By Andrew Hammond and Angus McDowall
DUBAI/RIYADH (Reuters) - Saudi Arabia and Bahrain are expected to announce closer political union at a meeting of Gulf Arab leaders on Monday, a Bahraini minister said, in a move dismissed by the opposition as a ruse to avoid political reform.
The decision is part of efforts to increase integration within the Gulf Cooperation Council (GCC), as the organization's six nations worry about Iran's power in the region and the presence of al Qaeda after the Arab uprisings.
Saudi Arabia and Bahrain might initially seek closer union, local media have said, as both share a concern about discontent among Shi'ite Muslims against their ruling Sunni dynasties, and accuse Shi'ite Iran of fomenting it - a charge it denies.
Saudi security forces entered Bahrain in March 2011 before a crackdown on pro-democracy protests led mainly by majority Shi'ite Muslims against the Sunni Al Khalifa monarchy, a U.S. ally.
"I expect there will be an announcement of two or three countries. We can't be sure but I have a strong expectation," Samira Rajab, Bahrain's minister of state for information affairs, told Reuters on Sunday. Two of the countries mentioned were Saudi Arabia and Bahrain; Rajab did not name the third.
"Sovereignty will remain with each of the countries and they would remain as U.N. members but they would unite in decisions regarding foreign relations, security, military and economy."
Despite appearances of unity, there are deep divisions within the GCC, which also includes Kuwait, Qatar, the United Arab Emirates and Oman, as its officials meet in Riyadh on Monday for day-long talks.
Riyadh fears that Bahrain's pro-democracy movement has the potential to spill over into Saudi Arabia's Shi'ite-populated Eastern Province region, home to major oilfields.
Meanwhile Iranian President Mahmoud Ahmadinejad made a surprise visit to an island claimed by the UAE last month, raising latent fear among Gulf rulers of Iranian power since the 2003 invasion of Iraq brought Iran's allies and fellow Shi'ites to power.
The United States, with its Fifth Fleet in Manama, sees the Al Khalifa family as key allies in stemming Iranian influence in the Gulf, though Washington has not said it believes that Iran is behind the unrest and has called for dialogue.
Washington said last week it would resume arms sales to Manama, drawing fire from international rights groups.
Bahrain's leading opposition party Wefaq said the Saudi interventions aimed to stop democratic change.
"The issues facing Bahrain are local, not regional. There is little the Saudis can do: they sent troops but failed because the crisis is still going on, and that's because it requires a political solution," said senior Wefaq official Jasim Husain.
"Any agreement must get the people's approval, not least in Saudi Arabia. I suspect this supposed union is just rhetoric."
Pro-democracy protesters burned tires and clashed with police in Bahrain on Saturday to demand the release of opposition leaders and rights activists, one of whom has been on a three-month hunger strike.
Bahrain said last week it would step up efforts to crush unauthorized protests, which it terms "rioting", after 15 policemen were injured by improvised bombs.
Opposition activists say the death toll in the unrest has risen from 35 when martial law ended last June to 81, as police make heavy use of teargas and birdshot pellet. The government says many of the deaths were caused by the protesters' or bystanders' pre-existing poor health.
Bahrain's hardline prime minister, seen as opposed to concessions to the Shi'ite opposition, backed the idea of a union.
"The great dream of the peoples of the region is to see the day when borders disappear with a union that creates one Gulf," the official Bahrain News Agency quoted him as saying on Sunday.
Justin Gengler, a researcher based in Qatar, said hardliners including the prime minister, army chief and royal court minister see a union as a way of stopping the empowerment of Shi'ites and preserving the privileges of the ruling family.
"Even a dramatic announcement tomorrow of some grandiose plan for GCC union must be taken with a grain of salt," he said.
A monetary union project has faltered, and other differences are also deep.
Qatar and Oman maintain good ties with Iran. Saudi Arabia has objected to a bridge project between Bahrain and Qatar, and Bahrain has not been able to buy gas from Qatar.
Saudi Arabia and the UAE are suspicious of Egypt's Muslim Brotherhood, while Brotherhood affiliates operate openly in Kuwait and Bahrain, and Qatar promotes the group via its Al Jazeera satellite television channel.
The Arab Spring uprisings have been a challenge for Gulf rulers. Saudi Arabia took action to stop the spread to Bahrain, after the shock of seeing Hosni Mubarak fall in Egypt without American intervention to save him.
But Qatar led efforts to champion the revolt in Libya and Saudi Arabia has backed the uprising in Syria, while betting that distribution of oil wealth will limit discontent at home.
Gulf leaders also fear that the revolt in Yemen has given al Qaeda a chance to gain more of a foothold; another alleged bomb plot was revealed last week.
Rajab said there were "reservations" among some GCC members over the union, while the deputy head of Bahrain's appointed upper house of parliament said openly he was skeptical.
"I have my doubts," said Jamal Fakhro. "It will not be an easy achievement to have one foreign policy between six countries, unless it's limited to specific issues."
(Writing by Andrew Hammond and Reed Stevenson; Editing by Alessandra Rizzo)