The situation in Bahrain is deteriorating quickly. The intervention of forces from Saudi Arabia and the United Arab Emirates could hit these countries, as well as hit Qatar, the home of Al-Jazeera. All these countries have significant Shiite populations. Iran, that is blamed for fueling the Shiite protests in Bahrain, might push the Shiites in these countries to stage significant demonstrations.
In Saudi Arabia, there is a small Shiite minority, but it’s concentrated near the Persian gulf – the area which has many of the kingdoms oil fields. In Bahrain, the Shiite population is large, and is discriminated by the Sunni monarchy. In Qatar and in the UAE, the population is small.
Around 1500 troops from Saudi Arabia and the UAE have entered Bahrain in order to assist the regime amidst rising protests. They are supposed to focus on defending the oil fields and other strategic installations, freeing the army of Bahrain in fighting the protesters. But, there are reports that Saudi forces have taken an active part in depressing demonstrations.
Iran, ruled by the Shiite clergy, has reacted angrily to the violence in Bahrain. While apparently only verbally supporting the revolting Shiites in Bahrain, Iran has reportedly also sent guns and other weapons to the protesters and helping them with organizing the protests.
The fear is that the Iranians will step up their efforts in Bahrain, and not only there. They might help stage protests in the United Arab Emirates, also a Western backed country and an oil rich country. Qatar is a more sensitive issue.
Qatar’s policy leans less to the West. And its importance also comes from Al-Jazeera. This pan-Arab news channel has huge influence all over the Arab world. If the Iranians meddle with Qatarian affairs, it might have a serious backlash.
Regarding Saudi Arabia, the tensions have definitely escalated. Saudi Arabia is the most important Sunni Muslim country, while Iran is the most important Shiite country. Both have had very tense tensions, but they seemed to have gotten closer recently, after the Saudis were angry with the American abandonment of Egypt’s Hosni Mubarak.
But the turmoil in Bahrain has raised the fear of a proxy war between Saudi Arabia and Iran in these small, oil rich countries as well as in Saudi Arabia itself.
A spread of protests to Qatar and the UAE will send oil prices high to the sky after they have managed to calm down. They rose as the production of oil came to a halt in Libya, as battles rage around Ras Lanuf.
Escalation will naturally aid the Swiss Franc, which is the No. 1 safe haven currency, after Japan’s catastrophe took the Japanese yen out of the small club of safe haven countries.
Further reading: Saudi Arabia’s day of Rage.Get the 5 most predictable currency pairs