P 051358Z AUG 08
FM AMEMBASSY MANAMA
TO RUEHC/SECSTATE WASHDC PRIORITY 8040
INFO RUCNIRA/IRAN COLLECTIVE PRIORITY
RUEHGB/AMEMBASSY BAGHDAD PRIORITY 0264
RHMFISS/HQ USCENTCOM MACDILL AFB FL PRIORITY
RHBVAKS/COMUSNAVCENT  PRIORITY

S E C R E T SECTION 01 OF 03 MANAMA 000528

BAGHDAD FOR AMBASSADOR ERELI

E.O. 12958: DECL: 08/06/2018
TAGS: PREL PGOV KISL KNNP PTER EFIN IR BA

SUBJECT: BAHRAIN’S RELATIONS WITH IRANREF: A. 07 MANAMA 1045 B. 07 MANAMA 1070 C. 07 MANAMA 1016 D. MANAMA 22 E. MANAMA 220 F. MANAMA 430 G. MANAMA 442

Classified By: CDA Christopher Henzel for reasons 1.4(b) and (d).

¶1. (C) Summary: The Sunni ruling family of tiny, Shi’a-majority Bahrain have long recognized that they needed outsiders -- first the British, then the United States -- to protect them from predatory neighbors, Iran foremost among them. Both Shahs and Ayatollahs have asserted claims to sovereignty over Bahrain from time to time. While keeping close to their American protectors, Bahrain’s rulers seek to avoid provoking Iran unnecessarily, and keep channels of communication with Iranian leaders open. End summary.

Historical Background 
---------------------

¶2. (C) The Sunni al-Khalifa family took Bahrain in 1783 from another Arab clan that acknowledged Persian overlordship. As the British were leaving Bahrain in 1971, the last Shah of Iran asserted, then withdrew, a claim of sovereignty over the country. After the Islamic revolution in Iran, the clerical regime has from time-to-time publicly re-asserted these claims during exercises in nationalist muscle-flexing. The most recent was in 2007, when the semi-official Kayhan newspaper ran an editorial that asserted an Iranian claim to Bahrain. Bahrain -- and the USG -- loudly denounced the editorial, and the GOB eventually announced that it was satisfied with the editor’s statement that he did not speak for the government.

Shi’a Bahrainis’ Ties with Iran 
-------------------------------

¶3. (SBU) Sixty to seventy percent of Bahrain’s 500,000 citizens are Shi’a. (The other half-million residents are guest workers.) With the exception of a few merchant families, Shi’a Bahrainis are poorer than Sunni Bahrainis. Most Bahraini Shi’a are Arabs, but about 10-15 percent of Bahrainis are ethnically Persian, and speak Persian at home. Many of these descend from families who came here to work in the British administration or, starting in the 1930s, in the oil industry. Persian-speakers (mostly Shi’a, a few Sunni) now tend to belong to the professional classes.

¶4. (C) Post’s very rough estimate is that 30 percent of the Shi’a here follow clerics who look to more senior clerics in Iran for guidance. The majority look to Ayatollah Sistani in Iraq, and a few to Muhammad Fadlallah and others in Lebanon. Bahrain’s most popular Shi’a cleric is Sheikh Isa Qassim, who has occasionally endorsed the Iranian regime’s doctrine of velayat-e faqih, and as a result is a lightning rod for loud Sunni criticism (ref F), and quieter criticism from some more orthodox Shi’a clerics. (See septel for profiles of Bahrain’s leading Shi’a clerics.)

¶5. (C) A number of Bahrain’s middle-aged clerics studied in Qom during the years when Saddam obstructed study in Iraq. Several Bahraini clerics currently teach in Qom. The pious among Bahrain’s Shi’a are very happy that they again have access to study and pilgrimage in Iraq’s holy cities. A delegation of Shi’a community leaders visited Najaf in July for the opening of the new airport there, and was widely feted upon their return to Bahrain. Our Shi’a contacts hail the opening of the Najaf airport as a sign of a resurgent Iraq that will regain its prominence as the center of Shi’a learning and religious authority. As a result, we expect religious ties with Qom to subside in coming years.

