Political Risks In Bahrain: Understanding The Kingdom's Challenges

Bahrain's political landscape has been marred by unrest and instability, with the country's Shia Muslim majority population often feeling marginalised and discriminated against by the ruling Sunni Al Khalifa family. This has led to protests and clashes with police, with the government pursuing legal crackdowns on activists and opposition groups. Bahrain's economy is also heavily reliant on oil and gas, with high levels of public debt and fiscal dependence on hydrocarbon revenues, making the country vulnerable to volatility in commodity prices. The country's human rights record has been called into question, with reports of restrictions on fundamental freedoms, surveillance of social media, and attacks on activists, journalists, and parliamentarians.

The marginalisation of the Shia population

The Al Khalifa family's rule has been characterised by discrimination against the Shia, who see the family as conquerors. The Shia community has faced persecution and disenfranchisement, with citizens prohibited from joining the army, intelligence agencies, or police force. They hold only a small portion of senior official positions, and high-ranking posts are predominantly occupied by Sunnis. This marginalisation extends to economic circumstances, with the Shia majority facing worse economic conditions overall.

The Bahraini government has been accused of pursuing a policy of demographic change by naturalising Sunni migrants and granting them citizenship, thereby altering the demographic balance in favour of Sunnis. This has further marginalised the Shia population, as the naturalisation of Sunnis has diluted their majority status. The government has also been criticised for its crackdown on Shia opposition leaders and activists, with arrests, raids, and threats of legal action.

The Shia community's grievances were a significant factor in the 2011 uprising, which was driven by a demand for equality and inclusion. However, the ruling Sunni elite placed the blame on the Shia community, claiming that the Iranian government was supporting dissident groups. This narrative justified the violent crackdown on protesters and resulted in further political repression of Shia leaders and activists.

The normalisation of diplomatic relations with Israel

Bahrain and Israel have had a complex relationship since Bahrain achieved independence in 1971. Bahrain became part of the Arab League boycott of Israel, but relations began to thaw in 2005 when Bahrain abandoned the boycott in exchange for a free trade agreement with the United States.

In 2017, King Hamad bin Isa Al Khalifa denounced the boycott, stating that citizens of Bahrain were entitled to visit Israel. This was followed by a series of diplomatic exchanges and meetings between the two countries, including Bahraini recognition of Israel's right to exist in 2018.

On September 11, 2020, it was announced that Bahrain and Israel had agreed to establish full diplomatic relations, making Bahrain the fourth Arab country to recognize Israel since its founding in 1948. The agreement, known as the Abraham Accords, was formally signed on September 15, 2020, at the White House in Washington, D.C.

The normalisation of diplomatic relations between Bahrain and Israel has been praised by many countries, including the United States, the United Kingdom, Australia, Brazil, Canada, Costa Rica, Croatia, Cyprus, the Czech Republic, Egypt, Estonia, Germany, Greece, Jordan, Kosovo, Latvia, Oman, Romania, and Uruguay. These countries have welcomed the move as a step towards peace, stability, and security in the Middle East.

However, the normalisation of relations has also faced criticism from some quarters. The Palestinian leadership denounced the agreement as a betrayal of Jerusalem and the Palestinian cause, recalling its ambassador from Manama. Iran, Turkey, and Hezbollah also condemned the move, with Iran stating that Bahrain's rulers had "paved the way for the Zionists in the region". The majority party in the Algerian Parliament described the normalisation as a "full-fledged stab and betrayal" of the Palestinian cause.

Despite the criticism, the normalisation of diplomatic relations between Bahrain and Israel represents a significant shift in the region's political landscape and has the potential to lead to increased cooperation and improved relations between Israel and other Arab countries.

The role of the US and UK in Bahrain's security

The United States and the United Kingdom have historically played a significant role in Bahrain's security landscape. The US and Bahrain have a shared interest in maintaining stability and security in the Middle East, and both countries work closely together to achieve this goal.

Bahrain is a vital partner for the US on regional security initiatives and is a member of the Global Coalition to Defeat ISIS. Bahrain hosts the US Navy's Fifth Fleet, which plays a crucial role in countering piracy and terrorism in the region, as well as supporting freedom of navigation and the flow of commerce and energy resources through the Strait of Hormuz. The US has provided Bahrain with military equipment, training, and assistance worth billions of dollars to enhance its defence capabilities and interoperability with US forces. Since 2002, Bahrain has been designated as a Major Non-NATO Ally by the US, which provides it with various benefits, including potential participation in cooperative research and development.

The UK, on the other hand, has a long-standing bilateral relationship with Bahrain, dating back to when Bahrain was a British protectorate until its independence in 1971. Many senior Bahraini figures have been educated in the UK, and both countries enjoy strong business and trade ties. The UK supports Bahrain's efforts to develop its parliamentary institutional capacity and encourages inclusive and transparent governance.

