Saudi dominance in Gulf region in danger

Bloomberg

Unless a compromise is found, the U.A.E. withdrawal will effectively end the Gulf Arab dream of creating a monetary union for a group with a combined gross domestic product of $1.1 trillion.

The dispute threatens to set back integration among the six nations of the Gulf Cooperation Council and their desire to adopt a monetary policy independent of the U.S. as they face the global financial crisis and a perceived threat from Iran.

"Saudi Arabia will have to show it understands the concerns of its smaller neighbors to continue on the path of unity for the GCC," said Jean-Francois Seznec, an expert on the Gulf oil monarchies at Georgetown University. "The U.A.E as well as other countries wants to be taken seriously now."

The U.A.E., which has the world’s fifth-largest oil reserves and is the second-biggest Arab economy after Saudi Arabia, announced it would no longer take part in the monetary union Wednesday - a fortnight after Saudi Arabia’s capital Riyadh was chosen as the site for the central bank.