Gulf Arab leaders will gather on Tuesday to try to agree on a location for a regional central bank, which some diplomats said would mostly likely be based in either Saudi Arabia or the UAE.
Heads of state of Saudi Arabia and its neighbours in the world's biggest oil-exporting region are seeking to lend credibility to a plan for single currency that member states have agreed to delay beyond an initial 2010 deadline.
Their meeting in the Saudi capital Riyadh comes as pressure for monetary union intensifies after the global financial crisis and oil price collapse ended the Gulf's six-year boom.
"The circle is narrowing from four to two countries - Saudi Arabia and the UAE," said on senior Gulf official. "There are intense efforts to reach a final agreement. The leaders would like to make a solemn announcement about this."
Those comments were echoed by another Gulf diplomat.
A Reuters poll of 21 economists and analysts this week pegged Saudi Arabia, the region's largest economy, as the most-likely choice for the headquarters of the central bank.
The poll ranked Bahrain second and the UAE third in a tight race, with a decision complicated by many political and economic considerations.
Deciding on the location would be a show of political will for monetary union, which lost credibility after Oman decided in 2006 not to join and Kuwait severed its dinar's dollar peg in 2007, breaking a deal to keep it intact until union.
"The most important thing is that they make a decision at all," said Simon Williams, a regional economist at HSBC.
"It would be a great shame if a project with the strategic importance of a region-wide single currency was to flounder because there was no agreement on an issue as basic as the location of the central bank."
The Gulf must decide the location so a monetary council, the predecessor for the central bank, can begin operating this year.
This council will decide on a new timetable to issue the single currency, the GCC said in March in the first official acknowledgement the Gulf would fail to meet the 2010 deadline. (Reuters)
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