* UAE not interested in common Gulf currency for now
* Foreign Minister says Gulf central bank should be in UAE
* Qatari adviser says state believes in common currency (Adds more UAE minister quotes, Oman official, analysts)
By Patrick Lannin and Daliah Merzaban
RIGA/DUBAI, May 21 (Reuters) - The United Arab Emirates held the door open on Thursday to rejoining the Gulf Arab monetary union, a day after pulling out of the project, although it said it was not interested in participating for the moment.
Foreign Minister Sheikh Abdullah bin Zayed al-Nahayan said his country had withdrawn from the project to create a common currency because Gulf Cooperation Council (GCC) heads of state had decided against basing the joint central bank in the UAE.
The UAE's decision to opt out on Wednesday from the euro zone-style plan marked the latest in a series of political disagreements that have held up the common currency under negotiation for almost a decade.
"I would not say the door is closed, there is nothing that is an end game in politics," Sheikh Abdallah told reporters on a visit to Latvia, signalling the UAE may reconsider its position. "But I am saying that for the moment we are not interested."
Analysts said the public outcry by the bloc's second-largest member gave a rare glimpse into Gulf decision-making, typically kept behind closed doors to preserve an image of harmony.
The UAE withdrawal came two years to the day after Kuwait dropped its dollar peg, breaking a deal to keep it until union. Just months before, Oman had opted out of monetary union.
"If anything, it's political manoeuvring," said Ala'a al-Yousuf, chief economist at Gulf Finance House. "If the economic gains from going ahead were perceived to be significant and immediate, the UAE would not have jeopardised these gains for the political symbolism of having the central bank."
WITHHOLDING VETO
Sheikh Abdallah spoke out against the decision on May 5 to base the joint Gulf central bank's headquarters in the Saudi capital, Riyadh, arguing the UAE was a regional financial centre and the Gulf's most-transparent economy.
Conservative Riyadh is already home to the GCC Secretariat while Abu Dhabi hosts no GCC body and had been vying for the central bank for years.
"(Opting out) was a political decision. We did not see that it would be wise for the UAE to participate in a union which does not recognise the strength of the UAE economy," Sheikh Abdullah said.
GCC decisions are unanimous but the UAE decided not to use its veto and block the project from moving ahead. "It was not that it was in Saudi Arabia, it was that it was not in the UAE," he said. "We thought that the decision made by the GCC was not based on merit, it was based on different issues altogether."
An Omani government official, requesting anonymity, said on Thursday that Saudi Arabia had offered the UAE presidency of the joint central bank as a concession to keep the country on board.
"Saudi Arabia is the region's natural leader in many spheres but the UAE seems to be making clear that the kingdom can't expect to lead in all," said HSBC economist Simon Williams.
STICKING WITH IT
Analysts said economic benefits of a common currency are limited due to the small amount of intra-regional trade, but union would give the Gulf a better negotiating position with the world and afford greater monetary policy options.
Most Gulf states peg their currencies to the dollar and get the bulk of their revenues from oil and gas exports. The UAE economy minister said on Thursday the UAE was committed to other areas of integration in a region which is also working on a common market and customs union.
"I believe that the union will happen," said John Sfakianakis, chief economist at SABB bank in Riyadh.
"The Gulf would be perceived as an oil-trading bloc, which is especially important for the smaller countries in the region. The UAE is a big economy in the region, but not to the world."
Qatar reaffirmed its support on Thursday for the plan. A top adviser to the Qatari Emir told the Doha-based daily Al Arab that the UAE's withdrawal was "regrettable".
"We believe in the common currency for the GCC and we will forge head with the work," Ibrahim al-Ibrahim said. The comments echoed those of Kuwait's finance minister on Wednesday.
"Progress on the monetary union has been very slow and given the tasks central banks have ahead of them I don't see it happening in the next five years," said Monica Malik, a regional economist at EFG-Hermes. (Additional reporting by Dania Saadi in Dubai and Saleh al-Shaibany in Muscat; editing by David Stamp)