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Saudi Arabia Risks Shiite Unrest in Wake of Bahrain (Update2)
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By Henry Meyer


Feb. 18 (Bloomberg) -- Violent unrest in Bahrain provoked by
discontent among the majority-Shiite Muslim population risks spilling
over to their co-religionists in neighboring Saudi Arabia, which holds
one-fifth of the world’s oil, analysts say.

Bahrain, a close Saudi ally which is ruled by the Sunni Muslim Al
Khalifa family, has been rocked by protests since Feb. 14 that have
led to calls for the government’s dismissal after at least five people
died as security forces cracked down on the demonstrators.

Saudi Arabia has a Shiite minority concentrated in its eastern oil-
producing hub that also complains of discrimination. Any spread of
unrest into the world’s biggest oil exporter risks pushing crude
prices above the 2 1/2-year high reached this week. Authorities
arrested 38 people after clashes involving Shiite pilgrims in the holy
city of Medina two months ago.

A member of the Saudi royal family, Prince Talal Bin Abdul Aziz,
warned in an interview with BBC Arabic TV that unless King Abdullah
introduces more political participation and human rights, Saudi Arabia
may also see protests.

“Unless problems facing Saudi Arabia are solved, what happened and is
still happening in some Arab countries, including Bahrain, could
spread to Saudi Arabia, even worse,” Prince Talal told the London-
based TV broadcaster in an interview aired late yesterday.

Credit-Default Swaps

Credit-default swaps on Saudi Arabia surged today on concern political
unrest in Bahrain will spread to the kingdom.

Swaps on Saudi Arabia, used as a measure of confidence in the country
although it has no debt, jumped 10.5 basis points to 137, the highest
since July 2009, according to CMA. Contracts on Bahrain rose for a
fifth day, climbing 18 basis points to 302, the highest in 17 months.

A senior leader of Bahrain’s Shiites, Abdulwahab Hussain, said today
the government must resign and parliament shut down pending a
transition to democracy. He spoke in an address to about 10,000
demonstrators, the biggest crowd in five days of protests.

“There is tension right now and now you have the added situation in
Bahrain that may ignite the spark,” said Christoph Wilcke, an expert
on the country at New York-based Human Rights Watch, by phone from
Munich. “This anger has the potential to spill over.”

16 Miles Away

Unrest in Bahrain, which is linked to Saudi Arabia by a 26- kilometer
(16-mile) causeway and whose capital, Manama, is only a four-hour-
drive from its Saudi counterpart, Riyadh, has in the past spread
across the border. In 1995, the Saudi government arrested a large
number of Shiites in its Eastern Province on suspicion of involvement
in protests taking place in Bahrain, according to Human Rights Watch.

Saudi Foreign Minister Prince Saud al-Faisal and counterparts from
other members of the six-nation Gulf Cooperation Council pledged to
Bahrain they will stand “united in the face of challenges” and wished
it “continued progress, security and stability” at an emergency
meeting late yesterday in Manama, the official Saudi Press Agency said.

The Saudi benchmark Tadawul All Share Index fell 1.8 percent, the most
this month, on Feb. 16 as protests in Bahrain escalated.

‘Second-Class Citizens’

“The events in Bahrain are being followed very closely by both the
government and the citizens of Saudi Arabia,” Ibrahim AlMugaiteeb,
president of the Human Rights First Society, in the Saudi city of al-
Khobar, said by e-mail. “The Saudi government has to treat the Shiites
the same way Sunnis are treated in the kingdom if they want long-term
stability.”

Tawfiq AlSaif, a prominent Shiite activist from the eastern region of
Qatif, called last year for the government to appoint Shiites as
ministers and ambassadors as a first step toward ending their
treatment as “second-class citizens.”

Saudi Arabia’s royal family maintains a strict version of Sunni Islam.
It prohibits the public observance of other religions and limits the
practice of other branches of Islam.

It has a Shiite minority estimated at between 10 and 15 percent of the
population, according to Human Rights Watch. Most live in the Eastern
Province, where state-owned Saudi oil company Saudi Aramco is based,
and in which they constitute 75 percent of the population.

‘Significant Discrimination’

The U.S. State Department noted in a human rights report on Saudi
Arabiapublished in 2009 that Shiites in the kingdom face “significant
political, economic, legal, social and religious discrimination
condoned by the government.”

The latest religious violence broke out in Medina on Dec. 16 during
the Shiite festival of Ashura, injuring several people. In February
2009, clashes between Shiite pilgrims and religious police led to the
arrest of some of the pilgrims and sparked disturbances in towns in
the east of the country.

In addition to religious restrictions that forbid them from building
mosques and discourage prayer meetings, Shiites are taught only about
Sunni Islam at schools, are often disqualified as witnesses in court,
can’t serve as judges in ordinary courts and are excluded from high-
ranking government or security posts, according to Human Rights Watch.

While Saudi King Abdullah has taken some steps by promoting dialogue
between the different strands of Islam, he hasn’t taken any concrete
action to combat discrimination and harassment of the Shiites, said
Wilcke. Now that the 86-year-old monarch is out of the country,
recuperating after medical treatment in the U.S., Interior Minister
Prince Nayef bin Abdulaziz, who is effectively in charge in his
absence, could take a harder line, he said.

Iranian Influence

There are concerns that Shiite-led Iran, Saudi Arabia’s main regional
rival, is backing the protests in Bahrain, Sratfor, an Austin, Texas-
based intelligence-consulting group, said in an e-mailed statement
yesterday.

Iran has increased its regional influence since a Shiite- led
government took power by winning elections in Iraq after the U.S.-led
overthrow of Saddam Hussein. Kuwait, which has a 30 percent Shiite
minority, last year broke up what it said was an Iranian spy cell,
prompting Saudi authorities to call for U.S. allies in the Persian
Gulf to step up security cooperation.

Saudi religious leaders have in the past accused Iran of encouraging
violence by Shiite minority groups in the region. In November 2009,
Saudi Arabia’s grand mufti, Sheikh Abdul Aziz al- Sheikh, said the
Iranians were “cooperating in sin and aggression” by backing Shiite
insurgents in Yemen in a conflict that drew in the Saudi army.

U.S. Diplomats

Still, U.S. diplomats in Bahrain, cited in a 2008 cable released by
WikiLeaks, said they had found “no convincing evidence of Iranian
weapons or government money here since at least the mid-1990s.” They
were responding to charges by Bahraini authorities that local Shiite
opposition groups were supported by Iran.

Saudi Arabia has condemned popular uprisings against Middle Eastern
rulers this year, and backed Egyptian President Hosni Mubarak until he
was overthrown by protest movements last week. Iran welcomed Mubarak’s
fall and also that of Tunisia’s Zine el Abidine Ben Ali, whose Jan. 14
flight from the country after a month of demonstrations ignited the
unrest in the region.

The potential for protests in Bahrain to oust the kingdom’s Sunni
rulers is a major strategic threat to Saudi Arabia, said Ayham Kamel,
an analyst at the Eurasia Group in Washington, which monitors
political risk.

“Inspired by their counterparts in Bahrain, Shias will seek greater
social, economic, and religious equality,” he said. “Regionally, Saudi
Arabia’s stability is at risk if the Shia opposition succeeds in
toppling the Al Khalifa regime.”

To contact the reporter on this story: Henry Meyer in Moscow athmeyer4@bloomberg.net
.

To contact the editors responsible for this story: Willy Morris atwmorris@bloomberg.net
; Andrew J. Barden at barden@bloomberg.net.

Last Updated: February 18, 2011 09:58 EST