Gulf leaders to discuss Gaza at economic summit

MUSCAT (Reuters) - Israel's air strikes on Gaza will not derail Gulf Arab leaders' plans to sign monetary union pacts at a summit but the issue will share the spotlight at their discussions, Omani hosts said on Sunday.

"The issue (Gaza) will impose itself on the agenda. The events of yesterday will have their deserved place in the discussions," Information Minister Hamad al-Rashdi told Reuters.

But Gulf Arab rulers gathering on Monday are still expected to approve a long-planned pact to take them closer to issuing a single currency.

"I don't think the agenda will be derailed," Abdulmalik al-Hinai, undersecretary at Oman's Economy Ministry, told Reuters.

At least 296 Palestinians have been killed in two days of Israeli attacks in the Hamas-ruled Gaza Strip.

The United Arab Emirates (UAE) said the ministers discussed the Israeli raids at a meeting ahead of the summit.

"We hope there will be reasonable voices from the international community to pressure Israel to stop its brutal aggression," UAE Foreign Minister Sheikh Abdullah bin Zayed al-Nahayan told reporters.

The head of the Gulf Cooperation Council (GCC), which groups Washington's regional allies, on Saturday described the Israeli attacks as "barbaric," and Saudi Arabia urged the United States to intervene to end the strikes.

The U.S. administration has said Palestinian militant group Hamas was responsible for the renewal of violence in Gaza.

The GCC is a loose political and economic alliance of six oil-producing countries -- Saudi Arabia, the UAE, Oman, Qatar, Bahrain and Kuwait.

Oman's foreign affairs minister said the Gulf summit and an Arab foreign ministers meeting in Cairo on Wednesday would discuss holding an emergency Arab summit on the Gaza raids.

"We are supporting this (summit)," Youssef bin Alawi bin Abdullah said, adding Qatar may host the summit.

But Saudi Foreign Minister Prince Saud al-Faisal told the Saudi Press Agency the Gulf ministers made no decision about the proposed Arab summit, and that it would be up to Wednesday's meeting to decide about it.

MONETARY UNION

Gulf states had yet to agree on where the joint central bank would be located, which could be decided on Monday, Hinai said.

"At least three of them want it," he said. "They will discuss the monetary union and issue the agreement of the monetary union and the basic law of the monetary council."

Mohamed al-Mazrooei, a top GCC economic official, said the UAE, Qatar and Bahrain have submitted proposals to host the bank, while Saudi Arabia has expressed its interest.

Deciding on the location is one of the political obstacles that have derailed the single currency plan for years.

Global economic concerns are also expected to weigh on the meeting. Oil prices have collapsed to about a quarter of their peak in July, putting an end to the Gulf region's economic boom.

The credit crunch is derailing expansion projects and Gulf Arab bourses have tumbled sharply.

Rulers would also discuss a proposal to extend by a year the time period to implement a regional customs union, Hinai said.

Gulf states have yet to reach a deal on how to distribute customs revenues, an issue that should be resolved by the end of next year following a consultancy study, he said.

Also on the agenda are talks over the progress of their common market, global free trade agreements, a proposed regional water grid, how to further economic cooperation with Yemen and a regional economic and social development plan, he added.

Gulf states have been discussing monetary union for decades but only set the 2010 deadline for a single currency in 2001.

(Additional reporting by Saleh al-Shaibany; Writing by Inal Ersan and Firouz Sedarat; Editing by Sami Aboudi)