Bahrain backed off a move to dissolve the country's main opposition block on Friday following strong criticism from the Obama administration.
"We would welcome them reversing this particular action, " State Department Spokesman Mark Toner told reporters in Washington.
Bahrain's Justice Ministry filed a case Thursday to disband the country's main opposition block, the Shia-backed al Wefaq and the smaller Islamic Action Society.
The ministry charged the organizations with violations of the constitution and laws of the kingdom, undertaking activities that harmed social peace, national unity and inciting disrespect for constitutional institutions.
The country's state news agency now says the Ministry of Justice will await further investigations into the parties' activities before pursuing a case that would dismantle the organizations.
Al Wefaq spokesman Ibrahim Mattar tells CNBC "This isn't near as harsh an attack as government forces killing four people while they are being held in jail." he says, referring to the deaths of four activists who allegedly died in police custody. "But if they [the government] are calling al Wefaq extremists then they are calling a huge part of the population extremists. The party has a huge support base in Bahrain."
Lawmakers from Al Wefaq, the country's main opposition bloc in Parliament, resigned in protest over the government's crackdown on protestors last month. The organization took a moderate stance during the protests, urging reform and supporting the prospect of a national dialogue. Al Wefaq says it has always complied with Bahraini laws and regulations and that it is still committed to a political solution to Bahrain's crisis.
Behind the scenes observers tell CNBC that efforts toward a national dialogue have been continually derailed by hardliners on both sides. The prospect for any real reform, they say, continues to recede as talk of resuscitating talks has dwindled and the country's Crown Prince, Salman bin Hamad bin Isa Al Khalifa, the man tasked with orchestrating reforms, now taking a much harsher tone towards the opposition movement.
Bahrain's Ambassador the U.S., Houda Nonoo, in a an editorial earlier this week called for tolerance toward Bahrain.
Calling her nation a young democracy, she wrote:
"We must proceed with the National Dialogue that our Crown Prince called for more than seven weeks ago. I am confident that as the protestors see life returning to normal in Bahrain - banks have reopened, students have returned to class and traffic is flowing again - that they will come to the table to make Bahrain stronger than ever."
Back to Business in Bahrain
Tanks and armored vehicles manned by military forces sporting black face masks litter the country's financial district. Security forces with machine guns and plain-clothes police man checkpoints across the country. A government promise that the state of security will end in June remains far from certain.
According to one Shia protestor "we feel our spirit has been broken ... we come home at night and are prisoners in our homes. This is not sustainable. If I could get out of the country I would. This could go on for years.”
Prominent expat business leaders, however, speaking again on condition of anonymity, tell CNBC a different story.
"This is not America, this is not the West," a business woman says. "These protestors were out of control and did their utmost to destroy Bahrain's future as a business hub. No one felt safe to leave their homes during the demonstrations. It's unfortunate that the media failed to get this side of the story."
Though the Central Bank tells CNBC that no major international banks located in Bahrain have given any indication that that they are planning to leave the Kingdom, the introduction of GCC forces in March and the subsequent state of national security with its curfews, checkpoints and rumors of violence continues to raise red flags for financial institutions.
"Disruption to the free and secure movement of people - especially business people - has changed the nature of the game, "one prominent CEO based in Bahrain tells CNBC. "The risk of detention without charge is enough to drive all sections of the community below-ground."
While the country's rulers frame the current crisis as an Iranian-backed Shia attack on the state, Bahrain's expatriate community as a whole has stayed out of the fray, with many business community leaders acknowledging to CNBC that they don't know what will happen next.
One longtime resident who prefers to remain anonymous for safety reasons tells CNBC that the situation is no longer a question of politics but of humanitarian crisis.
"For most Bahrainis, this is nothing short of a police state. In the month since Saudi-led GCC forces crossed into Bahrain, opposition leaders, prominent businessmen, human rights activists and journalists have all been targeted. Disappearances and arrests have become the norm. Like Germany in the late 1930s, it has become not a question of if they will come for you but when."