Subject: Saudi Arabia Risks Shiite Unrest in Wake of Bahrain (Update2) - Bloomberg
From: "Michael Andrews" <[email-masked]>
To: "Hunter Biden" <[email-masked]>, "Eric Schwerin" <[email-masked]>, "Devon Archer" <[email-masked]>
Date: Fri, 18 Feb 2011 12:44:37 -0500

I think this is something we should watch and perhaps use as we begin  
our approach to Chevron.

Saudi Arabia Risks Shiite Unrest in Wake of Bahrain (Update2)
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By Henry Meyer

Feb. 18 (Bloomberg) -- Violent unrest in Bahrain provoked by  
discontent among the majority-Shiite Muslim population risks spilling  
over to their co-religionists in neighboring Saudi Arabia, which holds  
one-fifth of the world’s oil, analysts say.

Bahrain, a close Saudi ally which is ruled by the Sunni Muslim Al  
Khalifa family, has been rocked by protests since Feb. 14 that have  
led to calls for the government’s dismissal after at least five people  
died as security forces cracked down on the demonstrators.

Saudi Arabia has a Shiite minority concentrated in its eastern oil- 
producing hub that also complains of discrimination. Any spread of  
unrest into the world’s biggest oil exporter risks pushing crude  
prices above the 2 1/2-year high reached this week. Authorities  
arrested 38 people after clashes involving Shiite pilgrims in the holy  
city of Medina two months ago.

A member of the Saudi royal family, Prince Talal Bin Abdul Aziz,  
warned in an interview with BBC Arabic TV that unless King Abdullah  
introduces more political participation and human rights, Saudi Arabia  
may also see protests.

“Unless problems facing Saudi Arabia are solved, what happened and is  
still happening in some Arab countries, including Bahrain, could  
spread to Saudi Arabia, even worse,” Prince Talal told the London- 
based TV broadcaster in an interview aired late yesterday.

Credit-Default Swaps

Credit-default swaps on Saudi Arabia surged today on concern political  
unrest in Bahrain will spread to the kingdom.

Swaps on Saudi Arabia, used as a measure of confidence in the country  
although it has no debt, jumped 10.5 basis points to 137, the highest  
since July 2009, according to CMA. Contracts on Bahrain rose for a  
fifth day, climbing 18 basis points to 302, the highest in 17 months.

A senior leader of Bahrain’s Shiites, Abdulwahab Hussain, said today  
the government must resign and parliament shut down pending a  
transition to democracy. He spoke in an address to about 10,000  
demonstrators, the biggest crowd in five days of protests.

“There is tension right now and now you have the added situation in  
Bahrain that may ignite the spark,” said Christoph Wilcke, an expert  
on the country at New York-based Human Rights Watch, by phone from  
Munich. “This anger has the potential to spill over.”

16 Miles Away

Unrest in Bahrain, which is linked to Saudi Arabia by a 26- kilometer  
(16-mile) causeway and whose capital, Manama, is only a four-hour- 
drive from its Saudi counterpart, Riyadh, has in the past spread  
across the border. In 1995, the Saudi government arrested a large  
number of Shiites in its Eastern Province on suspicion of involvement  
in protests taking place in Bahrain, according to Human Rights Watch.

Saudi Foreign Minister Prince Saud al-Faisal and counterparts from  
other members of the six-nation Gulf Cooperation Council pledged to  
Bahrain they will stand “united in the face of challenges” and wished  
it “continued progress, security and stability” at an emergency  
meeting late yesterday in Manama, the official Saudi Press Agency said.

The Saudi benchmark Tadawul All Share Index fell 1.8 percent, the most  
this month, on Feb. 16 as protests in Bahrain escalated.

‘Second-Class Citizens’

“The events in Bahrain are being followed very closely by both the  
government and the citizens of Saudi Arabia,” Ibrahim AlMugaiteeb,  
president of the Human Rights First Society, in the Saudi city of al- 
Khobar, said by e-mail. “The Saudi government has to treat the Shiites  
the same way Sunnis are treated in the kingdom if they want long-term  
stability.”

