Gulf Arab leaders gather to discuss monetary union, electricity grid, amid Dubai debt concerns

Gulf leaders gather to discuss monetary pact

KUWAIT CITY — Leaders of the six Gulf Arab states were to move ahead with plans to set up a common currency and launch a new $1.6 billion regional electricity grid Monday, the latest bids for regional integration at a summit where Iran’s nuclear program was also on the agenda.

The two-day gathering of Gulf Cooperation Council leaders came against a backdrop of concerns about Dubai’s debt as the emirate’s chief conglomerate wrangles for more time on some of its $60 billion in liabilities. But officials appeared poised to focus on broader political and economic challenges confronting their oil-rich countries in the wake of the global economic meltdown.

On the agenda for the gathering was plans to push ahead with a Gulf-wide monetary union that could pave the way for a common currency like the euro. Those plans, in the works for years, suffered a blow when the United Arab Emirates, the region’s second largest economy, said in May it was backing out. Oman had also said it was not joining.

Kuwaiti Foreign Ministry Undersecretary Khaled al-Jarallah told the country’s official KUNA news agency that “an agreement on the time frame to realize the common Gulf currency was reached” during a GCC foreign ministers meeting Monday. He did not provide additional details.

Officials have said they are aiming to launch the unified currency by 2010, but analysts say there is little chance that deadline will be met.

At the summit, Gulf leaders are expected to launch a regional monetary pact, the precursor to setting up a Gulf central bank and subsequently the unified currency. The central bank’s headquarters will be in Saudi Arabia, the Arab world’s largest economy, and analysts said the UAE’s withdrawal may have been linked to its not being selected to host the institution.

The GCC nations are seen as among the most influential of the Organization of the Petroleum Exporting Countries’ member-states. They are home to over 40 percent of the world’s proven oil reserves and most of them have relied heavily on their oil wealth to secure greater political and economic clout in the international arena.

Gulf sovereign wealth funds, particularly those in the UAE and Qatar, have invested heavily abroad, snapping up chunks of major companies like German automaker Volkswagen AG and Britain-based bank Barclay’s.

Even as they look to diversify abroad, the six members — Kuwait, the UAE, Saudi Arabia, Oman, Qatar and Bahrain — are also increasingly eyeing tighter links at home.

The electricity grid is seen as one of the key projects, as is a Gulf-wide railroad system. Both aim to bring the countries closer together, tying in their infrastructure.

Also on the agenda is the fighting in Yemen, where Saudi Arabia has launched several strikes targeting Shiite rebels in the southern part of the Arab world’s poorest country. The Arab powerhouse had last month unleashed its military against the rebels after they crossed into the kingdom and killed a Saudi soldier.

KUNA said Sunday that officials completed a draft of the final communique to be issued at the summit, which also tackles Iran’s nuclear program.

The West says Iran is trying to develop nuclear weapons through its uranium enrichment program, a charge Iran has repeatedly denied.

The draft document says the GCC nations “reiterated their stance highlighting the importance of finding a peaceful settlement on the Iran-West standoff” noting that it was critical to the region’s security, al-Jarallah, the Kuwaiti foreign ministry official, was quoted as saying Sunday by KUNA.

The debt woes of Dubai, one of the seven semiautonomous sheikdoms making up the UAE, appeared not to weigh too heavily on the gathering after the emirate said Monday it had received a $10 billion lifeline from Abu Dhabi.

Part of the money was to cover a bond coming due Monday that was issued by Nakheel, the property developer arm of Dubai World, the emirate’s chief engine for growth.

Dubai World faces a total of roughly $60 billion in debts amassed as it relied on cheap credit to bankroll its projects. The conglomerate wants to reschedule about $26 billion of the debt with creditors.

The company’s debt problems, which surfaced late November, had roiled markets, and Dubai’s unwillingness to stand behind the liabilities of a company it owns have tarnished the emirate’s reputation and raised doubts about its creditworthiness.

A number of banks in the Gulf region have exposure to Dubai World debt.