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### Viewing cable 07MANAMA669, FUTURE OF BAHRAIN: AMBASSADOR'S PARTING THOUGHTS

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
07MANAMA669 | 2007-07-19 06:58 | 2011-05-04 00:00 | SECRET | Embassy Manama

Appears in these articles:
http://www.al-akhbar.com/node/9115
http://www.al-akhbar.com/node/9116
http://www.al-akhbar.com/node/9117
http://www.al-akhbar.com/node/9118
http://www.al-akhbar.com/node/9119
http://www.al-akhbar.com/node/9120
http://www.al-akhbar.com/node/9121
http://www.al-akhbar.com/node/9122
http://www.al-akhbar.com/node/9123
http://www.al-akhbar.com/node/9124
http://www.al-akhbar.com/node/9125
http://www.al-akhbar.com/node/9126
http://www.al-akhbar.com/node/9127
http://www.al-akhbar.com/node/9128
http://www.al-akhbar.com/node/9122
http://www.al-akhbar.com/node/9129
http://www.al-akhbar.com/node/9131
http://www.al-akhbar.com/node/9562
http://www.al-akhbar.com/node/9952
http://www.al-akhbar.com/node/9950
http://www.al-akhbar.com/node/9951
http://www.al-akhbar.com/node/9954
http://www.al-akhbar.com/node/9953

`

    VZCZCXRO6801
    PP RUEHDE RUEHDIR
    DE RUEHMK #0669/01 2000658
    ZNY SSSSS ZZH
    P 190658Z JUL 07
    FM AMEMBASSY MANAMA
    TO RUEHC/SECSTATE WASHDC PRIORITY 7032
    INFO RUEHZM/GULF COOPERATION COUNCIL COLLECTIVE
    RUEHAM/AMEMBASSY AMMAN 1339
    RUEHEG/AMEMBASSY CAIRO 0950
    RUEHLO/AMEMBASSY LONDON 1002
    RUEKJCS/SECDEF WASHDC
    RHMFISS/HQ USCENTCOM MACDILL AFB FL
    RHBVAKS/COMUSNAVCENT

` `

    S E C R E T SECTION 01 OF 07 MANAMA 000669

    SIPDIS

    SIPDIS

    E.O. 12958: DECL: 07/20/2032
    TAGS: PREL PGOV PHUM PINR ETRD ECON BA POL OFFICIALS
    SUBJECT: FUTURE OF BAHRAIN: AMBASSADOR'S PARTING THOUGHTS

    Classified By: Ambassador William T. Monroe.  Reason: 1.4 (B)(D)

    -------
    SUMMARY
    -------

    ¶1. (S) Bahrain faces numerous challenges as it attempts to
    deal with transitional issues of economic development and
    political reform.  Because the country's Sunni-Shia sectarian
    divide so dominates the local landscape, the path forward is
    potentially more treacherous for Bahrain's leadership than
    for the rulers of other GCC countries.  The sectarian issue
    affects much of what the USG is trying to do in Bahrain, most
    notably our freedom agenda, as seen in the NDI saga, and our
    counterterrorism cooperation. It is also a factor in the
    country's shift to a more socially and religiously
    conservative society; although King Hamad and the Al-Khalifas
    are generally moderate and secular in outlook, the King has
    made a political calculation to ally with Sunni Islamists in
    Parliament in the face of Shia opposition. A key factor for
    Bahrain as it deals with the many challenges it confronts in
    a complex regional environment will be the quality of its
    leadership.  Like Bahrain itself, the royal family is going
    through a period of transition, from the traditional tribal
    leadership of the Prime Minister to the modern, technocratic
    approach of the Crown Prince, who while waiting in the wings
    is managing economic reform.  The King himself is the
    transition from the old to the new.  With sectarian tensions
    in the region rising and disaffected Shia youth willing and
    ready to challenge the regime, there is a harder edge to the
    sectarian divide that may cause increasing problems for the
    ruling family.  The betting here, however, is that Bahrain's
    "shock absorbers" are sufficiently strong to give the
    government the space it needs to implement economic reforms
    and improve the well-being of its people. In this context,
    the U.S.-Bahrain relationship remains strong: trade ties have
    been bolstered significantly with the FTA; the U.S. Navy
    presence remains welcomed and has been strengthened by
    Bahrain's decision to join the coalition; Bahrain's new
    Parliament offers promising prospects for more engagement;
    and CT cooperation has improved since the government's
    mishandling of six Sunni terror suspects in 2004 precipitated
    the departure of Navy dependents.

