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Potential instability in Bahrain poses a significant threat to U.S. strategic interests. The United States gains immensely from basing rights in Bahrain, which is a key location in the Persian Gulf with its deepwater port and good airfield access. Nowhere else in the region provides such useful geography or facilities.¹ Yet another sudden uprising by Bahrainis could endanger U.S. military personnel and their families living in Bahrain and could threaten the ability of the United States to keep its bases.

Aside from relying on the United States for protection, Bahrain also prioritizes its own security sector as it faces both internal and external threats. Internally, the country was roiled by protests sparked by the Arab Spring in 2011, with smaller-scale protests continuing to this day. Externally, it considers Iran to be a potential existential threat, and Bahrain is also taking part in operations against Yemeni rebels.

Especially since restrictions on U.S. arms sales to the country were lifted by the administration of U.S. President Donald Trump, Bahrain has been on a massive military spending binge: in 2017 and 2018, just the publicly known defense procurement contracts with the United States amounted to over $6 billion. That is a tall order for a country with an overall budget of about $10 billion per year.

This military procurement splurge is occurring against a backdrop of long-term Bahraini financial trouble. Bahrain spends much more money than its oil, financial, and other sectors bring in. It is thus in the midst of negotiating a five-year, $10-billion bailout package with its Arab allies that will include low-interest loans, spending cuts, and a new value-added tax. The $10-billion aid package will help the country plug fiscal holes in the short term, but will not substantially alter the long-term rent-seeking activity by the country’s elites that keeps Bahrain in dire economic straits.

As Bahraini citizens are being asked to tighten their financial belts due to the country’s economic constraints, there are legitimate questions of how Bahrain will come up with the money to pay for new military purchases, as well as what they contribute to the kingdom’s defense.

The answer is that no one outside the Bahraini royal family seems to know. The Bahraini royal family is not obligated to put many public accounts—including security sector procurement— to scrutiny, so there is little transparency or accountability to these purchases. This breakneck but unaccountable security sector procurement spending may create pressures on the legitimacy and, ultimately, the stability of the Bahraini regime. Large purchases of weapons come at the expense of paying for other items like housing and economic development. Those same arms are also often turned on the population itself, especially the politically marginalized Shia majority, to repress dissent. The lack of transparency and accountability over the security sector, as well as the repression it metes out, allows the regime to largely resist both internal and external calls for democratic reforms. With a population holding significant grievances with the monarchy and a political economy on shaky ground, large purchases without clear national security purposes, means to pay for them, or public accountability only further hurt the legitimacy of the regime.

This potential for instability has important strategic ramifications for the United States, given Bahrain’s role as a key basing location and ally in the Persian Gulf. It is thus in the United States’ interest to strongly encourage the Bahraini royal family to improve its security sector accountability and transparency, lest the lack thereof fuels domestic political grievances that may boil over and jeopardize U.S. objectives in the region.

Bahrain’s monarchy has ruled through a combination of coercion, patronage, and sectarianism while extracting significant rents from Bahrain’s economy. Yet this extractive and absolutist regime has fostered discontent among Bahrain’s Shia majority and the population at large. The Bahraini security sector—and in particular its unaccountable purchases of security-related equipment and services—contributes decisively to the problem of state fragility. Given its pivotal role in providing for Bahrain’s security and supplying nearly all its weapons, the United States has leverage. It should use that leverage to push the Bahraini monarchy to reform its security sector procurement practices. Otherwise, unchecked security spending and endemic corruption will threaten to destabilize the Bahraini regime and imperil U.S. interests.

