Monetary union does not have to be all about the money

The GCC monetary union is dead. And long live monetary union. In a perverse manner, both statements are technically correct. The decision to locate the GCC’s future central bank in Riyadh was a milestone on the road to full monetary union, and a signal to sceptics that the 10-year project was at last coming to fruition. But alas, the dream may have crashed to the ground after the UAE formally announced it was withdrawing, and wished the remaining members “all the very best”.

The shock has been doubly compounded as it came only a few days after the UAE had expressed its unspecified “reservations” following Riyadh’s selection. And as Sultan al Mansouri, the Minister of Economy, pointed out on Thursday, the reason for the UAE withdrawal was precisely that it did not manage to secure the future headquarters. But since the UAE apparently has not ruled out rejoining the project at a later date, experts believe a compromise could emerge. One possibility, for example, might be for the first GCC central bank governor to be chosen from the UAE.

Nevertheless, the UAE’s decision caught everyone by surprise and is causing the remaining members of the project – Saudi Arabia, Bahrain, Qatar and Kuwait – to go back to the drawing board and ask what sort of unified GCC central bank will now emerge. For this, the UAE should be thanked.