    --------------------------------------------
    BILATERAL RELATIONS -- STRONG AND BROADENING
    --------------------------------------------

    ¶2. (C)  As I get set to depart after three years as
    Ambassador to the Kingdom of Bahrain, the U.S. relationship
    with this small island country is strong, healthy, and
    broadening. Despite continuing negative local press coverage
    and editorializing about U.S. policies in the region, support
    for the U.S. Navy presence and base in Bahrain remains
    generally strong and has weathered the departure of all Navy
    dependents in 2004.  In fact, the Navy's relationship with
    Bahrain has been strengthened by Bahrain's decision to join
    the coalition and participate actively in CTF-150 and
    CTF-152.  The trade relationship has been bolstered
    significantly by the implementation of the free trade
    agreement.  Trade is expanding rapidly, the newly-formed
    American Chamber (Amcham) in Bahrain is growing and making
    itself known as an active presence in Bahrain, and the
    U.S.-Bahrain Business Council made a big local splash with
    its initial trade mission to Bahrain in May.

    ¶3. (S)  Our freedom agenda took a hit with the closure of
    NDI's office in June 2006, but NDI is starting to resume
    programming and, following the broader participation of Shia
    oppositionists in the November parliamentary elections,
    prospects look promising for more robust engagement with
    politicians and civil society.  The government's current
    focus on education is a natural for us, offering
    opportunities for enhanced programming.  The government's
    handling of the six Sunni terrorist suspects, whose abrupt
    release precipitated the 2004 departure of the Navy
    dependents, remains a reminder of the difficulty of actually
    prosecuting Sunni extremists in Bahrain, but CT cooperation
    has since improved and, by Gulf standards, is good and
    collaborative.  To date, the government has largely succeeded
    in neutralizing the small number of Sunni extremists of
    concern to us.  On the regional diplomatic front, new Foreign
    Minister Shaikh Khalid has proven to be a supportive voice,
    especially on the Israeli-Palestinian question, and the
    government is essentially like-minded on Iraq, Iran, and
    Lebanon.  But Bahrain, small as it is and with a constant eye

    MANAMA 00000669  002 OF 007

    on neighboring Saudi Arabia, will never be a leading player
    in the region on key foreign policy issues.

    ------------------------
    PROSPECTS FOR THE FUTURE
    ------------------------

    ¶4. (C) Bahrain, like many countries in the region, is at a
    bit of a crossroads as it struggles to deal with critical
    issues of economic development and democratic reform.
    Because it does not have the oil wealth of its Gulf neighbors
    and because its Sunni-Shia sectarian divide so dominates the
    economic and political reform debate, the path forward is
    potentially more treacherous for Bahrain's leadership than
    for the rulers of other GCC countries.  There is no
    indication that the Al-Khalifas will not be able to chart the
    course ahead in a positive, stable way or that U.S. interests
    will be threatened.  But the challenges ahead will require
    good leadership.  And regional developments, especially in
    Iran and Iraq, will have an impact.  If developments in Iraq
    and Iran move in a way that further exacerbates sectarian
    tensions, the path forward in Bahrain will be all that more
    daunting.

    ¶5. (C) Bahrain is facing the same challenges that many
    countries in the region are facing, including pressures for
    democratic reform, the need to develop and reform the
    economy, rising Islamic extremism, sectarian tensions, and
    security threats.  How the royal family and government deal
    with these challenges will say much about Bahrain and its
    future.

