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Bahraini protesters met strong armed resistance on Thursday from military forces in Pearl Square, in the capital, Manama.

What's gone wrong

For a month, thousands of Bahrainis occupied the central square of Manama, their capital, in a protest partly inspired by the wave of unrest sweeping the Arab world but also deeply rooted in their nation's past. Unlike their neighbours along the eastern flank of Saudi Arabia, they were determined to loosen the grasp of their autocratic king and his uncle, who has been prime minister longer than most of his people have been alive.

Then, with the help of Saudi troops who'd arrived on Monday, the regime of King Hamad bin Isa Al Khalifa unleashed a violent attack, driving protesters from Pearl Square with guns and tanks, killing several in the process. A three-month state of emergency has been declared, opposition leaders have been thrown into jail and revolutionaries who'd dared to dream of repeating Egypt's outcome now face the spectre of a Libya-style civil war.

Meanwhile, the superpowers, especially the United States, are pressing for a peaceful end to the showdown. Bahrain is the Arab world's tiniest state, but it's also special.

As University of London historian Nelida Fuccaro puts it: "This small island is a microcosm of the Middle East - you have sectarianism, class issues, poverty, repression and a young generation coming up."

Even more important, she adds: "Bahrain sits in the region that provides the most oil to the global economy - and it's the most volatile country there."

Why it matters

Although minuscule - a patch of desert that, at 760 square kilometres, is only slightly larger than Calgary - Bahrain casts a long shadow. It has largely exhausted its own petroleum reserves, but sits in the heart of the Persian Gulf oil patch, linked to Saudi Arabia by the 25-kilometre King Fahd Causeway since 1986. Iran, with which it has a long history, sits just 200 kilometres across the water to the northeast.

A former British protectorate that will mark 40 years of independence in August, the nation of 1.2 million is strategically important both to its neighbours - since replacing battered Beirut as the region's banking centre in the 1980s - and to the United States, as the home base of its Fifth Fleet and an important foothold from which to keep tabs on U.S. interests and rivals in the area.

But its nearest neighbour has the greatest stake in Bahrain's future - especially if the popular upheaval were to succeed and have a ripple effect.

"Bahrain could be the breach in the Saudi Arabian wall when it comes to democracy," says Michael Byers, a political scientist and Middle East expert at the University of British Columbia. "If you're a Saudi ruler, you're very nervous today."

How it got to this

Bahrain is no stranger to foreign rule. From ancient times, its freshwater springs, lucrative pearling industry (to which the square so central to the uprising owes its name) and vital location made the islands wealthy and attracted the attention of empires - especially the one across the Gulf.

Over the years, ownership changed repeatedly - at one point, Portugal was in control - before the current rulers, the Al Khalifas, arrived from Qatar in the late 18th century after defeating a Persian vassal then in control of the island. To stay in power, the family turned to Britain, agreeing to serve as a base for the Royal Navy in exchange for its protection.

Iran, however, continued to press its claim until finally, in the 1960s, it agreed with the British to let the Bahrainis decide their own future. In a plebiscite, they voted to become independent, rather than another of the Shah's provinces. The day after Britain withdrew in 1971, the United States moved in, and relied heavily on the Manama base during the 1991 and 2003 invasions of Iraq.

Although protected from outside threat, Bahrain is doubly divided on the domestic front. Its rulers, like those of Saudi Arabia, are Sunni Muslims but the vast majority of the population have been Shiites for centuries, maintaining close ties with Iran, whose ayatollahs armed a radical Islamic group that staged a coup attempt in 1981.

Politics also break along sectarian lines. The largest opposition party, Al Wifaq, is a Shia organization lead by Iranian-educated cleric Sheik Ali Salman, and has campaigned for religious causes, such as the enforcement of conservative dress codes at public institutions. Smaller Sunni parties back the regime and, between them, control a majority of the seats in parliament.

The religious divide bleeds into an economic one. Although the country is affluent, the wealth has not been distributed evenly. While Sunni elites and high-flying foreigners live amid the glass towers of the capital, impoverished Shiites in the suburbs complain they are shut out of government and military jobs in favour of Sunni immigrants from such places as Syria and Pakistan.