The Political and Economic Anatomy of the Bahraini Regime

Bahrain is one of the smallest authoritarian states in the world—both in terms of population and geographic area—and it is in some ways an efficient regime with strong capacities to maintain order. Yet its monarchy stands in a uniquely precarious position, as the country is the only remaining Arab state where a minority Sunni population rules over a majority Shia one. Though Bahrain keeps data on the demographics of its Sunni and Shia communities a closely guarded secret,² a statistical analysis conducted in 2017 suggests that Shia represent between 55 and 60 percent of the population.³

Coercion, Patronage, and Sectarianism: The Pillars of Bahraini Regime Survival

Above all, the Sunni royal family maintains its power through absolute control over politics. The king, Hamad bin Isa Al Khalifa, has the power to appoint all ministers, judges, and one of the two houses of a very weak parliament. He can amend the constitution at will. His family holds twelve of twenty-six cabinet posts, including the roles of prime minister, deputy prime ministers, and ministers of interior, finance, justice, and foreign affairs.⁴ Most political organizations have been ruled illegal, nonviolent opposition leaders are regularly arrested or exiled, and the last relatively free media outlet was closed in 2017. The Bahraini population is not quiescent; protests have been a near constant reality over the decades, including widespread demonstrations that threatened the monarchy’s hold on power during the Arab Spring in 2011. However, the regime’s practice of surveilling, arresting, and punishing its citizens keeps a lid on larger protests, so small-scale protests are the norm.

Second, the monarchy selectively distributes patronage from oil rents to preserve a small but crucial coalition of supporters, particularly within the security sector. Thus, while Bahrain has a per capita gross domestic product (GDP) of nearly $50,000 per year,⁵ the nation’s oil wealth is highly unequally distributed throughout the population, as is the case in many other Gulf Cooperation Council (GCC) countries. Many GCC states, Bahrain included, maintain various overstaffed and inefficient state agencies to absorb much of the labor force and spend huge sums on relatively large, well-equipped militaries.⁶

By providing targeted patronage to the security sector, the monarchy keeps its ruling coalition as small as possible and protects the regime from any potential challengers. As scholar Justin Gengler notes:

Indeed, why waste limited resources chasing citizens opposed to the status quo when they might be used to reward those who already have a material stake in its preservation? Rather than deploy limited resources inefficiently upon the whole of society, rulers of distributive states such as those of the Gulf generally seek to maximize their own share by rewarding disproportionately a finite category of citizens whose support is sufficient to keep them in power, while the remaining population is comparatively excluded from the private rentier benefits of citizenship.⁷

In determining which citizens may be most loyal to the regime and deciding questions of resource allocation, the Bahraini regime deliberately exploits sectarian divisions. The regime’s policy, as described by Gengler, can be described as an “ethnic subsidy,” whereby a ruler co-opts one’s co-ethnics as a relatively cheap support base that is large enough to ensure regime survival.⁸ Thus, rather than trying to temper sectarianism in Bahrain, the regime reinforces it. The government uses electoral and legislative rules, plus hiring practices and the media, to institutionalize sectarian cleavages rather than ameliorate them. The regime also moves aggressively against cross-sectarian political movements and leaders, limiting their ability to unite under common grievances.

Using the politics of fear so common in authoritarian states, the monarchy portrays the Shia majority not as an aggrieved group of fellow Bahraini citizens but as a mob backed by Bahrain’s arch enemy, Iran, that poses an existential threat to Bahrain. In a version of “protection racket politics,”⁹ the regime portrays democracy as dangerous to the Sunni minority and stirs up fear that the Shia majority could vote in an Iranian-style government. The Bahraini regime can also point to the results of other Arab Spring revolutions in places like Syria, where civil war and chaos resulted. The regime can thus win the allegiance of its key supporters by highlighting that it is better for Sunnis to remain under the security umbrella of an oppressive state and receive the regime’s largesse rather than risk civil war or subservience under Shia rule.¹⁰

Given its reliance on the three pillars of coercion, patronage, and sectarianism, the Bahraini regime has created three distinct groups. First is the Sunni monarchy and the inner circle of key supporters, including elites within the security sector, who receive an outsize share of the overall rents. Second is the larger Sunni population who are generally supportive of the regime. Though this group receives a greater share of rents than Shia, it is still rather poorly compensated by the regime for its support. Last are the Shia, who make up the majority of the country but receive the fewest benefits.¹¹

The Privy Purse: The Monarchy’s Dominance Over Bahrain’s Economy

Control of state resources, including the massive security procurement budget, is at the core of this model. The same people who control Bahrain’s economy, and especially its oil and natural gas wealth, also control the security sector.¹² A key aspect of maintaining control for authoritarian regimes is restricting access to information on state finances and economic activity, and Bahrain is no different. It is thus unclear how much money is actually in state coffers and how much of the state’s resources are expropriated by the monarchy and its key supporters.¹³ It is clear, however, that the royal family can extract billions in rents each year from sources as diverse as oil revenues, land titles, a sovereign wealth fund, shares in companies, and tax revenues.