    -----------------
    DEMOCRATIC REFORM
    -----------------

    ¶6. (C) King Hamad has taken important first steps in
    launching Bahrain on the road of democratic reform.  His
    approach of gradual steps with safeguards to protect the
    minority Sunnis (and ruling Sunni royal family) has critics,
    both from Sunni conservatives who think he has moved too fast
    and Shia activists who have little trust in the ruling family
    or its intentions.  On the positive side, the King succeeded
    in drawing the largest Shia opposition group -- Al-Wifaq
    --into the parliament, and political discourse and press
    reporting is as lively and open as it has ever been.
    Parliament, while still finding its way, is playing an
    increasingly important oversight role.  The press, especially
    Shia-oriented Al-Wasat, has successfully raised sensitive
    issues of concern ranging from environmental damage to royal
    family behavior.

    ¶7. (C) At the same time, however, the current system is
    flawed, most notably through a gerrymandered electoral map
    designed, at least for now, to keep the Shia majority
    population from gaining control of the elected parliament.
    The King says that his ultimate goal is to create a
    constitutional monarchy where the royal family plays a
    paternal role as protector of all Bahrainis, Shia and Sunni
    alike.  Whether he succeeds hinges on two questions.  First,
    in the short run, will the King and the Sunni-controlled
    government allow Al-Wifaq enough parliamentary successes so
    that it can justify its decision to join the Parliament and
    win the battle for the hearts and minds of the broader Shia
    population?  Al-Wifaq already faces stiff opposition from the
    rejectionist Haq group.  Second, in the longer run, is the
    Sunni royal family truly willing to see democratic reform
    proceed to its logical conclusion where Shia MPs control the
    parliament?  Al-Wifaq leader Ali Salman talks of the day --
    admittedly far in the future -- when Bahrain would have a
    Shia Prime Minister, a concept even liberal royal family
    members (much less Bahrain's Saudi neighbor) have trouble
    imagining.

    ¶8. (C) For U.S. interests, Bahrain's sectarian divide will
    continue to hamper our efforts to support democratic reform.
    For many Sunni, support for democracy translates into support
    for the Shia majority.  The recent flare-up in controversy
    over a possible NDI return illustrates the sensitivity of our
    democratic programming.  Still, the new parliament, which is
    extremely short on expertise and experience, offers promising
    opportunities for cooperation, which NDI is adroitly trying
    to exploit.

    --------------------
    ECONOMIC DEVELOPMENT

    MANAMA 00000669  003 OF 007

    --------------------

    ¶9. (C) With Bahrain's limited petroleum resources, economic
    development and transformation of the economy to compete
    successfully in the globalized economy will be key
    challenges.  The government has taken some important steps in
    the right direction.  It has moved solid technocrats with
    clean reputations into key positions (e.g., Shaikh Ahmed at
    Finance, Hassan Fakhro at Industry and Commerce, and Abdul
    Hussein Ali Mirza at Oil and the Tender Board).  It has
    started to corporatize state corporations, putting many of
    them under a Singapore-style holding company, Mumtalakat.  It
    has established and beefed up another Singapore-style
    organization, the Economic Development Board, to lead the
    economic development effort. The King has charged his
    American-educated son, Crown Prince Shaikh Khalifa, with
    responsibility to oversee the economic reform effort.  The
    Crown Prince has spearheaded an effort to reform the labor
    market, aimed at lessening dependence on cheap imported labor
    and providing incentives to increase productivity.  And
    Bahrain has signed an FTA with the U.S., symbolically
    signaling its intention to actively participate in the global
    economy and more practically giving an important boost to the
    country's trade and investment climate.

