Key political risks to watch in Bahrain
 

Key political risks to watch in Bahrain
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An anti-government protester runs behind riot-police armoured carriers during an anti-government protest in the village of Sitra south of Manama, March 30, 2012. (REUTERS/Hamad I Mohammed)


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DUBAI: Bahrain remained tense in March, with daily clashes between police and Shi'ite Muslim youths, while Sunni hardliners mobilised against any dialogue to end the conflict.

Here are some of the main political risks in Bahrain:

INTERNAL CONFLICT

Unrest led by majority Shi'ites demanding reforms to give parliament legislative clout and create a new government has failed to die down despite the crushing of last year's protests.

Bahraini authorities were relieved to have prevented a revival of mass demonstrations on the Feb. 14 anniversary of the uprising and are now concerned to ensure the motor-racing Formula One Grand Prix passes off smoothly on April 20-22.

In March the government declared "significant progress" in implementing recommendations of a commission of international legal experts to remedy abuses during martial law last year.

Those concern improving police conduct and installing video cameras in police stations, as well as judicial, educational and media reforms, but activists say violence has claimed 30 lives since June, many of them due to the effects of tear gas.

The Interior Ministry contests this and says riot police use restraint under attack from petrol bombs and other missiles.

Various hardline Sunni groups have rejected any dialogue with Shi'ite-led opposition parties. Wefaq, the biggest of these, drew about 100,000 people to a huge March 9 rally.

Sunni groups such as the Salafi Asala party view any compromise with Shi'ites as an invitation to Iranian influence.

Shi'ite hardliners also oppose talks. The grassroots February 14 Youth Coalition said in March it wanted to bring down the Sunni monarchy.

A senior diplomat and a senior figure from Wefaq said, however, that Saudi Arabia was increasingly concerned that the strife in Bahrain could spill over into its Eastern Province where Shi'ites have clashed with police in recent months.

They said Riyadh also feared that fighting in Syria - where Sunni Gulf rulers see a chance to topple the Iran-allied Bashar al-Assad - could provoke Tehran to stoke tension in Bahrain.

"The Saudis really don't need unrest in the Eastern Province right now," said Michael Stephens, researcher at the Doha-based Royal United Services Institute. "The policy priority for Saudi Arabia has been Syria for the last three months."

Sectarian divisions festered in Bahrain long before unrest erupted last year. Shi'ites complain of unequal access to state jobs, housing and health care - a charge the government denies.

The al-Khalifa family rules 1.3 million people, about half of them foreign workers. Shi'ites say the rulers are trying to change the demographic balance by granting citizenship and jobs in the security apparatus to Sunnis from elsewhere.

A new constitution and parliamentary polls a decade ago helped reduce Shi'ite discontent. But the lower assembly's powers are offset by an upper council appointed by the king, reviving tension in a youthful population, half aged under 30.

The post-unrest inquiry led by Cherif Bassiouni said more than 4,000 people were fired after the protests were quelled.

The United States, whose Fifth Fleet is based in Manama, is pressing Bahrain to respond to the inquiry's recommendations. It said in January it had approved part of a $53 million arms sale but wanted more progress before releasing the rest.

The government has appointed a new security chief and hired U.S. and British police chiefs to lead efforts to improve policing and end abuses.

FRICTION WITH IRAN

Fears of a regional war rose in January as Washington and Tehran sparred over sanctions and access to Gulf oil. Iran threatened to close the Strait of Hormuz in response to Western measures that could choke its oil exports and gas imports.

Bahraini officials say the protests had a sectarian agenda and were backed by Shi'ite Iran. The opposition denies this.

The United States and Saudi Arabia, the world's biggest oil exporter, regard Bahrain as an ally in the standoff with Iran over its disputed nuclear programme. While Bahrain has close ties with Saudi Arabia, it also has links to Iran.

Many Shi'ites visit Iran as pilgrims or religious students. Some look to Iranian clerics such as Supreme Leader Ali Khamenei as spiritual guides. Others follow clerics in Iraq or Lebanon.

Khamenei's followers may send alms to his office, donations viewed suspicion by the government, although Shi'ites say they are entirely disconnected from politics.

Some Bahrainis known as Ajam are Shi'ite Iranians in origin but they are traditionally close to the government.

Prosecutors link Iranian Revolutionary Guards to an alleged plot by five arrested Bahrainis and two London-based dissidents to attack the interior ministry and Saudi embassy in Manama.

Bahrain could be a target for Iranian reprisals if the United States or Israel attacked Iran. The U.S. naval base allows the U.S. military to protect Saudi oil installations and Gulf waterways without having Western troops on Saudi soil.

IMPACT ON ECONOMY

Bahrain's status as a Gulf banking, trading and Islamic finance hub is at risk. Total investment in its mutual funds dropped nearly $800 million last year to $8.4 billion, central bank data show. Its banks hold assets of about $211 billion.

Bankers say the unrest damaged Bahrain's main advantages as a convenient, stable, liberal business location, but express relief that the Feb. 14 anniversary passed without a crisis. Some banks moved to Dubai but some Indian banks have moved in.

In February Bahrain restricted on-arrival visas after some Western activists entered as tourists. Tourism remains down.

Bahrain has seen a rapid rise in natural gas consumption as its economy has grown, but tension with regional producers Qatar and Iran has hampered plans for gas imports, threatening growth.

Aluminium Bahrain (Alba), for example, raised $338 million in an initial public offering in November 2010 but has had to postpone expanding output, partly due to lack of energy.

Bahrain is in talks to import an average 400 million cubic fee per day gas from Russia's Gazprom through an LNG terminal expected to open in 2015, the oil minister said in March.

It consumed 1.3 billion cubic feet of gas per day (cfd) in 2007 and expects consumption to rise to 2 billion cfd in less than a decade. It produces about 1.7 billion cfd.

Bahrain's economy relies on oil it sells from a field it shares with Saudi Arabia but which is in Saudi hands. The plans to diversify the economy, developed under the crown prince's sponsorship over the past decade, aim to help the country move beyond reliance on oil receipts as reserves dwindle.

But analysts question whether the political hardliners who have taken charge in the past year will retain the same commitment to training and employment of Bahrainis and ending the sponsorship system. Such reforms would help indirectly to promote meritocracy, equality and empowerment of poor Shi'ites who are traditionally supporters of opposition groups.


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