By Andrew Hammond
DUBAI (Reuters) - Hardliners in Bahrain's Saudi-backed Sunni Muslim ruling family may dig in their heels after a Formula One Grand Prix debacle that spotlighted a frustrated pro-democracy uprising instead of projecting an image of stability.
Western leaders joined rights groups and media watchdogs in criticizing Bahrain before Sunday's race, which was cancelled last year due to the unrest. Officials hailed its reinstatement as proof of a return to calm, but billowing smoke from tires set alight by protesters on race day told a different story.
"I suspect now that those in the ruling family who argued that this is more trouble than it's worth will be saying 'I told you so'," said Justin Gengler, a Qatar-based researcher on Bahrain, singling out the royal court and defense ministers.
Those ministers, full brothers from a family branch often known as the Khawalids, are widely viewed as masterminds of last year's crackdown, which cut short a dialogue Crown Prince Salman had begun with the opposition on democratic reforms.
Bahrainis took to the streets in February 2011, inspired by successful revolts in Egypt and Tunisia, but won no concessions. The government broke up the Pearl Roundabout protest camp a month later, imposed martial law and brought in Saudi troops.
The Sunni Al Khalifa monarchy branded the protesters as Shi'ite subversives with Iranian backing and Bahrain slipped off the Saudi- and Qatari-dominated pan-Arab news agenda.
Western allies such as Britain and the United States, whose Fifth Fleet is moored in Manama, muted criticism of Bahrain for fear of alienating a trusted friend - or its Saudi big brother.
Yet turmoil still convulses the tiny Gulf island, where riot police clash daily with demonstrators, mostly from the Shi'ite majority, and opposition parties stage mass marches.
Police deploy armored vehicles, teargas, sound bombs and birdshot to lock protesters down and prevent a critical mass from re-forming and winning world attention. As a result, activists say the death toll has risen to 80 from 35, including five security personnel, when martial law was lifted in June.
Bahrain's government says it remains open to limited reform, but unease at the prospect of any power shift from the Sunni royal family to the Shi'ite majority has stifled progress.
The hardline royal court minister, Khaled bin Ahmed, initiated contacts with the leading Shi'ite party Wefaq in January, but pro-government Sunni radicals objected strongly and the chance of renewed dialogue appears to have evaporated.
Nevertheless, King Hamad responded to the Grand Prix furore on Sunday by stating his "personal commitment to reform and reconciliation".
Sheikh Abdulaziz bin Mubarak al-Khalifa, adviser to the Information Affairs Authority, said many Bahrainis wanted reforms but did not want them dictated by one party or sect.
"All the political societies want to fight corruption, efficient government, an empowered parliament," he said. "As long as there are no preconditions, mutual respect and no raising the bar too high, then there is hope."
Sheikh Abdulaziz declined to comment on any potential rifts within the government over the question of reform. Crown Prince Salman has long been seen as its keenest royal advocate.
He brought Formula One to Manama in 2004 as part of what analysts say was a vision for political and economic change that would reduce reliance on receipts from an oilfield shared with Saudi Arabia - and the influence that the arrangement gives a powerful neighbor with no interest in a democratic Bahrain.
The negative publicity the latest race attracted may help to undermine whatever remains of that reform drive.
"If anything the race will probably encourage the hardliners in government to say 'we don't need this sort of thing, we don't make money from it and it brings troublesome Westerners'," said Jane Kinninmont, a Chatham House analyst based in London.
Prince Salman's reforms had for years been seen as a challenge to the way Sheikh Khalifa bin Salman, prime minister since independence from Britain in 1971, handles the economy.
Sheikh Khalifa has become a figurehead for Sunnis who fear Shi'ite empowerment in the event of democratic change. Changes of personnel and remit in key bodies since last year's crackdown suggest the concerns of the security apparatus now dominate.
"It appears to be the case across the family and throughout the government that they think they are winning," said Toby Jones, Middle East historian at Rutgers University.
"There is no sense of urgency or commitment to creating the kind of space necessary to arrive at a rapprochement," Jones said. "If that's true, then it seems that all this talk of a split - and contradictory agendas - does not really matter."
Bahrain, a banking and tourism hub, is a shadow of its former self. Economic growth slowed to 1.3 percent in the last three months of 2011 compared to 2.2 percent the year before and inflation hit a three-year high of 4.7 percent in March.
This has increased reliance on Saudi Arabia which has promised, along with other Gulf oil and gas powers, to offer extra financial help, giving extra comfort to the ruling elite.
Hotels and office space have low occupancy and fewer Saudi weekend visitors frequent its bars, restaurants and malls. Few foreign media have correspondents based in the country.
Wefaq, the main Shi'ite party, says attempts to reach a deal with the authorities are at an impasse.
"This government is not serious about having a real dialogue, to listen to the demands of the Bahraini people and implement those demands which cannot be ignored," Wefaq leader Sheikh Ali Salman told Reuters.
"Who are you to have a monopoly in power? Who tasked you with the job of appointing the government, controlling all ministries, taking advantage of national wealth?" he asked.
Demonized in pro-government media as the "Hezbollah of Bahrain" yet singled out by U.S. President Barack Obama as an interlocutor the government should engage, Wefaq says the country is hostage to discord within the ruling family.
The party, whose more radical rivals favor ditching the monarchy altogether, expects the conflict to get more violent.
"Petrol bombs only appeared after November and in recent months we have seen some bombings, though it's still not clear who carried them out," Salman said. "It's just logical that political deadlock will result in deeper instability."
(Writing by Andrew Hammond; Editing by Alistair Lyon)