MEDINA, Saudi Arabia, (Reuters) – The tense, gloomy atmosphere at Gulf Arab currency talks in Saudi Arabia indicated just how deeply divided the six central bankers were as they met to hammer out details of a monetary union plan.
Tuesday’s official statement attempted to put up a united front for currency markets tearing at dollar-pegged exchanges rates on the expectation that a 2010 deadline for monetary union would slip.
The body language of the governors, and the mood at the meeting told a different story.
The governors abruptly ended their talks a day early on Tuesday and crammed a scheduled third day of sightseeing in Medina, Islam’s second holiest city, into an evening tour.
The central bankers rarely talked to each other in public during the tour and prayed separately at the three mosques they visited.
They said even less to journalists, who were repeatedly reminded by summit organizers to “stick to protocol”, a stark contrast to the more informal atmosphere of previous gatherings of regional central bankers and finance ministers.
The usually gregarious Sultan Nasser al-Suweidi, governor of the United Arab Emirates central bank, declined comment on everything, even on why he had cut and then raised interest rates on the Monday and Tuesday.
By contrast his head of treasury, who rarely talks to the media, chatted freely with reporters on the subject in Abu Dhabi, the UAE capital, on Wednesday.
It was Suweidi who ratcheted up market expectations for the Medina meeting by casting doubt in a Reuters interview in January on whether the six oil producers would stand by an exchange rate regime set up to prepare for a single currency.
At the time he ruled out a unilateral revaluation of the dirham and said any review would be agreed by the six governors.
The governors did agree to leave their exchange rate regime unchanged, Saudi Arabian Monetary Agency Governor Hamad Saud al-Sayyari told reporters after the meeting, although his patience wore thin when he was asked to be more precise.
“Don’t you listen?,” Sayyari snapped at one reporter.
“What do you want? I’ve already said that we are sticking to the same foreign exchange system.”
The governors were under intense pressure to clinch a deal on European Union-style convergence criteria to inject momentum into the monetary union project.
On the one hand, speculators had forced Kuwait and the UAE, the top candidates for a revaluation according to a Reuters poll last month, to cut interest rates to ease pressure on exchange rates.
On the other hand, rulers of the six countries had agreed to give the central bankers power to negotiate a binding agreement.
“They feel a great deal of pressure on the convergence criteria. It’s not easy for them to make decisions,” an official of the Gulf Cooperation Council Secretariat, the executive of a regional economic and political bloc, said on condition of anonymity.
In the end no deal was reached. Sayyari said the 2010 deadline would not be met without an extraordinary effort from Saudi Arabia, Kuwait, Bahrain, Qatar, and the UAE.
Oman, the sixth country, pulled out last year, saying it did not think the deadline was achievable.
Even the agreement to leave exchange rates unchanged was purely an informal one, Hamood Sangour al-Zadjali, executive president of Oman’s central bank, told Reuters.
The governors had spent three hours behind closed doors without their aides.
“The talks were transparent and frank,” a Gulf Cooperation Council Secretariat official said, avoiding a question on whether the meeting had been tense.
“Each delegate delivered his ideas in a very open manner.”