There are some specifics available. Public debt is 88 percent of GDP, and the $2.3 billion Bahrain has in foreign reserves is barely enough to cover a month of imports.¹⁴ All three major rating companies rate its debt as junk, and investors are betting that the Bahraini dinar is likely to be unpegged from the dollar.¹⁵ It does not help that 70 percent of government revenue is based on oil ¹⁶—with its highly volatile price swings—or that Bahrain needs oil prices to rise to $125 a barrel to balance its budget (oil has hovered over $60 per barrel so far in 2019).¹⁷

As a result, hydrocarbons are critical to the budget.¹⁸ All mineral wealth on the surface and underground in Bahrain is owned by the state.¹⁹ Historically, in an agreement originally reached among the British colonial administrators, oil companies, and the monarchy, one-third of oil revenues went to the privy purse, another third to the state budget, and the final third to a reserved fund.²⁰ However, when the Abu Sa’afa oil field was discovered in 1966, which at the time became the largest source of oil revenue for Bahrain, its revenues went straight to the privy purse, rather than the government budget, in addition to the previously allocated third of oil revenues.²¹ This lopsided distribution of oil rents between the privy purse and the public budget was typical of countries that now comprise the GCC prior to their independence and the 1973 oil crisis, when most countries ceased to publicly account for revenues.²²

It is impossible to know with any surety how much oil revenue the monarchy receives, but a 2016 study found the total value of Bahrain’s oil exports to be $92.8 billion dollars between 2002 and 2011, compared to total declared public oil and gas revenues over the same period of $39 billion dollars. That leaves a gap of $53.8 billion. In most of those years, the value of the oil exported was at least double the declared public revenue. While these estimates do not provide a definitive number for how much money is off-budget in Bahrain, they do highlight the large gaps between publicly listed amounts and the actual value of exports.²³

But the monarchy has more resources available than just oil and natural gas. The next most obvious is land because, especially in a place as small as Bahrain, large landowners are particularly noticeable. The king and the prime minister (the king’s uncle) own two relatively large islands off the coast of Bahrain, as well as a number of other palace compounds.²⁴ A 2010 Bahraini parliamentary investigation documented that about one-quarter of the country’s land did not have complete records. The Land Registration Board, whose director is appointed by the king, is accused of re-registering public and sometimes even private lands to the royal family, which has then turned over the deeds to developers for new offices or hotels. Prime Minister Khalifa bin Salman Al Khalifa is reportedly known as “Mr. 50 Percent” because he takes that share in the businesses to which he provides public land.²⁵

The monarchy also controls Mumtalakat, Bahrain’s sovereign wealth fund, which holds $11 billion in assets worldwide. Established in 2006, the organization has twenty-nine commercial assets, including some of the largest firms in the country, such as Gulf Air, the Bahrain Telecommunications Company (Batelco), and the National Bank of Bahrain.²⁶ The revenue from Mumtalakat does not go into the government budget.²⁷ And though the fund is recognized for the transparency of its accounts, as Ravi Shankar Chaturvedi of Tufts University noted in 2016, “The fund’s transparency is of little good when its parent, the sovereign, is shrouded in a veil of corruption.”²⁸

Beyond its official holding company, the royal family is believed to have a stake in a number of other companies, often secretly held through cut-outs. A 2014 investigation by the Financial Times showed, for instance, that a private investment vehicle called Premier Group, believed to be owned by the royal family, had shares in projects worth at least $22 billion.²⁹ In other cases, the monarchy’s role in various businesses is public. For example, Shaikh Mohammed bin Isa bin Mohammed Al Khalifa, described as a political and economic adviser to the crown prince, is the executive chairman of the McLaren Group Limited holding company, which includes the McLaren luxury car brand and Formula One racing team. The largest shareholder, with a 62.6 percent share of this $3.1 billion business, is Mumtalakat.³⁰

