The boom in oil prices in 1973 increased the capital flow into the Gulf region, eased the region's economic progress, and led to the formation of The Gulf Co-operation Council. The GCC was established on May 25, 1981 when a Charter was signed by six Gulf states including Kuwait, Qatar, Saudi Arabia, the United Arab Emirates (UAE), the four oil-exporting countries and members the Organization of Petroleum Exporting Countries (OPEC), and two non-OPEC members, Oman and Bahrain.

In their second Supreme Council meeting in November 1981, the member countries signed the United Economic Agreement (UEA) which set goals to achieve free trade and enhance policy cooperation and full economic integration. The integration process started with the establishment of a Free Trade Zone in 1983, followed by the adoption of a common band of tariffs (ranging between 4 and 20%) in 1988, a launching of a Customs Union in January 2003 and an Arab free trade zone in January 2005. In addition, the council set out a plan to establish a common market by 2007, and to adopt monetary union and a common currency by the year 2010. There has been a need for the establishment of monetary union where a single currency would eliminate the high costs of currency transactions, and would establish unified currency share prices in the region. To achieve this goal, member states agreed on using the US Dollar as a common peg for their currencies in 2000.