Protests Heat Up Ahead of Bahrain Grand Prix

Bahrain Formula One Grand Prix
Lars Baron | Bongarts| Getty Images
Bahrain Formula One Grand Prix

Racers from one of the world's most followed sports have descended on the island-nation of Bahrain this weekend to resume their battle for the championship crown. It's been three years since protests inspired by the Arab Spring began, and the country's unresolved political divisions are fueling debate about whether the event should take place at all.

Protests have already taken place in the country. Between 2,000 to 3,000 demonstrators marched down a highway in Karzakkan, a village just north of the Sakhir circuit source on Thursday, according to Reuters newswire. Protesters waved banners and chanted against the Bahrain government, it said.

The race passed without serious incidents last year, although members of the Force India Team were whisked away through tear gas after running into clashes between government forces and protestors calling for reforms.

For the Sunni-led monarchy, the event serves as a crucial symbol of unity and an important global marketing tool. The Grand Prix is an important source of revenues for Bahrain; a cancellation in 2011 is estimated to have cost around half a billion dollars in lost income.

For opposition activists from the Shiite majority, the event is equally important. The high-profile nature of the sport allows them to raise attention to their plight and the stalled political reconciliation process.

Clashes and explosions have taken place in the lead-up to 2013's event and security has been ramped up. The charity Human Rights Watch reported last week that Bahraini authorities were carrying out home raids and arbitrarily detaining opposition protestors.

Meanwhile, a spokesperson for the Bahraini government said it would ensure that "appropriate security measures are taken... as in all other countries which host such international sporting events".

As both Sunnis and Shiites vie to use the Grand Prix for their respective agendas, race organizers and sponsors wary of damage to their brands, are anxious. Still, the governing body of the sport is trying to avoid taking sides.

"We need to be careful not to mix sport with politics," FIA President Jean Todt told CNBC, speaking at the Doha GOALS (Gathering of all Leaders in Sport) forum.

As Bahrain's $26 billion economy does not enjoy the large oil revenues of other states in the Arab Peninsula, reputation damage could have much more of an impact on its overall output.

"The unrest has undoubtedly been a drag on Bahrain's economy, through its impact on tourism and investment inflows, but it has not lead to a full-blown crisis largely thanks to help from regional friends such as Saudi Arabia," Farouk Soussa, chief economist for the Middle East at Citi, told CNBC.

Soussa said the uncertainty will probably persist, as any progress in the national dialogue was unlikely to lead to an immediate halt in street violence.

"We also think the risk of terrorism in Bahrain and the wider region is rising as a result of ongoing events in Bahrain," Soussa added.

Last month, credit ratings agency Moody's maintained its negative outlook for Bahrain's banking system, citing the "challenging domestic operating environment, amidst ongoing social unrest, which continues to affect investor confidence".

However, Bahrain's economic growth appears to be gaining momentum at present. The International Monetary Fund revised its forecast for economic growth in 2013 from 2.8 percent to 4.2 percent, in its World Economic Report out on Wednesday.