On top of all of this, the royal family ultimately controls the tax revenues. To further help plug gaps in the budget, the government announced a 5 percent value-added tax that is beginning a phased rollout in 2019. Bahrain has received loans and other direct financial assistance from Saudi Arabia in the past.³¹ The country will presumably receive more direct assistance as part of the $10 billion bailout. Yet even that may not be enough, as the chief Middle East economist for Bloomberg Economics, Ziad Daoud, estimates Bahrain will need at least $12.7 billion to cover its expenditures, and possibly quite a bit more.³²

Thus, while it is impossible to know exactly how much money is going to the Bahraini monarchy’s inner circle, it is clearly many billions more than the billions estimated to be derived just from oil rents. This creates a massive, unaccountable slush fund for whatever the monarchy chooses to spend it on, including expensive security sector purchases. And amid all of this, average Bahraini citizens are being asked to tighten their belts.

The Regime’s Discontents: Sectarian and Cross-Sectarian Grievances

During the Arab Spring, Bahrain was often a center of global attention as over one hundred thousand protesters demanded democratic reforms, many of which had been previously promised by the royal family. The Bahraini protests began on February 14, 2011,³³ and at first they were largely nonsectarian with broad calls to reform the Bahraini regime (though as the protests continued, they became increasingly more sectarian). The monarchy soon found itself unable to cope, and on March 14, Saudi troops and Emirati policemen from the GCC Peninsula Shield Force arrived in Bahrain. The government soon declared martial law with mass arrests, a curfew, a ban on rallies, and other repressive measures.³⁴ This crackdown became a symbol of how brutal a regime’s response could be: not only were the protester camps bulldozed and protest leaders imprisoned, but even the doctors who treated the wounded were arrested. More broadly, thousands of workers were fired, nearly all of them from state or semi-state entities.³⁵ Since then, small-scale protests have occurred regularly in Shia areas, and low-level attacks against police and other security forces continue.³⁶

But 2011 was hardly the first time there had been mass mobilization against the regime. The majority Shia had engaged in waves of uprisings and protests against the Khalifa regime for decades.³⁷ The current protest movement is made up largely of Shia groups, though Wa’ad, a recently disbanded leftist group with both Sunni and Shia participation, is also prominent. A small number of Shia groups are solidly pro-Iranian, and some of them are willing to use violence. The vast majority, however, eschew violence, and instead seek reforms to allow greater representation, accountability, and equality.

Shia Grievances

Shia grievances center primarily on their political and economic marginalization under the Bahraini regime, particularly a lack of voice and representation. Bahrain’s political system has been designed to exclude the Shia majority, as well as the regime’s opponents more generally. While Bahrain has a parliament, it is advisory only and its upper house is entirely appointed. Moreover, severe gerrymandering has been used to ensure the election of supposed independents who are friendly to the royal family.³⁸ When even that was not enough, the Bahraini government made it illegal for anyone in the opposition to actually run for parliament. Opposition leaders of peaceful political “societies” (since political parties are illegal) are regularly imprisoned, stripped of their citizenship, or sent into exile. The prominent political societies have all been dissolved by the government.

Sunni and Shia communities are very segregated,³⁹ so another significant grievance involves the lack of housing and access to basic public services, with many Shia villages missing even paved roads. Furthermore, in Shia communities, many basic services are supplied by local charities rather than the state.⁴⁰ According to a 2009 poll, Shia respondents were much more likely than Sunnis to report difficulty in claiming official documents, enrolling a child in public school, receiving medical treatment, or receiving help from the police when needed.⁴¹ The ghettoization of many Shia also has a secondary benefit for the regime: by pushing most Shia into isolated villages, protest movements are easy to contain in local areas with a few roadblocks, preventing larger protests from reaching the city center, as they did in 2011.⁴²

The lack of employment opportunities is also a major grievance. Shia are explicitly forbidden from working in some sectors, and informally barred from others.⁴³ Anyone seeking a sensitive job position in the bureaucracy needs a “certificate of good history and conduct” from the police to show they have never been arrested or detained, including for political reasons. This discourages many Shia applicants and restricts many others to only the lower rungs of state jobs.⁴⁴ Shia have many fewer opportunities for public sector employment than Sunnis with identical employment attributes, while Shia were likely to be in lower paying, lower prestige jobs than equally qualified Sunnis.⁴⁵ A 2003 survey found that Shia held only 18 percent of the 572 high-ranking government posts,⁴⁶ and in a 2009 survey, all those surveyed who were employed in semi-skilled, unskilled, or agricultural labor were Shia.⁴⁷

