Kuwait's decision to go it alone on changing its currency link with the dollar, and not to act in coordination with the other members of the Gulf Cooperation Council (GCC), is an important example of how the GCC member governments do not want the GCC to move into deeper political or economic union.
The GCC has not found an independent role in 26 years of existence because its leaders prefer to use it to coordinate their several national efforts rather than to pool elements of their sovereignty into one regional organisation. The GCC has been an important regional body, and has fared much better than the moribund Arab League, but it has still not gone beyond a forum which encourages cooperation between sturdily independent states.
Where the GCC did plan deeper links it has stuck to modest targets, and been successful in delivering one element at a time. These have mainly been areas of government which affect people and what they can do, such as free movement of citizens or residents, or the right to buy property, or own businesses, and even cultural exchanges.
The six member states share a common heritage as Arab states in the Gulf, and they have largely common views on how to deal with regional and wider issues. But for anything moving beyond the specific targets it has already achieved, a more committed political will for union is required than the member states offer at present.
The armed forces are one example of how the GCC has held back from deeper integration. The GCC has always cooperated effectively in military, and the six states regularly hold joint exercises. Indeed, the GCC was formed in 1981 as a Gulf Arab reaction to new Iranian militancy after the 1979 Islamic Revolution, and its early years were dominated by the long war between Iran and Iraq.
But despite this history of successful military cooperation, it has not gone deeper. For example, there is no GCC-wide joint military command structure, and no GCC force made up of units from the six nations reporting to the GCC and not to the member states.
Another example of institutional hesitancy is currency union. A few years ago the plan to have a common currency seemed relatively easy, since all the GCC currencies were pegged to the dollar, all their oil exports are priced in dollars, and the dollar was relatively strong.
Today it looks very different as the dollar has fallen substantially, taking the GCC currencies down with it and giving them increasingly serious problems. The UAE had floated the idea of all six moving from the dollar peg before the planned currency union in 2010, but Kuwait has decided not to bear the pain any longer and plunged ahead unilaterally. Oman has backed off currency union, and other central banks have spoken of challenges.
Plans
This means that any plans to go ahead with monetary union will now have to include re-calibrating the currency pegs, which will inevitably give the member states political and economic problems. Although if the political will is found to re-unite the six states on this issue, a free floating GCC currency could solve their problems by stopping the present reliance on the continuously depreciating dollar.
Economic union appeared to be a substantial area where the GCC had agreed to move ahead. All member states agreed that economic union was a necessary pre-condition of monetary union, and they agreed on customs union, with the same customs tariffs applying across the six states, and open borders to all goods. This was a substantial achievement since it brought together the extremes of some states wanting to maintain a protectionist environment which sheltered their businesses, and others seeking to have open trade and global competition.
However, the reality is that goods are still stopped at internal GCC borders, the tariffs are still not yet unified and large parts of various member states' economies are exempted from tariffs anyway, as governments regard them as strategic parts of the economy which need support. But despite its refusal to move to deeper union of structure or purpose, the GCC remains a useful organisation which is gaining in importance as the Gulf states themselves play a more important regional role.
And the GCC has delivered one very basic and very important success: since the start of the GCC, no GCC state has gone to war with another, despite their disputes and despite their previous history of continual fighting. This is something that the wider region can learn from.
