By Lin Noueihed and Frederik Richter
MANAMA (Reuters) - Hardline Bahraini opposition and youth groups prepared on Friday for a march on the royal court that is expected to spark fighting on the Gulf island where the majority is Shi'ite but the ruling family is Sunni.
Bahrain, home to the U.S. Navy's Fifth Fleet, has been gripped by the worst unrest since the 1990s when protesters took to the streets last month, inspired by uprisings that unseated entrenched autocratic rulers in Egypt and Tunisia.
Seven people have been killed in clashes with security forces and thousands of the February 14 youth movement still occupy Pearl roundabout, a busy traffic intersection in Manama's financial district, but the opposition is increasingly split.
Moderate opposition leaders urged hardliners to cancel the march on the royal court in Riffa, which is set to begin at 3:30 p.m. (1230 GMT), warning it could spark clashes between Shi'ites protesting against the government and Sunnis who support it.
A youth faction later said the march would go ahead.
"It has become clear that the al-Khalifa regime and their cohorts do not value the blood of the natives of this land as much as they value their monopolization of power, whilst stealing the wealth of the people and repressing and depriving citizens of their basic rights," it said in a statement.
The march would go through the Riffa area, where Sunnis and members of the royal family live, risking the first direct clash between mainly the Shi'ite Muslim protesters and the royals.
Bahrain's interior ministry warned that the march threatened internal security and its forces would prevent clashes.
"The interior ministry holds the organizers and participants of this march responsible for the consequences and reiterates the need to avert any confrontation among the residents that could result in unnecessary loss of life," it said.
"The interior ministry confirms that forces to defend public order will be present to prevent any clash that may occur."
No more than a few hundred to a few thousand are expected to join the Bahrain march, but politicians and activists on all sides expect Sunni civilians to come out to block their advance.
Moderates led by the largest Shi'ite party Wefaq are calling for constitutional reforms and have called a less provocative rally on Friday that is expected to draw tens of thousands.
The coalition of much smaller Shi'ite parties behind the march on the royal court are calling for the overthrow of the monarchy and the establishment of a republic -- demands that have terrified Sunnis who fear this would play into the hands of the oil-producing Gulf's main Shi'ite power, non-Arab Iran.
"If they make the journey they will be met by plainclothes people and not security forces," said a political source, who declined to give his name. "These protesters are trying to derail the political process because in an election they could not win a seat if they tried."
The march comes on a day of rallies in neighboring Saudi Arabia, the world No. 1 oil exporter, where protests are banned. On Thursday night, police dispersed a gathering in its Eastern Province, home to Shi'ites and joined to Bahrain by a causeway.
Both sides are watching closely, as any weakening of the government in either of the neighbors could cause contagion.
On Thursday, the political and economic bloc of Gulf Arab oil producers announced a $20 billion aid package for Bahrain and Oman, both of which are facing anti-government protests.
Unlike mostly Sunni Tunisia and Egypt, Bahrain is divided between Shi'ites, who have long complained of discrimination in access to jobs and services, and the Sunni ruling family.
Over half of Bahrain's 1.2 million population are foreigners. Bahrainis disagree on the exact figures but analysts say over 60 percent of Bahraini nationals are Shi'ite.
(Additional reporting by Warda Al-Jawahiry; Editing by Louise Ireland)