The UAE's withdrawal, two days ago, from the Gulf monetary union is based on reservations about the way the Gulf Cooperation Council (GCC) ignored an earlier plan to site the joint monetary council (which is the forerunner to a future GCC Central Bank) in Abu Dhabi.
An informal GCC meeting in Riyadh on May 5 decided to overrule the earlier formal undertaking made at GCC meetings in 2004, and went ahead with a new suggestion to locate the GCC Central Bank in Saudi Arabia.
Despite its withdrawal from the plan for the new currency, the Khaleeji, the UAE remains clear that currency union makes sense for those GCC nations which want to go that route.
This was spelt out by the way that the UAE did not veto the whole plan for currency union, which it had the right to do under the way the GCC works. Instead, a UAE Central Bank source told WAM that "the UAE extends its best wishes for success to those GCC member states which will join the monetary union agreement."
But the plan fact is that it will be hard for the GCC common currency to continue without the UAE, since the country is too big to ignore. The UAE's GDP is $260 billion, which is a quarter of the whole GCC's GDP of $1.1 trillion. Obviously Saudi Arabia is the largest in the GCC with a GDP of $481 billion, but this does not make it the sole arbiter of what should happen in the union of the six nations.
What happened in Riyadh earlier this month was a mistake, and the GCC nations should have stuck to the original plan to place the GCC Central Bank in Abu Dhabi.
The UAE has been a strong supporter of currency union for many years, and on the basis of the earlier GCC decision had actually built a GCC Central Bank headquarters in Abu Dhabi.
The UAE's decision to withdraw from the monetary union should force a re-think on the four nations which are still committed to the Gulf currency.
Saudi Arabia is the largest by a long way, but all four will need to work out how they can start again, so that they can come back to the UAE to talk about restarting the project on a more equitable basis.
They will find a strong supporter of currency union in the UAE, once it is clear that the future GCC Central Bank will have the correct management and policies that take into account the interests of all the GCC members.