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.
