DUBAI, March 30 (Reuters) - 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.
What to watch:
- Any new dialogue between government and opposition
- Any cabinet reshuffle or release of political detainees
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.
What to watch:
- Trial of men accused of Iran-linked plot
- Status of nuclear talks between Iran and the West
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.
What to watch:
- Bahrain's sovereign rating, banks returning or leaving
- Capital outflows, state of tourism and real estate market
- Plans for L
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