Bloomberg News

Torched Bank Warns Formula One Racing Into Bahrain Violence

April 19, 2012

A Bahraini Shiite Muslim youth takes part in a demonstration calling for the cancelation of the April 22 Bahrain Formula One Grand Prix, in the town of Muharraq. Photographer: -/AFP/Getty Images

A Bahraini Shiite Muslim youth takes part in a demonstration calling for the cancelation of the April 22 Bahrain Formula One Grand Prix, in the town of Muharraq. Photographer: -/AFP/Getty Images

The National Bank of Bahrain’s branch in the town of Jidhafs is boarded up after it was firebombed twice in the week before the country hosts Formula One motor-racing. Across one of the shutters, attackers spray- painted the word: “Avoid.”

Acts of violence have intensified in the run-up to the April 22 Grand Prix, the biggest international event in the island kingdom since a crackdown last year on pro-democracy protests led by the Shiite Muslim majority. Last year’s race in Bahrain was canceled due to the clashes.

For Bahrain’s Sunni rulers, hosting auto teams such as Mercedes and Red Bull and drivers including championship leader Lewis Hamilton is an opportunity to persuade investors that the unrest is in the past and the country is open for business. The wave of attacks undermines that argument and suggests tensions persist, with Shiite groups pledging to step up protests under the global media spotlight that Formula One brings.

Political unrest has already slowed growth in Bahrain and its escalation “would be a serious blow to the economy,” Sergey Dergachev, who helps manage $8.5 billion of emerging- market debt at Union Investment Privatfonds in Frankfurt, wrote in an e-mail this week.

Since the start of last year, Bahrain’s main stock index has dropped about 20 percent, 10 times the decline on the Bloomberg regional benchmark. The cost of insuring its debt via credit default swaps has doubled.

‘Compromised Image’

Economic growth slowed to 1.8 percent last year, from an average of almost 6 percent in the previous eight years, and will only recover to 2 percent in 2012, the International Monetary Fund said this week in its World Economic Outlook.

Bahrain, with a population of about 1.2 million, has promoted itself as a finance hub in the Gulf to rival neighboring Dubai. Persistent protests will undermine that campaign, said Jane Kinninmont, a senior research fellow for the Middle East and North Africa at the Chatham House foreign-policy institute in London

“For the services companies that Bahrain seeks to attract, a main consideration will be their ability to attract and retain professional talent, which will be reduced by perceptions of political instability and by Bahrain’s compromised image in the West,” she said in an e-mailed response to questions.

‘Hospitable Environment’

Bahrain’s appeal to foreigners has already suffered. It was the least attractive workplace for expatriates in the Gulf last year, according to an April survey by GulfTalent.com, dropping behind Kuwait and Oman. Only 8 percent of companies said they added employees last year, down from 23 percent in 2010.

Formula One will create more than 3,000 temporary jobs and generate $500 million for the economy, the government says. Beyond that, the race brings “huge returns” for the country “by regenerating interest in Bahrain as a friendly and hospitable environment,” Sheikh Salman bin Isa Al Khalifa, chief executive of the racetrack, said last month.

Shiite groups are calling on the ruling Al Khalifa family to grant constitutional government and equal rights. They say repression has continued since the killing of at least 35 protesters last year, with dozens of activists jailed and tortured. The Feb. 14th coalition, which demands the overthrow of the Sunni monarchy, has called for “three days of rage” to coincide with the race, which it dubs the “bloody Formula.”

A group was arrested yesterday for staging illegal demonstrations before the race, Major-General Tariq al-Hassan, the chief of public security, said in a statement yesterday. The detainees assaulted citizens and policemen with Molotov cocktails, iron rods and stones, al-Hassan said, according to the state-run Bahrain News Agency.

‘Facade of Normalization’

Al-Wefaq, the largest Shiite group, and smaller opposition parties will use the media glare to “make our voices heard all over the world,” Abdul-Jalil Khalil, a senior Wefaq member, said in an April 15 phone interview.

The government called in troops from Saudi Arabia and other Sunni-ruled Gulf states to help crush last year’s protests. Small-scale demonstrations still take place regularly in Shiite neighborhoods, sometimes spilling over into commercial areas of the capital, Manama.

“Beneath a facade of normalization, Bahrain is sliding toward another dangerous eruption of violence,” the Brussels- based International Crisis Group said in a report this week.

Several banks have been torched this month, without anyone claiming responsibility. Seven policemen were injured in a blast last week in the Shiite village of al-Eker.

‘Safe and Stable’

A convenience store owned by prominent Shiite businessman Faisal Jawad was vandalized on April 10. Members of security forces were among those detained in connection with the attack, according to the Interior Ministry.

Jawad said in a phone interview that his stores have been attacked 54 times since last year’s protests. The perpetrators “don’t represent the good people of Bahrain,” he said.

Even if there are no major disruptions to the Formula One event, “investors should realize that Bahrain will continue to face the risk of intensified unrest in the short and medium term,” said Anthony Skinner, Middle East director for Bath, U.K.-based Maplecroft, a global risk adviser.

Bahrain’s government has downplayed security risks for the auto race. Visitors will find “safe and stable conditions,” the Information Affairs Authority said on April 10. In recent clashes, “no person who was not a rioter or police officer has been injured,” it said.

‘Path of Reconciliation’

“‘We will not allow anyone to spoil an important event for the vast majority of Bahrainis,” Sheikh Abdul-Aziz Mubarak Al- Khalifa, a spokesman for the authority, said in an April 17 phone interview. He said the race is “a great venue for people of all sects and religions to come together and support a cause that will allow us to embark on a path of reconciliation.”

Khalil, from the opposition Wefaq party, said scores of people have been injured in clashes with police this month and scores more arrested in the past two weeks.

“Formula One should be held at a time of stability, not when we’re going through such circumstances,” he said.

To contact the reporter on this story: Donna Abu-Nasr in Manama at dabunasr@bloomberg.net

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net


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