MENA Uprisings: Iran Sends Flotilla To Bahrain

If there is one risk that seems to have been overlooked by the marketplace is this: a potential escalation of Middle East tensions.

The Reuters reports,

Shi'ite-ruled Iran sent a flotilla to Bahrain on Monday to show solidarity with mainly Shi'ite Muslim protesters, escalating tensions with the island kingdom that is home to the U.S. Navy's Fifth Fleet.

It was not clear when the convoy might reach Bahrain, which has a majority Shi'ite population but is ruled by a Sunni king.

Bahrain, which has cracked down on pro-democracy protesters in recent weeks, has criticised the decision to send the flotilla and accused non-Arab Iran of interfering its affairs.

Iran's English-language Press TV said 120 activists, including professors, students and clerics, were aboard the convoy, sent to condemn the killing of Bahraini protesters.

The MENA unrest has earlier spread to Bahrain from which Saudi Arabia earlier sent troops to help quash the mounting opposition.

Kuwait has likewise declared in the same article that

“Kuwait will not hesitate to defend the Kingdom of Bahrain against any danger that may threaten its security," the al-Watan daily quoted an unnamed senior Kuwaiti source as saying.”

Ruling autocracies has been linking arms in the face of growing dissent from her constituencies.

Moreover this isn’t about Christian-Muslim conflict but about Muslim inter-religious or sectarian schism. The point I would to make is for those who tunnel on the view that the world operates as religious black and white conflict, obviously this isn’t one of them.

In addition, the Bahrain episode is more of a consequence of foreign meddling on what is a local political disorder. And the meddling of Saudi Arabia has similarly triggered a counter response: Iran implicitly applies symbolical intervention by sending a flotilla.

What used to be a local problem has now gravitated to a regional predicament a risk I earlier pointed out.

We hope that this won’t turn into a full scale conflagration, because if it does, there will be much turmoil especially in the energy markets.

This is one development that requires vigil.

Saudi Arabia Led GCC Intervention In Bahrain

As everyone seems fixated on Japan, which seems to have eclipsed most of the world’s problems, here is one important development: Arab dictators appear to have closed ranks.

The Bloomberg reports, (bold emphasis mine)

Saudi Arabian troops moved into Bahrain as part of a regional force from the Gulf Cooperation Council, the first cross-border intervention since a wave of popular uprisings swept through parts of the Arab world.

“This is war against the unarmed Bahraini people,” said Matar Ebrahim Ali Matar, a member of al-Wefaq, the largest Shiite opposition party.

Mainly Shiite protesters in Bahrain have been demonstrating since Feb. 14, demanding democracy through free elections from their Sunni monarch. Shiites comprise as much as 70 percent of the population. King Hamad bin Isa Al Khalifa has offered a national “dialogue” toward changes in response, which hasn’t quieted protesters. Clashes escalated on Sunday with more than 100 people injured.

The deployment signals that the Bahraini regime has lost confidence it can deal with the protests and underscores Saudi Arabian concerns about uprisings at home, according to Christopher Davidson, a scholar in Middle East politics at Durham University and author of “Power and Politics in the Gulf Monarchies,”

“It is in Saudi’s interest that nothing serious happens in Bahrain, because it would embolden similar protests in its eastern provinces,” Davidson said in a telephone interview late yesterday.

Why is this important?

We get some clues from the same Bloomberg article,

The protests in the tiny kingdom have fueled fears of a regional Shiite uprising supported by mainly Shiite Iran. Many Shiite Bahrainis retain cultural and family ties with Iran and with Shiites in eastern Saudi Arabia; Bahrain’s Sunni ruling family has close links with Saudi Arabia, which holds 20 percent of the world’s oil reserves.

The U.S. is urging Bahrain, home to the U.S. Navy’s Fifth Fleet, to allow nonviolent protests and encouraging Gulf nations to use restraint, White House spokesman Jay Carney told reporters at the White House.

If the revolutions were merely local then we would be dealing with residual common factor risks, or event risk that is limited to a specific nation.

However, when domestic events includes international political interventions, then the risk factor transforms into systematic or market risk.

This is more a problem, for me, than that of Japan’s risk of a full blown nuclear meltdown (which on my assumption would eventually be resolved as others before it).

The key difference between the event risks of Japan and Bahrain is one of technical (Japan’s nuclear power woes) relative to social (religion based geopolitics).

The GCC intervention into Bahrain could well play into rival Islam Shiite-Sunni sect belligerency, particularly Saudi versus Iran, and possibly dragging more participants. At worst, there could be a regional conflagration.

This is a very important variable that needs to be monitored because further deterioration can extrapolate to a shift in the tide of the underlying market trends.