse it from IE.

samuraisam said...

Dubai Jazz:
Can you please paste the error message?
The page views are unusually low today, so I think a lot of people might be having errors for some reason.

samuraisam said...

Dubai Jazz:The problem appears to be related to statcounter and doesn't seem to be happening on other blogs for me. Will try and fix it.

Dubai Jazz said...

Sam, it's working OK now. The error message doesn't appear anymore.

Dubai Nikolai said...

Thanks for your comments. There appear to be UAE concerns about the openness of the Saudi banking system and of its economy in general, but the UAE made quite political observations according to The National today - the Saudis getting to be the HQ of all GCC bodies etc. Frankly I think the UAE might come round to the currency if there is a relatively neutral compromise on location, as this would satisfy the status preoccupations of the rival leaderships mostly involved in this spat and would arguably be good, although hardly crucial, for the financial and other ambitions of the UAE to be a part of a common currency. London (pre meltdown) of course shows that being part of a common currency is not crucial to international financial ambition, and the UK actually does a lot of trade and investment exchange with its regional neighbours. Dubai Nikolai

Stained said...

I got the errors yesterday from IE...but no issue with Firefox or Chrome....

samuraisam said...

Is anyone still getting the errors? If you don't get the error, try refreshing the page and allowing it to load completely. I am still getting the error

Al-ain Rose said...

yes sam, I still have it.

rosh said...

Sam,
All's well here..

Dubai Jazz said...

this is weird, it's working fine for me now.

measured PR said...

I don't understand why the Saudi's did not realize how much of an issue this was to the UAE. It would have made more sense to choose Bahrain as a HQ than both the UAE and Saudi. Saudi is a bad choice merely because it will definitely end up being under their complete control. This is not because they are good or bad people, but their economy and sheer population dward the other countries.

Bahrain has a more mature banking system than Saudi and the UAE. Saudi exerts considerable control over Bahrain. So, there is a balance, yet the Saudi's retain an upper-hand; if even indirectly.

Problem solved.

BuJassem said...

it's a bad time to join any kinda currency, especially when there is little to be gained. almost all the gcc currencies are pegged to the same currency.

i think the uae were really pissed off with riyadh, and this was a good excuse to put a bad project to bed (for now). wait a few yrs, might change things.

also the EU chose belgium as it's "capital".. it's fairly neutral and central.. very much like bahrain.. but he were love absolute power.

samuraisam said...

Interesting that this decision comes at the exact same time that Obama approves the UAE nuclear deal.

Emirati said...

samuraisam, the two have nothing in common.
WRT bahrain, i think it is an excellent idea bujassem. Bahrain should be the capital of the GCC, holding all its administrative offices and bearuracracy.

Abu Dhabi Blogger said...

I do not see this changing anything organically for the UAE economy. This objective was clearly never destined to meet its 2010 target. I doubt it will, in a meaningful way, taint the UAE's relationship with any of the GCC nations.

ColOman said...
This comment has been removed by the author.
ColOman said...

this only shows that Oman is wiser by 2 years... even if head office moves to Abu Dhabi, how would you control inflation in Saudi if they don't stick to the quota?

They are not sticking to common market rules now, why would they stick to any rules if head office moves to Abu Dhabi? they haven't sticked to any rules for decades! what would do your the bigger brother who don't sticks the house rules and is a big bully ?

Keefieboy said...

Euros are pretty cool.

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