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Fresh Protests in Bahrain Strain Businesses, Markets

Laura Gamble, CNBC Producer, Bahrain
Monday, 28 Mar 2011 | 11:55 AM ET

Fresh reports of violent clashes and midnight raids taking place over the weekend did nothing to stifle a steady stream of traffic through Bahrain's financial district Monday, nor did the continued presence of foreign troops and tanks keep business from re-opening their doors.

Young Indian Muslims pose with placards during a protest rally against the ongoing political turmoil in Bahrain, Libya, and Yemen.
Noah Seelam | AFP | Getty Images
Young Indian Muslims pose with placards during a protest rally against the ongoing political turmoil in Bahrain, Libya, and Yemen.

"People just want life to go back to normal," one Bahraini businessman tells CNBC.

But as Bahrain's foreign minister quashed speculation of foreign mediation between government and opposition leaders, many investors looked at the country's billion dollar financial industry and saw continued risk.

"It is the intensity of protests in each country and the response of leaders which are determining risk profile. In Bahrain, the military response will have a long term consequence," says Angus Blair, chief economist at Beltone Financial. "What you've got now is a huge lack of trust between a large section of the population and the ruling family."

"In the GCC," says Blair, "we've mostly seen limited concessions with large injections of cash helping to assuage protestors' demands. But since this doesn't equate long term productivity, it may not be enough to quell a growing demand for political change."

Bahrain's index rose .05 percent Monday, while the promise of $93 billion in social spending in Saudi Arabia that buoyed markets through Sunday failed to keep the country's index from slipping .2 percent.

The cost of continuing unrestboth economically and politically, says one former member of Bahrain's Shua Council, could be very expensive. Plus allowing for the prospect of an actual physical conflict with the country's neighbors.

"The stability and sustainability of political reforms is in everyone's interest," says Dr. Mansoor M. Al Alarayedh of the Gulf Council on Foreign Relations. "You cannot have political progress in this part of the world by ignoring the religious process. Bahrain is basically the neighbor to the two opposing sects of Islam, it cannot go either way, it must co-exist among them. This is what we aspire to."

Now opposition groups say a "shadow campaign" by security forces has left some 250 people missing despite calls from opposition groups for government action on a proposed national dialogue.

The continued postponement of that dialogue, says Al Alarayedh, will only allow sectarian tensions to gain traction.

"It cannot be monarch or people," says Dr. Al Alarayedh. "It must be a partnership."

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