Bahrain Use of Force May Hit Economy as Shiites Opposed to Ruler Protest

“Death, death to Al Khalifa!” Shiite Muslim mourners chanted as they followed the coffin of Bahia al-Aradi through Manama’s narrow streets. “Down, down with Hamad!”

Rage at Bahrain’s Sunni ruler, King Hamad Bin Isa Al Khalifa, permeated the March 22 funeral of the first woman killed after his crackdown against the opposition a week earlier. The slogans show how protesters have been radicalized by the violence against them: When Shiites started rallying in February they were asking King Hamad for rights, jobs and Cabinet changes, not demanding his overthrow.

The Al Khalifa family’s decision to quell the protests, arrest their leaders and invite a Saudi-led force to help restore order may backfire on the island nation’s economy. Lacking the oil wealth of its Gulf Cooperation Council neighbors, the Al Khalifas have promoted their country as a corporate hub -- “Business-Friendly Bahrain” -- an image under threat after mass protests around the financial district and the prospect of more violence.

“The crackdown and the use of GCC forces are both very polarizing,” Jane Kinninmont, a senior research fellow on the Middle East and Africa at London-based Chatham House, said in an e-mail. “It will take the country years to recover from this.”

Activists defied the state of emergency and held demonstrations in Manama and villages around the country today to protest government violence, eliciting more attacks and arrests, the Bahrain Youth Society for Human Rights said.

Tear Gas, Gunfire

Mohammed al-Maskati, president of the society, said warplanes flew low over the Shiite villages and security forces used tear gas to disperse protesters and in at least two villages, Karzakan and Dumistan, fired live ammunition. He said one man in his 70s died as a result of inhaling tear gas, while many people wounded in the clashes were unable to reach medical facilities because of checkpoints set up by the police.

There was no one immediately available from the Interior Ministry late today to comment on the unrest, according to the ministry’s media office.

Instead of “stabilizing what is a highly charged political situation,” the government’s actions may have entrenched sectarian divisions, Standard & Poor’s Ratings Services said March 18, explaining why it cut Bahrain’s credit rating by two levels. S&P forecast “damage to Bahrain as a tourist destination and, more importantly, as an offshore financial center in relation to other competing cities in the Gulf.”

Yields on Bahrain’s benchmark 10-year dollar bond have jumped more than 1 percentage point this year, to about 6.3 percent, and the cost of insuring its debt through credit default swaps has almost doubled.

‘Hatred, Rancor, Bigotry’

Bahrain, where Shiites make up about 70 percent of the population of less than 1 million, is home to the U.S. Fifth Fleet. It was the first Persian Gulf monarchy to be hit by the wave of unrest that toppled leaders in Tunisia and Egypt this year. The Shiite-led opposition is calling for parliamentary government and an end to discrimination over jobs and housing.

King Hamad, who before the clampdown had offered a national dialogue with opposition leaders, now accuses them of colluding with Shiite-ruled Iran in “subversive designs” that may have spilled into other Gulf countries if they hadn’t been quashed, the state-run Bahrain news agency reported. The agency has referred to protesters as “stray hyenas” and accused them of spreading a “culture of hatred, rancor, bigotry and sectarianism.”

‘Radicalized by Violence’

The crackdown has already killed at least 21 people, a larger proportion of the population than the death toll in Egypt during the revolt that toppled Hosni Mubarak, and another 66 are missing, the Bahrain Human Rights Society said March 22. Doctors, activists and opposition leaders including Ebrahim Sharif, a secular Sunni and head of the opposition National Democratic Action Society, have been arrested.

Ali Jaffar, a pharmacist at Salmaniya Medical Complex, said he was forced from an ambulance at gunpoint on March 15, when he went to aid injured people during protests in Sitra village. “They made us lie down with our hands behind out heads,” he said in an interview. “We thought they were going to kill us.”

“There will be certain Shiite groups within the country that become radicalized because of the violence used against them,” said Theodore Karasik, director of research at the Dubai-based Institute for Near East and Gulf Military Analysis. “Some will go underground, and may form resistance groups.”

Barricades Against Police

In some Shiite villages, young men have set up barricades against police incursions. In Karzakan, residents hold protests each day at 4 p.m., while in Dumistan small groups of men watch police movements on the outskirts of the town.

“I am afraid we are about to enter a period of radical demands,” said Mattar Ibrahim Ali Mattar, a member of the largest opposition party, Al-Wefaq. “We don’t know what will happen. The more the government uses force and violence, the more this increases the demands.”

In the days leading up to the latest attacks by security forces and the arrival of Saudi troops, protesters had begun to target the financial industry that’s central to Bahrain’s economy, contributing about one-quarter of gross domestic product. The industry’s assets of $222 billion in December were more than 11 times gross domestic product, according to data on the Central Bank of Bahrain’s website.

Police fought with demonstrators blocking access to the financial center on March 13. Hotels, shops, government buildings and banks in central Manama were forced to close. HSBC Holdings Plc (HSBA) and Standard Chartered Plc (STAN) shut their branches, though both banks say they have restored full operations.

Bahrain Grand Prix

That day, Bahrain had been due to host the season-opening Formula One Grand Prix, the kind of high-profile international event that the Al Khalifas have promoted. Another is the Manama Dialogue, an annual gathering of policy makers that was attended by U.S. Secretary of State Hillary Clinton last year.

The government announced on Feb. 21 that the Formula One race was canceled. The event generated about $600 million for the economy in 2008, including $117 million spent by visitors on hotels, food and drink, shopping and travel, according to a study commissioned by the government last year.

Other international events have been scrapped. UNESCO, the cultural branch of the United Nations, has shifted a June meeting of its World Heritage Committee to Paris from Manama. Two international energy conferences scheduled for next month have been postponed.

Manama Dialogue

“Having high-profile sporting events and conferences canceled will hurt the economy,” Karasik said. “Do you think the Manama Dialogue will happen this year? I doubt it.”

The mourners at al-Aradi’s funeral vowed not to give up their political battle. Women wept and men beat their chests as they accompanied the body toward the American Mission Hospital for burial.

“The government has humiliated us enough,” said Najeeba al-Zaki, a mother of four. “It is time for this to end. We will not stop pressing for our demands.”

To contact the reporter on this story: Glen Carey in Riyadh at gcarey8@bloomberg.net

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net.

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