Tawfiq AlSaif, a prominent Shiite activist from the eastern region of  
Qatif, called last year for the government to appoint Shiites as  
ministers and ambassadors as a first step toward ending their  
treatment as “second-class citizens.”

Saudi Arabia’s royal family maintains a strict version of Sunni Islam.  
It prohibits the public observance of other religions and limits the  
practice of other branches of Islam.

It has a Shiite minority estimated at between 10 and 15 percent of the  
population, according to Human Rights Watch. Most live in the Eastern  
Province, where state-owned Saudi oil company Saudi Aramco is based,  
and in which they constitute 75 percent of the population.

‘Significant Discrimination’

The U.S. State Department noted in a human rights report on Saudi  
Arabiapublished in 2009 that Shiites in the kingdom face “significant  
political, economic, legal, social and religious discrimination  
condoned by the government.”

The latest religious violence broke out in Medina on Dec. 16 during  
the Shiite festival of Ashura, injuring several people. In February  
2009, clashes between Shiite pilgrims and religious police led to the  
arrest of some of the pilgrims and sparked disturbances in towns in  
the east of the country.

In addition to religious restrictions that forbid them from building  
mosques and discourage prayer meetings, Shiites are taught only about  
Sunni Islam at schools, are often disqualified as witnesses in court,  
can’t serve as judges in ordinary courts and are excluded from high- 
ranking government or security posts, according to Human Rights Watch.

While Saudi King Abdullah has taken some steps by promoting dialogue  
between the different strands of Islam, he hasn’t taken any concrete  
action to combat discrimination and harassment of the Shiites, said  
Wilcke. Now that the 86-year-old monarch is out of the country,  
recuperating after medical treatment in the U.S., Interior Minister  
Prince Nayef bin Abdulaziz, who is effectively in charge in his  
absence, could take a harder line, he said.

Iranian Influence

There are concerns that Shiite-led Iran, Saudi Arabia’s main regional  
rival, is backing the protests in Bahrain, Sratfor, an Austin, Texas- 
based intelligence-consulting group, said in an e-mailed statement  
yesterday.

Iran has increased its regional influence since a Shiite- led  
government took power by winning elections in Iraq after the U.S.-led  
overthrow of Saddam Hussein. Kuwait, which has a 30 percent Shiite  
minority, last year broke up what it said was an Iranian spy cell,  
prompting Saudi authorities to call for U.S. allies in the Persian  
Gulf to step up security cooperation.

Saudi religious leaders have in the past accused Iran of encouraging  
violence by Shiite minority groups in the region. In November 2009,  
Saudi Arabia’s grand mufti, Sheikh Abdul Aziz al- Sheikh, said the  
Iranians were “cooperating in sin and aggression” by backing Shiite  
insurgents in Yemen in a conflict that drew in the Saudi army.

U.S. Diplomats

Still, U.S. diplomats in Bahrain, cited in a 2008 cable released by  
WikiLeaks, said they had found “no convincing evidence of Iranian  
weapons or government money here since at least the mid-1990s.” They  
were responding to charges by Bahraini authorities that local Shiite  
opposition groups were supported by Iran.

Saudi Arabia has condemned popular uprisings against Middle Eastern  
rulers this year, and backed Egyptian President Hosni Mubarak until he  
was overthrown by protest movements last week. Iran welcomed Mubarak’s  
fall and also that of Tunisia’s Zine el Abidine Ben Ali, whose Jan. 14  
flight from the country after a month of demonstrations ignited the  
unrest in the region.

The potential for protests in Bahrain to oust the kingdom’s Sunni  
rulers is a major strategic threat to Saudi Arabia, said Ayham Kamel,  
an analyst at the Eurasia Group in Washington, which monitors  
political risk.

“Inspired by their counterparts in Bahrain, Shias will seek greater  
social, economic, and religious equality,” he said. “Regionally, Saudi  
Arabia’s stability is at risk if the Shia opposition succeeds in  
toppling the Al Khalifa regime.”

To contact the reporter on this story: Henry Meyer in Moscow [email-masked] 
.

To contact the editors responsible for this story: Willy Morris [email-masked] 
; Andrew J. Barden at [email-masked].

Last Updated: February 18, 2011 09:58 EST