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The Bahraini government has delayed plans to ban two main opposition political parties Al Wefaq and the Islamic Action Society after criticism from the U.S. government.

 

Wefaq is the largest political party in Bahrain, and is mainly supported by Shiites. It decided to suspend its membership in parliament in protest at the authorities response to the demonstrations.

 

The unrest in Bahrain is still ongoing, but has mainly moved to Shiite towns and villages out of the centre of the capital Manama. Major banks and financial institutions have temporarily relocated their staff.

 

April 15, 2011

 

 

Analysis and Forecast: Increasing Risk


 

The situation in Bahrain is still at a stand-off and appears to be heading towards an escalation. Although it has largely been removed from mainstream international media as the security forces have cleared the centre of Manana and severely restricted access of journalists to the country, clashes are still being reported in towns and villages.

 

Attempts by the government to ban Al Wefaq points to a view within the Bahraini government that a long-term compromise with the mainstream Shiite group is far from near. It may well be that the government threatened to ban the parties to use as a bargaining chip in an attempt to resolve the immediate standoff. However, this will unlikely resolve the long-term issues and will likely only address detainees and planned strikes.

 

The impact of the instability is also now having an increasing impact on the economy. Financial services institutions, who form almost a quarter of the country’s GDP, have mostly relocated expatriate staff to neighbouring states, as travel bans from various Western nations are in place. With the situation still at a standstill, those institutions are likely to start considering making their temporary relocations more permanent. This will have a devastating impact on the Bahrain economy in general. Other sectors including real-estate and tourism are reportedly in sharp decline. The losses are likely to exceed US $4 billion, which is almost 25 percent of the country’s GDP.

 

This will likely have a long-term negative impact on the Bahrain, both politically and economically. Bahrain will becoming increasingly reliant on Saudi Arabia, with Saudi essentially being responsible for the country’s foreign, financial and defense issues.

 

The figure below shows the make-up of the Bahraini parliament.