    ¶10. (S) That said, the country faces significant economic
    challenges.  Despite concerted efforts by Shia Minister of
    Labor Majid Al-Alawi to deal with the unemployment problem,
    unemployment remains a sensitive and potentially explosive
    issue among the country's Shia.  Poverty does exist in
    Bahrain, and many poorer Bahrainis have trouble making ends
    meet.  People are genuinely concerned about rising prices and
    lack of affordable housing. The government, in addition to
    training and finding jobs for less skilled workers who
    compete with foreign labor and are heavily Shia, must help
    create employment opportunities for the increasing number of
    university graduates. Finally, despite important efforts to
    improve transparency and institutionalize commercial law, the
    royal family still casts a large shadow over the economy,
    with its inevitable stake in major development projects, its
    extensive control over real estate, and its ability to make
    or break business deals.  The economy is growing at a healthy
    6 percent rate, the real estate sector is booming, economic
    reforms are being introduced, the telecommunications sector
    is opening up, and a new port will soon be inaugurated, so
    there is much positive to report. But many poorer Bahrainis
    do not yet feel the benefits.  That will be a key challenge
    for the government.

    -----------------
    ISLAMIC EXTREMISM
    -----------------

    ¶11. (C) Like much of the Islamic world, Bahraini society has
    turned more socially and religiously conservative in recent
    years, a striking development in a country long known as a
    center of openness and moderation in the Gulf. This trend is
    likely to continue as Islamists, who now dominate parliament,
    try to flex their muscles.  The trend can be seen at Bahrain
    University, where almost all female students are now covered
    (a sharp contrast from a generation earlier).  It was seen in
    the sharp parliamentary attacks against a mildly provocative
    dance show presented during this year's Spring of Culture
    festival, and in recent tourism office circulars aimed at
    restricting locations where alcohol can be served.  Bahrain's
    wooing of Islamic Banks is also having an impact. Islamic
    banks are financing several new projects which include
    upscale hotels, like the just opened Banyan Tree and
    Arcapita's planned Four Seasons.  Bahrainis and expats alike
    are just now discovering that these hotels will not serve
    alcohol. Islamist parliamentarians periodically bring up
    their desire to ban alcohol more broadly, criticize
    permissive entertainment, and talk of the need to segregate
    Bahrain University by sex.

    ¶12. (S)  Ironically, although King Hamad and the Al-Khalifas
    more generally are for the most part moderate and secular in
    outlook, the King has made a political calculation to ally
    with the Sunni Islamists in Parliament, an approach that
    serves to increase the Islamists' clout.  He feels he needs
    the support of the Sunni Islamists as a counterweight to the
    large Shia bloc in the parliament, which is considered the
    opposition.  Although the more liberal, moderate Sunni or
    non-sectarian political societies might seem to be the King's
    natural ally, on many issues including democratic reform and
    government/royal family oversight they often in fact align

    MANAMA 00000669  004 OF 007

    themselves with the Shia oppositionists.  With the King
    supporting the Sunni Islamist parties, the result is an
    elected Parliament dominated by three religious-based
    parties, two Sunni and one Shia, who hold 32 of the 40 seats.

    ¶13. (C) This is not to say that the moderates have given up.
    In fact, there are some hopeful signs.  The Islamist attack
    on the Spring of Culture generated the first significant
    popular counter-reaction we have seen, although it is unclear
    if that will be sustained.  After years of essentially ceding
    Bahrain University to Islamist influences, the government has
    appointed a moderate new President (a good contact of the
    Embassy), over the opposition of Islamist elements at the
    university.  Ministry of Justice and Islamic Affairs
    Undersecretary Fareed Al-Muftah has launched a determined
    effort to promote moderation in the mosques, and has welcomed
    USG help in this endeavor. There is a recognition that
    Bahrain's campaign to strengthen its tourist industry will
    suffer if alcohol laws are too restrictive; the CEO of the
    Islamic Bank behind the Banyan Tree told us he is looking for
    a solution to the alcohol problem, perhaps by creating a new,
    non-Islamic company to buy out the hotel.  Clearly, a major
    challenge for the government in the coming years will be to
    balance its goal of creating an open, investor-friendly,
    globalized economy with its perceived need to maintain the
    support of the country's strong Sunni Islamic movement.

