The real problem is therefore political, not economic, explains Giyas Gokkent, chief economist at National Bank of Abu Dhabi. As all sides try to come together, each must relinquish some elements of power to contribute to greater unity. “It involves some degree of sovereignty loss, because you abdicate policymaking from a national level to a super-national level,” he says. “I think there is a fear amongst some members that the GCC institutions may be dominated by one country or a group of countries.”

While Saudi Arabia has the largest economy in the region, with a GDP of 1,308 billion Saudi riyals ($349 billion), the UAE is the second largest, with a GDP of 476 billion dirhams ($130 billion), and the larger financial sector to boot. But, while a diplomatic solution is feasible (one option is the formation of a commission to launch the central currency in Riyadh followed by the central bank’s establishment in the UAE), the credibility of the proposed integration of the GCC is reduced. “The question people will keep asking themselves is, ‘

what will happen the next time the GCC has to face difficult decisions?’” says Maratheftis. “And there will be many more difficult decisions to be made in the very near future.”

Two major problems underpin this loss of credibility. First, this problem was aired in public before it could be resolved - breaking the local tradition of solving problems behind closed doors. Second, the smaller economies in the GCC will not be so likely to succeed with such tactics in the future. The prospect of GCC institutions locating in Manama, Muscat or Kuwait City seems rather unlikely, at best.            

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