Gulf Currency Blunder:
The unified GCC Gulf currency has been pronounced dead on arrival. It is now certain that the unified currency project will be postponed until sometime after 2010, if it is ever implemented at all. Kuwait announced yesterday that it will unpeg its currency (the dinar) from the depreciating U.S dollar and return to valuing it based on a basket of major currencies (do they know there are only three major currencies now, not counting the yuan?). Some Saudi Arabian sources claim to be considering the same, although this may be unlikely.

No monetary unification project has cost more in money and time, has been subject to more studies by experts, working parties, and committees of various levels- I was involved in several of these groups over the years- than the GCC Gulf exchange rate coordination and currency unification. This has been a project in the unmaking for over a quarter of a century. Clearly the technical studies needed in preparation for a common currency and to iron out the monetary, fiscal, and trade issues were poorly done by the GCC central banks, monetary authorities, and Finance officials of the six Gulf Arab countries. The impact of trade and budgetary issues especially were not taken seriously by the central bankers. I do not know how much input the IMF had in the project, but history and my own limited experience has shown that the Fund bureaucracy is not a good source of advice on currency unification.

It looks like the whole structure of GCC currency exchange rate policies was not well thought out and needs some serious overhauling. I know the tendency will be to try and patch up the existing proposal on currency unification, but the best approach now is to start from scratch- shred the old studies and start with the basics, go back to the old German experience in the 19th century.
 
Now the GCC central bank officials have shown that, like most other bureaucratic institutions in these countries, they cannot organize the proverbial (exchange rate) piss-up in a (monetary) brewery either.

Speaking of money: The new Saudi currency bears the picture of King Abdullah, complete with the dyed jet-black beard and moustache. The one riyal note will bear a picture of the "first" Islamic dinar issued centuries ago, but not a picture of the original Roman Dinarius coins issued much earlier, perhaps 2300 years ago. But then again, perhaps they don't know that the Saudi Rial is named after the Spanish Real (=Royal).
PS: if a new unified currency was in the cards, why did the Saudis go through the expense and effort of preparing new currency notes? Have they known all along that the currency unification effort was a waste of time?

Lebanon:
So, it is happening in Lebanon as well. The fighting has been going on for at least two days around Tripoli.
Some time ago this site warned that a lot of money was going to Sunni Jihadist groups in Lebanon without regard to their real affiliations. Both Lebanese money and Persian Gulf oil money (in one notable case they are one and the same in Lebanon) was directed toward groups that might weaken the Shi'a Hezbollah or offset its influence, and I warned that some of that money was going to al Qaeda allies, especially around the northern city of Tripoli (the other Tripoli, not the Tripoli of the famous shores in the song).

The Lebanese army death toll now is put in the tens. How many of the jihadists, and innocent civilians, have been killed? It looks like some Lebanese politicians and Arab donors, in their zeal to counter Hezbollah, have financed and encouraged Sunni extremist groups with al Qaeda Wahhabi affiliations. These groups are not fighting Hezbollah now: they are fighting and bloodying the Lebanese army, which in its frustration is shelling Palestinian refugee camps.

In the past, Arab regimes, and some Western powers, in their doubtful farsight, financed Sunni Islamists as a counter force to the demanding secular opposition (democrats, leftists, pan-Arabists, etc). That policy gave us al Qaeda, the Salafis, Hamas, and now their Iraqi and Lebanese offspring. And this is only one group of potentially dangerous Jihadists in Lebanon: there are several others, including in Beirut.

Meanwhile, Lebanese security authorities are apparently trying to decide whether to blame the group's new strength and cockiness on Syria, Iran, or both. In the past, Israel was blamed for any such inexplicable and embarrassing developments in an Arab country. One minister has already pointed the middle finger, as a reflex, toward Syria, even though some Lebanese groups claim that many of the fighters around Tripoli are outsiders, mainly Saudis.

Al-akhbar (May 19) reports that Jordanian Mukhabarat (their own Gestapo) has established a new "Division for Combatting Shi'ism". Is it a serious thing, or are Jordanian authorities angling for some Gulf oil money? Viva moderation in the new Middle East.
Cheers
Mohammed H. Ghuloum