Bahraini Policy Toward Iran 
---------------------------

¶6. (S) Bahrain’s Sunni rulers view Iran with deep suspicion, and support USG efforts to pressure Iran to change its behavior. But the Al-Khalifas also seek to keep channels open, and make occasional gestures to placate their large, touchy neighbor. Over the past year, we have seen both sides of this Bahraini balancing act. President Ahmadinejad visited Bahrain for five hours in November, 2007, (ref A) followed by President Bush’s two-day visit in January, 2008 (ref D). The GOB vetoed the plans of a prominent local Shi’a, with Iranian government funding, to build a charity hospital here, but the GOB continues protracted negotiations with Tehran over the potential purchase of Iranian natural gas (ref B). Bahrain’s leaders sometimes speak to U.S. officials of their genuine worries that Iranian missiles are sighted on targets such as the NAVCENT headquarters in downtown Manama and the royal palaces. Nevertheless, the GOB is careful to keep its public positions on Iran anodyne.

¶7. (SBU) The vacationing Bahraini Foreign Minister sent Minister of State for Foreign Affairs Nizar Baharna to the July Non-Aligned Movement Conference in Tehran. On July 31 Iranian media reported that President Ahmadinejad had reiterated to Baharna an invitation for Bahrain’s Prime Minister and King to visit Iran.

Diplomatic Presence 
-------------------

¶8. (C) Bahrain’s Ambassador in Tehran, Rashid Al-Dosari, is a former Ambassador to Saudi Arabia and one of the Bahraini MFA’s more experienced diplomats. However, during a recent visit to Manama, he admitted to Charge that he has poor access to Iranian officials. This may be, he said, because of the very short leash on which the GOB keeps the small Iranian Embassy in Manama.

Trade 
-----

¶9. (U) Bahrain has a growing but limited trade relationship with Iran. Despite Iran’s size and proximity, it is not one of Bahrain’s top-20 trading partners. According to published Ministry of Finance figures, bilateral trade totaled only $33.7 million in 2004, grew to $99 million in 2005, and remained constant at $108 million in both 2006 and 2007 -- accounting for less than 1% of Bahrain’s total trade. In contrast, bilateral trade with the U.S. reached $1.2 billion in 2007, behind only the EU and Saudi Arabia. The Bahrain-Iran trade relationship primarily consists of Bahrain exports of petroleum and mining products, and professional and financial services. Imports from Iran are minimal.

Counter-Proliferation and Counter-Terrorism Finance --------------------------------------------- ------

¶10. (C) As a banking and financial center, the GOB has been responsive on counter-terrorism finance issues, and has affirmed its support of UNSCRs 1737, 1747, and 1803 (ref E). In 2004, Iranian Bank Melli and Bank Saderat, together with Bahraini Ahli United Bank formed a joint venture to create Bahrain-based Future Bank BSC. Following U.S. sanctions against Banks Melli and Saderat, and in consultation with Embassy Manama and U.S. Treasury, in 2007 the Central Bank of Bahrain enjoined Future Bank from engaging in new business with Iran, effectively took control of the Board of Directors, and saw Ahli United Bank place all shares of Future Bank in a blind trust. The GOB stated that a blind trust was necessary because Ahli United was unable to divest itself of its interest in Future Bank since it was perceived by the market as “tainted” by the Iranian association (ref C). Ahli United, Bahrain’s largest lender, had already suspended all new transactions with Iran by August 2007. Future Bank’s deposits currently total about $275 million -- a fraction of 1% of a consolidated balance sheet for the Bahraini Banking system that exceeds $155 billion.

Alleged Iranian Subversion 
--------------------------

¶11. (S) Bahraini government officials sometimes privately tell U.S. official visitors that some Shi’a oppositionists are backed by Iran. Each time this claim is raised, we ask the GOB to share its evidence. To date, we have seen no convincing evidence of Iranian weapons or government money here since at least the mid-1990s, when followers of Ayatollah Shirazi were rounded up and convicted of sedition. (The so-called Shirazis were subsequently pardoned and some now engage in legal politics as the very small Amal party, which has no seats in Parliament.) In post’s assessment, if the GOB had convincing evidence of more recent Iranian subversion, it would quickly share it with us.
¶12. (C) Nevertheless, if Iran became embroiled in armed conflict, Bahrain’s Shi’a would be sympathetic, and the likely street demonstrations would be an internal security concern for the GOB.

Conclusion 
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¶13. (C) Bahrain will likely continue its careful engagement with Tehran, including senior visits, diplomatic representation, trade ties, and the limited presence in Bahrain of Iranian banks. At the same time it will continue to support, behind the scenes, U.S. pressure on Iran to change its behavior, and will continue to welcome a robust U.S. military presence in Bahrain and in the Gulf.HENZEL