Both the US and the UK have provided assistance to Bahrain in various forms, including military equipment and training, and economic cooperation. The security partnership between Bahrain and the US, in particular, is extensive and covers a wide range of areas, including border security, maritime security, military preparedness, cybersecurity, and counterterrorism.

In summary, the US and the UK have played a significant role in shaping Bahrain's security landscape through diplomatic relations, military cooperation, and economic ties. Bahrain's strategic location in the Gulf and its hosting of the US Fifth Fleet make it a crucial partner for the US in the region. The UK, meanwhile, continues to foster strong ties with Bahrain through trade and business relationships, as well as support for Bahrain's political and economic development.

The impact of the COVID-19 pandemic on Bahrain's economy

Bahrain's economy was negatively impacted by the COVID-19 pandemic, with a decrease in real gross domestic product (GDP), an increase in unemployment, and a decline in the current account balance. The country's GDP was expected to decrease by 3.59% in 2020, and the unemployment rate rose to 4.003% in 2019. The pandemic also caused a significant negative impact on financial transactions and consumer behaviour, with a decrease in retail activity and a shift in household consumption towards goods and services that could be consumed within homes.

The Bahraini government implemented several measures to mitigate the economic impact of the pandemic, including crisis packages worth $11.3 billion and $1.3 billion in March 2020 and June 2021, respectively. The Central Bank of Bahrain (CBB) also slashed interest rates and instituted a repayment holiday for bank loans. These measures helped businesses stay afloat and contributed to an economic recovery in late 2020 and 2021.

The pandemic's impact on Bahrain's capital markets was mixed. While foreign participation decreased due to a general move away from emerging markets, the kingdom continued to attract investors and provide a sound platform for listed companies to raise funds. Successful bond issuances, improved regulatory standards, and increased digitisation contributed to the resilience of the capital markets. However, there was a wave of delistings during the pandemic, with companies citing low trading volumes and a preference for private status as reasons for the move.

The COVID-19 pandemic also had a significant impact on the private sector in Bahrain. Fiscal stimulus and monetary policies played a crucial role in avoiding a COVID-19-related economic downturn. However, the crisis highlighted the need for proper preparation and planning to mitigate the long-term implications for the private sector. Digital transformation, strategic planning, and green growth were discussed as potential strategies to counter these implications.

The pandemic also affected Bahrain's asset management segment, with some companies delisting from the Bahrain Bourse (BHB) due to public scrutiny, high accounting standards, and lower-than-usual trading volumes. Despite these challenges, Bahrain's capital markets are expected to experience continued growth and consolidation, supported by improved macroeconomic conditions and the government's commitment to fiscal austerity.

The use of mercenaries in Bahrain's security apparatus

Bahrain has a history of political unrest, with the Shia Muslim majority population protesting against perceived marginalisation and unequal access to state jobs, housing, and healthcare. In 2011, the country experienced a pro-democracy uprising as part of the Arab Spring, which was met with a violent crackdown by the Sunni Muslim ruling family. In the years since, Bahrain has instituted wide-ranging reforms, but tensions persist, and the country's political and economic situation remains high-risk.

A key aspect of Bahrain's security apparatus is the use of mercenaries from foreign countries. On April 3, 2014, the Bahrain Mirror published a leaked document from the Bahraini Ministry of Interior, revealing the employment of Jordanian mercenaries in the country's police force. This document confirmed what many had long suspected—that Bahrain's security forces included mercenaries from Jordan, Pakistan, Yemen, Saudi Arabia, Syria, and Iraq. It is well-known that there are ten thousand Pakistanis working in Bahrain's security services and that Emirati officers were sent to Bahrain as part of the GCC Peninsula Shield Force in 2011. The exact number of Emirati officers currently serving in Bahrain is unknown.

The use of foreign mercenaries is a deliberate strategy by the Bahraini regime to distance all Bahrainis, regardless of sect, from institutional power. By employing individuals with no connection to local social relations and national concerns, the regime can easily replace them if there is any hint of dissent. Additionally, these mercenaries are offered incentives such as relatively high pay, Bahraini citizenship, and access to housing and government services for their families.

The employment of mercenaries has been widely criticised by human rights organisations. The Bahrain Center for Human Rights (BCHR), for example, has expressed deep concern over the recruitment of mercenaries from Makran Town in Pakistan. Nabeel Rajab, the president of the BCHR, stated that the Bahraini security institutions are taking advantage of the economic situation and poverty in Pakistan to recruit youth as mercenaries, putting them at risk by involving them in battles against residents demanding their rights. The United Nations has also repeatedly condemned countries that allow or tolerate the recruitment, use, financing, and training of mercenaries.

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