* Single Gulf currency agreed

* Consensus on oil output cut

* Palestinians' safety sought

MANAMA, 1 January — GCC leaders yesterday signed a landmark joint defense agreement and approved steps to adopt a single currency at the conclusion of their 21st summit. They also vowed to take steps to ensure oil market stability and backed output cuts at the next OPEC meeting in Vienna.

The summit was attended by Crown Prince Abdullah, deputy premier and commander of the National Guard, Sultan Qaboos of Oman, Sheikh Jaber Al-Ahmad Al-Sabah of Kuwait, Sheikh Hamad ibn Khalifa Al-Thani of Qatar, Sheikh Hamad ibn Isa Al-Khalifa of Bahrain and UAE's Vice President Sheikh Maktoum ibn Rashid Al-Maktoum.

"The (defense) agreement, signed on the sidelines of the Manama summit, aims at strengthening defense cooperation among the member states as per the principles laid down in the Gulf Cooperation Council's basic system," an official statement said. "This is the most important agreement signed by the GCC because for the first time it puts a legal framework to this type of cooperation," Bahrain's Foreign Minister Sheikh Muhammad ibn Mubarak Al-Khalifa told a news conference after the summit.

Delegates said the pact would pave the way for a rapid deployment force to deter aggression. They said the defense plan provided for the Peninsula Shield, a joint GCC force, to be expanded and equipped with a modern early-warning system and a sophisticated communications network.

"It stipulates raising the number of soldiers four to five times to at least 25,000 men, so that it becomes a rapid deployment force until other troops from the member states can join in to repel potential attacks," one delegate said. The agreement stipulates that an attack on any one member would be considered an attack on all GCC states.

The leaders have agreed "a common denomination for the currencies of the member states as a first step to unify their currencies," the communiqué said. Sheikh Muhammad said the US dollar would be the common denominator for a unified currency. "This is the first step which will be followed by others. Unifying the currency is not an easy task," he added. Currencies of all GCC states, with the exception of Kuwait, are pegged to the US dollar. Kuwait's dinar is currently linked to a basket of currencies.

The GCC leaders also asked central banks in the member states to agree on a program with a timetable for the unified currency that would be discussed at the next summit in Muscat in December 2001.

The summit leaders failed to reach a consensus on advancing the launch of a customs union to 2003 instead of March 2005. The communiqué said the unified tariffs would be implemented "at the originally agreed time." Each member state can speed up implementing the agreement on its own," Sheikh Muhammad said.

He did not say which countries had objected to the plan that would unify the tariffs within the targeted range of between 5.5 percent and 7.5 percent. Bahrain last week said it would go ahead with the plan and would cut tariffs on consumer goods and imported cars by 2003.

The summit called for oil output cuts at OPEC's next ministerial meeting in Vienna to shore up prices. They also asked their oil ministers to take any other steps necessary to achieve the organization's targeted prices of $25 a barrel.

"The GCC Supreme Council instructed their oil ministers to work to reduce production levels at OPEC's next meeting and take any other measures to maintain equilibrium in the market and achieve the targeted price," said the communiqué read out by GCC Secretary-General Jameel Al-Hujeilan.

The conference invited the regime of Iraqi President Saddam Hussein to "prove its peaceful intentions toward its neighbors," especially Kuwait, which Baghdad occupied from August 1990 to February 1991. The communiqué called for a "comprehensive dialogue" between Iraq and the United Nations, to examine all pending issues "with a view to lifting the sanctions" imposed on Iraq 10 years ago.

The GCC leaders expressed readiness to take part in any humanitarian initiative aimed at easing the "suffering of the brotherly Iraqi people" and to "work for the end of these sufferings in the framework of the UN resolutions."

The leaders backed the United Arab Emirates in its territorial dispute with Iran and urged Tehran to accept referral of the dispute to the International Court of Justice. They supported "all measures undertaken by the UAE to regain sovereignty on its three islands peacefully...and to invite Iran to accept referring the dispute to the International Court of Justice", the communiqué said. They criticized Iran's "excesses and military maneuvers" on the three strategic islands of Abu Mousa, the Lesser and Greater Tunbs.

UAE Information Minister Sheikh Abdullah ibn Zayed Al-Nahayan said Iran had refused to meet the GCC tripartite committee, or "even receive a letter from it". Iran has repeatedly rejected any mediation or arbitration in the dispute. The GCC leaders underlined the "full sovereignty of the UAE over the islands, an integral part of the Emirates," and charged GCC foreign ministers with examining "all possible peaceful ways of allowing the UAE to regain the three islands."

"We hope to have good relations with Iran, but what we want from Iran is to understand the position of the GCC and the UAE rights to these islands," Bahrain's Sheikh Muhammad told reporters. "We want to reach a solution. We want the dialogue to continue and be fruitful," he added.

On the Palestinian issue, the GCC urged the international community to offer "protection to the Palestinian people in the face of Israeli aggression." It expressed "confidence in the Palestinian negotiators" working in the framework of a US-sponsored Middle East peace plan, calling for Israel's withdrawal from all occupied Arab territories.