One of the job sectors largely unavailable to Shia is the security sector.⁴⁸ A leaked March 2009 confidential list of over 1,000 employees in Bahrain’s security sector showed that only 4 percent of employees were Shia while 64 percent were “non citizens, most of Asian nationalities.” The aforementioned 2009 survey did not find a single Shia who worked for the police or armed forces, despite the fact that the security sector is one of the largest employers on the island.⁴⁹ The Ministry of Interior is believed to employ the most Shia of any security agency, yet even here the personnel is only estimated to be about 10 percent Shia.⁵⁰

Furthermore, the Bahraini regime has stocked the lower ranks of the security sector with non-Bahrainis.⁵¹ As early as 1998, a Financial Times article reported that 8,000 to 10,000 Sunnis and their families had been brought from Jordan, Pakistan, Syria, and Yemen into the Bahraini security sector,⁵² and they continue to be the most common groups, along with a smattering of British in senior positions. In 2011, a pro-government media outlet reported that about 40 percent of the Ministry of Interior was composed of foreign nationals.⁵³ In addition, the National Guard and police force are thought to be primarily staffed by foreigners, especially Pakistanis and Yemenis. In 2009, the Bahrain Center for Human Rights reported that almost two-thirds of the National Security Agency’s personnel were non-Bahraini.⁵⁴ Shia are also concerned that foreign Sunnis are being brought in to change the sectarian makeup of Bahrain. In a country of less than 1.4 million people, it does not take many new immigrants to change the sectarian balance, especially when Shia hold only a slight majority of the country.⁵⁵

Grievances over the security services were a major motivator in the 2011 uprisings, and thus were a central aspect of the reforms promised by the monarchy in 2012. These reforms quickly stalled, however, in part because the exclusion of Shia from the security sector is fundamental to the Bahraini regime’s strategy of survival.⁵⁶ According to a leaked 2006 U.S. diplomatic cable, “The King noted that many Shia complain that there are no Shia in the military leadership of the country. This is a question of loyalty, he stated. As long as [Iranian Supreme Leader] Khamenei has the title of Commander-in-Chief, Bahrain must worry about the loyalty of Shia who maintain ties and allegiance to Iran.”⁵⁷

Shia exclusion from the security sector exacerbates discontent with the Bahraini state overall in three ways. First, it ensures Sunnis, especially the royal family, maintain control over the organs of power, despite being a minority of the population. Second, the Bahraini security sector is a major employer in the country, and exclusion from that sector means fewer good, middle-class jobs for Shia. And third, with an enlisted force largely made up of noncitizens, and very recently naturalized citizens, who speak little or no Arabic and have no social ties to the areas they patrol, the Bahraini security sector leadership can better oppress civilians where locals might balk. Locals blamed non-Bahraini security members for much of the violence during the Arab Spring protests.⁵⁸

Cross-Sectarian Grievances

More worrying still for the Bahraini regime is that it is not just the Shia who have grievances against the monarchy; many concerns are cross-sectarian. Issues such as repression, corruption, and the naturalization of noncitizens, including in the security services, anger Sunnis as well.⁵⁹

The regime’s increasingly authoritarian behavior, in particular, has caused discontent across sectarian lines. While Shia have suffered the bulk of the repression, Sunnis protesting the regime were also arrested during the 2011 uprising.⁶⁰ As of 2018, the number of Sunnis being arrested, interrogated, and censored on social media seemed to be increasing,⁶¹ and even pro-government groups, especially those that had spoken out on corruption issues, were under increasing pressure. Parliamentary elections were held on November 24, 2018 (with a runoff on December 1), but political opposition was not allowed,⁶² and many leaders—both Sunni and Shia—have been imprisoned. New laws passed in 2018 prohibit anyone who has ever been a member of any illegal political societies or who has been sentenced to prison for more than six months from seeking to hold office, thereby disqualifying many protesters and political prisoners.⁶³