    ------------
    SECTARIANISM
    ------------

    ¶14. (C) Bahrain's demographic make-up, with a Sunni-minority
    royal family ruling over a Shia majority population ensures
    that sectarianism permeates all issues in the country.
    Several factors have made the issue more sensitive in recent
    years: the sectarian tensions aroused by the war in Iraq, the
    sense that Iran and/or Shia power is rising, and the push for
    democratic reforms which, for Sunnis in Bahrain, raises the
    specter of Shia electoral dominance.  Human rights in Bahrain
    is framed in sectarian terms -- it is the Shia who have been
    disadvantaged politically and economically, and don't have
    access to certain jobs (especially in the military).
    Although there are poor Sunni in Bahrain, poverty and
    unemployment are likewise framed in sectarian terms.
    Bahrain's press is admirably more open and free-wheeling, but
    it is increasingly sectarian as well.  Al-Wasat, run by
    former Shia exile Mansour Al-Jamri, focuses heavily on
    Shia-related issues, often giving front-page coverage to
    controversial issues that are not even reported in two
    Sunni-associated dailies (Akhbar Al-Khaleej, whose editor is
    close to the Prime Minister, and Al-Watan, which has ties to
    the King's palace).  Akhbar Al-Khaleej and Al-Watan, in turn,
    have a decidedly Sunni slant, both in news reporting and
    editorial commentary.  Al-Wifaq leader Shaikh Ali Salman
    recently told us that the sectarian divide is not only
    sharper than it was in the past, but is sinking deeper into
    the roots Bahraini society.

    ¶15. (C) Currently, there are splits within both the Shia
    community and the Bahrain Sunni leadership on how best to
    deal with Bahrain's sectarian divide.  Leading Shia political
    society Al-Wifaq, after boycotting the 2002 parliamentary
    elections, made a calculated decision to try to work within
    the system.  Al-Wifaq participated in the 2006 parliamentary
    elections, and Al-Wifaq leader Shaikh Ali Salman has held
    high-profile meetings with the King and PM, helping secure
    the release of Shia arrested in connection with local
    demonstrations and gaining a commitment on wages.  Still,
    Shia rejectionists - led by Haq movement - seem to be gaining
    some ground in the poorer villages as Shia youth react to
    heavy-handed police tactics, economic frustrations, the
    perceived inability of Al-Wifaq to pass meaningful
    legislation, and long-term dissatisfaction with the
    Al-Khalifas. A part of the Haq strategy is to provoke the
    police to overreact to demonstrations, increasing Shia
    distrust of and alienation from the government.

    ¶16. (S) There are elements in the royal family that are only
    too happy to oblige the Shia activists and crack down hard on
    the demonstrators.  The royal family is, in fact, divided on
    how to deal with the Shia.  More moderate Al-Khalifas,
    exemplified by the Crown Prince, are focused technocratically
    on creating the economic, education, and labor reforms that
    will provide the necessary job creation for all Bahrainis and
    essentially coax disgruntled Shia into the system. They are

    MANAMA 00000669  005 OF 007

    less focused on democratic reform, but seem to accept it as
    an inevitable component of overall reform.  In contrast,
    royal family hard-liners, exemplified by the Prime Minister,
    are wary of reform for many reasons: the demographic threat
    posed by the majority Shia, whose loyalty to Bahrain (i.e.,
    connections with Iran) has long been questioned; concern that
    democracy, and by extension noisy street demonstrations, will
    scare investors away; and -- most importantly -- the
    potential threat to the Al-Khalifa regime that reform may
    ultimately pose.  Although one of the key hard-liners is
    Royal Court Minister and close King confidant Shaikh Khalid
    bin Ahmed, the views of the King are less clear.  It was the
    King, after all, who launched the reform movement, talks of a
    day when the King will serve as a constitutional monarch
    paternalistically protecting the interests of all Bahrainis,
    and infuriates hard-liners by regularly ordering the release
    or pardon of Shia extremists and demonstrators.  And yet, he
    does little to reign in Shaikh Khalid bin Ahmed and his
    hard-line allies.

