Dollar slide: is the Gulf ready to cut loose? No doubt about it, the dollar is in trouble and things look set to get worse before they get better. With oil prices standing at $90+ a barrel, the coffers of oil-producing states are bulging, but in real terms the scenario is giving rise to serious and widespread concern.

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BUSINESS AND FINANCE - Cover story

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Dollar slide: is the Gulf ready to cut loose? No doubt about it, the dollar is in trouble and things look set to get worse before they get better. With oil prices standing at $90+ a barrel, the coffers of oil-producing states are bulging, but in real terms the scenario is giving rise to serious and widespread concern.

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AS THE US dollar continued its sharp decline this autumn, investors around the world were waiting to see if the US Federal Reserve would act further to halt the slide and help curb the resulting big rises in the euro, sterling, Australian and Canadian dollars and other leading international currencies. While the fall in the value of the greenback has helped to push crude oil prices to record levels, many analysts feel that it has also fuelled a substantial rise in inflation in countries such as Saudi Arabia, Kuwait, Bahrain, the UAE and Qatar, whose riyals, dinars and dirhams are pegged to the US dollar. And that, in turn, has prompted increased pressure on Gulf governments to break their links with the US currency.

The dollar had already fallen to a record low of 1.43 against the euro in late October when the US treasury secretary, Hank Paulson, vetoed French, German and Italian plans to a...

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