And while the standard of living for Sunnis is higher than that of most local Shia, they, too, suffer from the poor economy. The 5 percent value-added tax will further add to that burden,⁶⁴ and subsidies for meat, cooking oil, and other necessities have been eliminated.⁶⁵ Despite the roughly $50,000 per capita GDP, wages have been flat and the median income is only $13,300 per year for private sector jobs and $18,600 for public sector ones.⁶⁶

Furthermore, the lack of affordable housing is ranked as one of the leading issues facing all Bahraini families, regardless of religion or tribe.⁶⁷ Bahrain has the world’s second-highest population density.⁶⁸ Over 1 million people are crammed into a location one-quarter the size of the U.S. state of Rhode Island, which would make for a tight fit under the best of circumstances, but half the island is reserved for vast royal properties and military facilities. In a 2011 Gallup poll, 41 percent of Bahrainis said they did not have the money they needed for shelter.⁶⁹ In 2016, 50,000 Bahrainis were on a waiting list for public housing with a backlog of applications that would need at least fifteen years to process.⁷⁰ The naturalization of non-nationals further exacerbates this problem. Sunnis as well as Shia resent how non-nationals receive free housing and can jump to the head of the queue for scarce housing, as members of the security services get automatic priority.⁷¹

Bahrain’s Security Sector and Risks to Stability

The Bahraini Security State

The Bahraini security sector is essential to maintaining the monarchy’s power. A tiny coterie of the closest members of the monarchy and key supporters firmly control all major security sector bodies via the fourteen-member Supreme Defense Council, which is chaired by the king and consists almost entirely of members of the royal family.⁷²

Domestic Security Sector Bodies

The security sector is divided into four parts: the Bahrain Defense Forces (BDF), Ministry of Interior (MOI), National Guard, and National Security Agency (NSA). The Bahraini government does not publish much basic information on its security sector, but sources have put the combined security sector forces at over 21,000, of which approximately 8,200 are in the BDF and the rest in the other three branches.⁷³ The regime also does not disclose basic personnel issues like salaries and promotion standards.⁷⁴ There is no evidence of promotion boards, and rank seems to be associated with sect and citizenship rather than merit.⁷⁵ In the past, the regime has imprisoned those publishing the names and salaries of public sector officials.⁷⁶

The BDF is generally well-equipped, professional, and well-compensated. Given Bahrain’s military weakness relative to potential aggressors, the BDF’s role has always been less about protecting the island from invasion and instead it is to protect the regime from internal foes and stave off any attackers for forty-eight hours until outside help arrives.⁷⁷ The royal family occupies the most senior positions in the BDF, while the rest of the officer corps consists of a princely class of Bahraini Sunnis who are carefully vetted according to their family background, history, and political orientation.⁷⁸

The MOI includes the Coast Guard, traffic police, customs and immigration officials, and the Special Security Forces Command. The MOI also runs the community policing program. This program, with at least 1,500 members, was established in 2005 and is the only branch to allow Bahraini Shia to join, though its members are unarmed.⁷⁹ However, according to a 2016 U.S. State Department report, it does not appear that a significant segment of the force is Shia.⁸⁰

The third branch in the Bahraini security sector is the National Guard, whose main mission is to guard critical infrastructure such as the airport and oil fields. It can provide extra forces to the Ministry of Interior if needed, and a 2016 report put the number of personnel at about 2,000.⁸¹ It is commanded by the king’s brother who reports directly to the king.⁸²

The fourth branch is the NSA, which conducts both domestic and foreign espionage. It is headed by Lieutenant General Adel bin Khalifa Al Fadhel, the only senior leader of the various branches who is not a member of the royal family.⁸³ The NSA was largely blamed for the worst civil rights abuses in the 2011 uprisings and was subsequently stripped of much of its authority, but in January 2017, the agency had its powers reinstated, including its authority to conduct arrests.⁸⁴ The demographics of the NSA are unclear, but a leaked 2009 report indicated that Shia did not make up more than 4 percent of it.⁸⁵

Further bolstering the security sector are an unknown number of private