    ----------------
    COUNTERTERRORISM
    ----------------

    ¶17. (S) The sectarian issue continues to color Bahrain's
    approach to counterterrorism. For the government and ruling
    family, the existential threat is Iran and its historical
    claims to Bahrain.  Iran's increased aggressiveness under
    President Ahmadinejad, coupled with perceived Iranian inroads
    in Iraq, have only heightened Bahraini concerns. The
    government is only too happy to have us focus on potential
    threats from Iran and their alleged Shia allies in Bahrain.
    In contrast, Sunnis, even Sunni extremists, form the base of
    support against a potential Shia/Iranian threat.  The
    government fully understands that any kind of terror attack
    by Sunni extremists in Bahrain -- against U.S. or Bahraini
    interests -- would be a disaster for the country and its
    economy, and it is ready to cooperate with us fully to make
    sure that doesn't happen.  But our future cooperation will
    continue to be affected by two factors: Bahraini confidence
    that, in this small island country, the authorities can stay
    one step ahead of and deal with any extremists planning a
    local operation; and Bahraini reluctance to move against or
    alienate the Sunni Islamist community at a time of heightened
    concern about Iran and rising Shia influence in the region.

    ----------------
    THE ROYAL FAMILY
    ----------------

    ¶18. (S) The key factor for Bahrain as it deals with the many
    economic, political, and security challenges in this complex
    regional environment will be the quality of its leadership,
    most notably the senior members of the royal family.  Like
    Bahrain itself, the royal family is going through a period of
    transition, from the traditional tribal leadership of former
    Amir Shaikh Issa and his brother Prime Minister Shaikh
    Khalifa, who has been in power since independence in 1970, to
    the more modern approach of Crown Prince Shaikh Salman, who
    while waiting in the wings has been charged with managing
    economic reform.  In between is King Hamad who, in the words
    of Deputy Prime Minister Jawad Al-Arrayid, is straddling the
    transition from tribal to modern leadership.

    ¶19. (S) The Prime Minister is definitely old school. He is a
    traditional Arab leader who enjoys greeting people at his
    majlis, attending weddings and condolence calls, and making
    gestures to people in need.  He has no interest in economic
    or political reform.  He is disliked by many Shia as the
    symbol of Sunni domination and repression, and for the wealth
    he has amassed through his tight control over the economy.
    For the King, he serves a useful purpose, both as a
    lightening rod drawing away criticism from the younger
    generation and for the attention he pays to the Sunni base.
    Although it would be a mistake to underestimate the power of
    the PM, in fact his powers are eroding.  Through several
    Cabinet changes, the King has moved out key Prime Minister
    supporters from economic-related ministries.  Al-Wasat editor
    (and former Shia exile) Al-Jamri says that Minister of the
    Royal Court Shaikh Khalid bin Ahmed is now the de facto PM,
    and that Shaikh Khalifa is currently more focused on
    protecting his business interests and his family's future.
    The PM initially reacted sharply against the Crown Prince's
    economic reforms, but lately seems to have acquiesced. Many
    of his old cronies who held key Cabinet positions now serve
    as advisors to the PM; the PM, it is said, is determined to

    MANAMA 00000669  006 OF 007

    demonstrate that the Al-Khalifas remain loyal to those who
    faithfully serve the Al-Khalifas.  He reportedly recognizes
    the limited capabilities of his two sons, DPM Shaikh Ali and
    especially Shaikh Salman.

    ¶20. (S) King Hamad is truly caught in the middle. He is the
    transition from the traditional tribal leadership style of
    his father and uncle to the modern technocratic style of his
    son.  He is caught between the liberal Al-Khalifas who
    support his reform efforts and those who fear change and
    democracy.  He is caught between those Sunnis who completely
    distrust the Shia and want to crack down hard on
    demonstrators and those who want to reach out and bring Shia
    into the system.  He is caught between his desire to be a
    regional leader on reform and those neighbors -- especially
    Saudi Arabia -- who worry about the influence his reforms
    might have elsewhere in the region.

