On Monday, Saudi Arabia, Qatar, Kuwait and Bahrain signed an agreement
to create a Persian Gulf monetary union bringing back memories of the formation of the European Union in 1993. Central bankers from the six Persian Gulf Arab states (which originally also included the United Arab Emirates and Oman)
have been discussing a framework for the organization and a single currency to help boost regional trade for several years.
It has been interesting to watch as it seems that plans for a 2010 regional currency already seem to be in disarray. In May 2007, Kuwait de-pegged its dinar from the dollar opting for a basket of currencies rather than the exchange rate mechanism siting the dollar's slide, increasing inflation, and the rising cost of imports. Then the UAE dropped out of the proposed union last month because of issues with Saudi Arabia over the location of the central bank -- Abu Dhabi or Riyadh. Oman left stating it would not be prepared for a single regional currency by 2010.
The door isn't closed on the UAE, which has the second-richest economy in the region, or Oman; but the union clearly has some issues to work out.