In the centuries before the arrival of the European colonialist powers the Persian and Ottoman Empires played push and shove across the Persian Gulf. The Arabian peninsula changed imperial overlords many times with the various tribal leaders negotiating allegiance. When the British came along they developed a strategy of making deals with individual tribal leaders who controlled some location they viewed as either strategic or profitable and establishing a protectorate. That series of operations accounts for the string of postage stamp sized countries ringing the oil rich gulf and the Arabian sea.
In 1783, the al-Khalifa family captured Bahrain from the Persians. They have been practicing a delicate balancing game to maintain control ever since. In the 19th C this was accomplished by a protectorate arrangement with Britain. In the days before oil became an important resource their production of pearls made them attractive to Queen Victoria and her ministers.
In 1965 the British government and Iran (the successor state to Persia) began talks about an agreement on borders in the Persian Gulf. Iran's claim to the Bahrainian Archipelago was one of several matters of contention. The argument emerged as a power struggle between Iran and Saudi Arabia. Iran was supporting the notion of a popular referendum to determine Bahrain's future on the assumption that the Shia majority would support union with Iran. It was eventually turned over to the United Nations Security Council. Following a UN staff survey the Security Council recommended political independence. Bahrain was established as an independent nation in 1971. This enabled the existing monarchy to maintain control. Saudi Arabia has maintained a close alliance with the royal family.
Bahrain is now connected by a long causeway to the mainland of Saudi Arabia. Their version of Islamic law is a bit more relaxed than that imposed in SA. This religious arbitrage has had a very favorable impact on the Bahraianian tourist industry. Various forms of earthly delights are on offer for the right price.
The present King Hamad ibn Isa Al Khalifah succeeded to the throne in 1999 and instituted some degree of political reform in comparison with his father's reign. Parliament is now elected and women have the franchise. There is a prime minister who presides over a 25 member cabinet. 80% of the cabinet's members are members of the Royal family.
Bahrain is one of the most diversified economies in the Persian Gulf. Highly developed communication and transport facilities make Bahrain home to numerous multinational firms with business in the Gulf. As part of its diversification plans, Bahrain implemented a Free Trade Agreement (FTA) with the US in August 2006, the first FTA between the US and a Gulf state. Bahrain's economy, however, continues to depend heavily on oil. Petroleum production and refining account for more than 60% of Bahrain's export receipts, 70% of government revenues, and 11% of GDP (exclusive of allied industries). Other major economic activities are production of aluminum - Bahrain's second biggest export after oil - finance, and construction. Bahrain competes with Malaysia as a worldwide center for Islamic banking and continues to seek new natural gas supplies as feedstock to support its expanding petrochemical and aluminum industries. Unemployment, especially among the young, is a long-term economic problem Bahrain struggles to address. In 2009, to help lower unemployment among Bahraini nationals, Bahrain reduced sponsorship for expatriate workers, increasing the costs of employing foreign labor. The global financial crisis caused funding for many non-oil projects to dry up and resulted in slower economic growth for Bahrain. Other challenges facing Bahrain include the slow growth of government debt as a result of a large subsidy program, the financing of large government projects, and debt restructuring, such as the bailout of state-owned Gulf Air.
CIA World Factbook
Religion plays a significant role in the politics of Bahrain. The royal family and the people who enjoy political power are followers of the Sunni sect of Islam. A majority of the population are followers of the Shia sect. This pattern also extends to the neighboring Eastern Provence of Saudi Arabia where the bulk of that country's oil reserves are located.
Understanding the interplay of religion and politics in Islamic countries is a tricky business for westerners. Religiously tinged conflicts often have more to do with economic issues and ethnic alliances than they do with theology.
The opening of opportunities for political parties has seen the emergence of Islamist parties. Some have Sunni connections and other Shia connections. They share criticisms of what they view as the excessively secular nature of present Bahrainian society. They also oppose the government's close diplomatic ties to the US. The presence of the US navy base there is a bone of contention. There are groups of secular liberals who are in opposition to the Islamists.
Western analysts often find it tempting to cast conflicts in the Middle East into fixed patterns. It became typical to try to explain the hornets nest stirred up by the US invasion of Iraq as a Sunni Shia conflict. That template is being dusted off again. Here is a recent article from Bloomberg that attempts to paint a conflict of Saudi Sunnis vs Iranian Shihites. It strikes me as something of an over simplification. What is true, however, is that Bahrain is at the center of larger forces contending for political control. The picture is greatly complicated by the various conflicts that are also simmering within Saudi Arabia and Iran.
When demonstrations began in Bahrain the government responded with decidedly violent repression. That response has been moderated, but the conflicts remain unresolved. The government is now attempting to placate the demonstrators with short term economic concessions,
Bahraini Opposition Refuses Money and Jobs Offers
The Bahraini Interior Ministry announced over the weekend that it was seeking to hire 20,000 people, a move it said would “benefit job seekers” and improve security in the country, which is home to a large U.S. Navy base.
The oil-rich countries of the Gulf led by Kuwait and Saudi Arabia are also reportedly considering a plan to provide billions of dollars to Bahrain and Oman as part of an effort to address social problems and quell protests. The recent spike in oil prices have given Saudi Arabia, the world’s largest oil producer, and its neighbors more scope for hand-outs and subsidies, part of longstanding policies to foster social harmony. King Abdullah of Saudi Arabia last month announced $37 billion worth of pay raises, unemployment checks and other benefits.
It seems unlikely that Saudi Arabia will be able to escape the protest that are engulfing the region. When that occurs it is likely to be a maelstrom of violent repression. Bahrain can expect to be caught up in it.