    ¶21. (S) The King is also a bit of an enigma. He favors
    reform, but lost much Shia support and trust when he appeared
    to pull back from his initial reform proposals.  He wants to
    reach out and support the people of Bahrain, but lacks his
    father's or uncle's touch with the people, is uncomfortable
    in majlis-like settings, and increasingly seems to isolate
    himself in his palace where he invites trusted friends and
    advisors to nightly dinners and discussions rather than
    mixing more broadly with the people.  He is a true friend of
    the United States and its policies in the region (and the
    U.S. military), yet courts harshly anti-American Sunnis and
    allowed his Royal Court Minister to call the shots in closing
    down NDI's Bahrain operations.  He counsels patience and
    understanding with the Shia, but permits hard-line royal
    family members to crack down hard against Shia interests.

    ¶22. (S) Long-time King confidant Hassan Fakhro captured a key
    element in the King's personality when he said that his
    biggest strength is that he is not vindictive.  He is a
    forgiving man.  This frustrates those in the Royal Family who
    feel he is too soft on the demonstrating Shia activists (who
    will never forgive the Al-Khalifas). But it may prove to be
    just the right approach to move Bahrain through the
    transition.

    ¶23. (S) The Crown Prince represents the future of Bahrain.
    On many levels that is a very good thing, for Bahrain and for
    the U.S.  U.S.-educated (DOD's Bahrain School and American
    University), Shaikh Salman talks and thinks like an American,
    and is an impressive and articulate interlocutor in venues
    ranging from bilaterals with U.S. leaders to discussions at
    Davos.  He evinces an air of technocratic confidence and is
    intently focused on creating a modern, competitive,
    globally-connected economy in Bahrain.  In areas under his
    purview, he can act decisively.  He has stayed away from
    political issues (democratic reform), leaving that for his
    father.  But there is no doubt that he sides with the
    moderate wing of the family.

    ¶24. (S) Universally respected abroad, Shaikh Salman does have
    his detractors at home.  Some members of leading business
    families, particularly those that have tied their commercial
    fortunes to the Prime Minister, have resented the young Crown
    Prince's efforts to shake up the economy (and perhaps
    jeopardize their privileged positions). Like his father, the
    Crown Prince is not comfortable cultivating people in
    traditional Arab settings such as majlises, and leaves an
    impression that he has somewhat isolated himself with a
    selected group of like-minded, similarly-aged friends and
    colleagues. Known for his fondness of cars, he is accused of
    drawing from the country's treasury to create his own pet
    project, the Formula 1 racetrack (in fact, there are signs
    the Formula 1 project may turn out to be a shrewd,
    investment-attracting endeavor for Bahrain).  Perhaps most
    critically, there are increasing grumblings that the Crown
    Prince is showing a familiar Al-Khalifa trait of exploiting
    Bahrain's land (and more recently, water to be exploited
    through re-claimed land projects) for his own personal
    wealth.  The extensive Al-Khalifa land holdings, in fact,
    could become a potentially destructive grievance if the whole
    economic and political reform process is not handled
    correctly and in a way that benefits all Bahrainis.

    -----------------------------------
    CONCLUSION: STRONG SHOCK ABSORBERS?
    -----------------------------------

    ¶25. (S) With sectarian tensions in the region rising, and

    MANAMA 00000669  007 OF 007

    disaffected Shia youth willing and ready to challenge the
    Al-Khalifa regime in the villages and on the streets, there
    is a sense of a harder edge to the sectarian divide that may
    cause increasing problems for the ruling family.  And there
    is definitely a greater sense of despair and frustration,
    especially among poorer Shia, than there was when I arrived
    here three years ago.  I recently asked Deputy Prime Minister
    Jawad Al-Arrayid, a long-serving Shia Minister who has
    managed to maintain excellent ties with the King, PM, and CP,
    whether he was worried about increasing Shia anger in the
    streets and the threat it may pose to the Al-Khalifa
    leadership.  Al-Arrayid said that Bahrain is like a car with
    extremely strong shock absorbers.  These strong shock
    absorbers allow Bahraini society to pass through very bumpy
    roads.  They will give the Bahraini government the space it
    needs to implement its economic reforms and improve the
    economic well-being of its people.  After observing Bahrain
    for the last three years, I believe he is right.

    ********************************************* ********
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