These deep divisions are at the heart of anti-government protest which, rather than being something new, has flared up on a regular basis since the Second World War.

"Because of its history of colonialism, Bahrain was exposed to greater political ideas than other states in the Gulf, which have been more closed," says Prof. Fuccaro, author of a 2009 history of Manama. "For instance, [Bahrainis]got the idea of strikes from India in the 1940s."

By the fifties and sixties, many trade-union leaders subscribed to the brand of socialism espoused by Egyptian leader Gamal Abdel Nasser, agitating for better working conditions and calling a general strike in 1965.

At independence, the country was to become a constitutional monarchy with a strong elected parliament. But in 1975, the monarch, Isa bin Salman Al Khalifa, and his prime minister (Prince Khalifa bin Salman Al Khalifa, who was his brother and is still in power) suspended the legislature and imposed autocratic rule.

Unrest flared up again in the mid-1990s. Working-class Shiites, complaining of unemployment, torched electricity substations and restaurants. Security forces killed dozens of unarmed youths. In 1999, King Hamad inherited his father's throne and began a series of reforms that included revising an elected, if largely powerless, parliament and granting women the right to vote.

The protests largely died down until last summer, when Shiite citizens began to hold demonstrations in Manama's suburbs. Last month, following the success of Egypt's protests, they flooded Pearl Square, demanding a true constitutional monarchy with a powerful parliament and elected prime minister.

Opposition leaders have tried to reach across the sectarian divide. Al Wifaq's Mr. Salman has called upon Shiites and Sunnis to co-operate, and the Haq party, a smaller and more radical group, has some prominent Sunni leaders, including Isa Abdullah Al Jowder, a veteran cleric who has agitated for democracy since the 1960s. Sunni youths have protested on the streets of Manama alongside Shiites.

And yet, last week, a pro-democracy vigil at a school for girls outside the capital devolved into a fight when parents of Sunni students showed up wielding sticks; the previous week, riot police had to intervene to stop a bloody melee in another community.

Can it be fixed?

The United States has a major stake in the outcome - yet took its time before jumping into the fray. Washington has pounded the drum for voters' rights around the world, but historian Jens Peter Hanssen, a Mideast specialist at the University of Toronto, contends that "it is not in its best interests to have democracy in Bahrain. The administration has it good with the current regime."

Although autocrats, the Al Khalifas have fostered perhaps the most open society in the region, moderating the demands of religious factions and adopting a permissive attitude toward drinking and gambling.

After this week's violence, however, President Barack Obama called King Hamad and urged him to launch constitutional reforms - advice the regime should heed, Prof. Fuccaro says, because the protesters seem willing to want nothing more. Under such a scenario, the king would devolve much of his power to parliament, ease out autocratic family members (including his uncle, the prime minister) and bring more Shiites into the public service.

Al Wifaq has indicated it would be content for the king to stay as long as he offers the concessions - which is just how the ruling family weathered the unrest of the 1990s.

Even before the President's call, it appeared Bahrain's government might embrace this approach, as it released political prisoners, announced a program to build 50,000 homes for the poor, accepted $10-billion in aid from its neighbours for new infrastructure projects and offered to negotiate with the opposition.

Now it seems the opposite may happen.

In response to the arrival of the foreign troops and the subsequent crackdown, protesters are upping the ante and calling for the downfall of the monarchy - an outcome that may not be permitted no matter what Mr. Obama says.

As UBC's Prof. Byers points out, Egypt had to listen to Washington, its great benefactor, but "one could ... argue the U.S. is more dependent on Bahrain than Bahrain is dependent on the U.S."

It does, however, depend on Saudi Arabia, especially now that thousands of Saudi troops have crossed the King Fahd Causeway.

With so much turmoil in the Arab world, the stakes may have become too high for members of the House of Saud. The fall of their royal next-door neighbour poses a threat even worse than endangering much of the world's oil supply - it could be a harbinger of things to come.

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