Confusion Reigns in Bahrain as Foreign Troops Roll In

General confusion reigned and businesses prepared for another day off in Bahrain Monday as military forces from other Gulf states deployed to the country.

A Bahraini anti-regime protester holds up a poster with a caricature image of Prime Minister Khalifa bin Salman al-Khalifa calling him a "war criminal" during a demonstration in the capital Manama.
Adam Jan | AFP | Getty Images
A Bahraini anti-regime protester holds up a poster with a caricature image of Prime Minister Khalifa bin Salman al-Khalifa calling him a "war criminal" during a demonstration in the capital Manama.

The U.S. embassy confirmed that foreign military elements, acting under the auspices of the Gulf Cooperation Council, have entered the country.

Civilians in the area reported troops on the road entering the tiny Gulf state, and images posted online by others showed heavy trucks and armored personnel carriers with mounted .50 caliber machinguns moving in column into Bahrain.

None of the vehicles showed national markings, but sources indicated that most or all of the troops entering the city are from Saudi Arabia, which confirmed that it sent about 1,000 soldiers into the country in order to protect government facilities.

White House spokesman Jay Carney said Monday that the United States does not view the Saudi move as an invasion.

Many of the capital's highways remained closed to traffic, and a CNBC reporter in the city center had not heard any gunfire there Monday.

Several firms with offices in Bahrain, including Credit Agricole, Norton Rose, Robeco and HSBC, were officially closed Monday and workers told either to work from home or, in some cases, given a timeline for moving to Dubai.

Bahrain's Financial Harbor, a sprawling office complex located in the center of the country's financial district, was completely shut down. The country's central bank closed at lunchtime, and Bahrain's stock exchange was forced to seek temporary offices elsewhere.

As much of the country's workforce prepares to enter a third day of virtual lockdown with still no official statement from the government, one businessman who asked to remain anonymous put it to CNBC like this:

"Today what you've seen is a Bahrain being defended by a foreign military force, two-thirds of its business district being held by protestors, its three main bridges manned by plainclothes mililtia or vigilantes who aren't prepare to show faces or give names. And what we're asking is has the government absolved itself from all management of the situation?"

Weeks of political stalemate have followed a February 19 call from the country's crown prince for a national dialogue as rival opposition leaders failed to come up with cohesive demands for reform.

Middle East Turmoil
Middle East Turmoil

"The Crown Prince understands the importance of an open, dynamic and liberal society," says Robeco CEO Douglas Hansen-Luke, a long-time Bahrain resident and member of the country's financial sector. "He deserves to be supported."

Early on, Crown Prince Salman bin Hamad bin Isa Al Khalifa, a man many refer to as the country's modernizer, was forced to give up the country's participation in the Formula One Grand Prix, an event that brings millions to the country's coffers annually. Even last week's $10 billion economic aid package failed to derail the more hardline elements in Bahrain's opposition.

Protests turned ugly once again on Saturday in the area of Riffa as anti-government activists overran police. On Sunday, police forces fired rubber bullets and tear gas on protestors in the city's financial district.

Bahrain's royal family asked the GCC for help in policing the situation after thousands of protestors routed those same security forces from the area and barricaded a large section of the country's main highway.

Despite the disruption to business, the decision to allow foreign troops into the country strikes many as ominous.

"The decision to bring in foreign troops is an unprecedented escalation," says Shadi Hamad of the Doha Brookings Centre. "Many in the opposition even feel that this a declaration of war. I don't see how that is going to promote national dialogue."

The decision to allow Saudi troops into the country as part of a broader GCC intervention is particularly galling to the opposition. One major grievance with the royal family sighted time and again by anti-government protestors has been the role of Bahrain's police force, a group largely made up of non-Bahraini nationals. As foreign military forces rolled into Bahrain Monday from Saudi Arabia, the government offered few and conflicting reports as to the state of the nation.

Robeco's Hansen-Luke spent an hour and a half in his car today as more than 100 military vehicles rolled by. He spoke to CNBC by phone:

"Bahrain seems to be poised on the edge of the abyss and one hopes good sense from all parties will allow a fair and stable outcome, but the government is running out of time to provide a fair and yet credible route to stability."

Bell Pottinger, the official public relations firm for the Bahrain government, confirmed late in the day local time that Saudi troops had moved into the city.

"It's difficult to see if there is really a middle ground and once you bring foreign troops into the game, all bets are off," says Hamid. "Bahrain looks to be entering a prolonged period of low-grade civil war."

With further as yet unconfirmed reports of a larger GCC force on its way, Bahrain ended its trading day day down 1.56 percent.