When Well Number One was tapped below Jebel Dukhan in the 1930s, Bahrain became the first in the Gulf to export oil. And when every other attempt to drill beneath Bahrain's surface came up dry, the kingdom became the first to confront the prospect of running out of oil.
In response to its limited oil reserves, the island state has long understood that economic diversification was critical to its people's long-term prosperity. The success of these efforts, particularly the drive to become a regional financial services centre, is clear. There are close to 400 financial institutions and 170 insurance companies licensed in Bahrain. In recent years, Bahrain has also diversified its role in global markets, becoming a leader in Islamic finance.
But Bahrain's efforts to diversify its economy rest in part on the world's confidence in its institutions. As security forces broke up demonstrations in Bahrain last week, that faith was shaken. The cost of insuring the country's debt against default rose to levels not seen since 2009, during the height of the global financial crisis. Two global rating agencies downgraded Bahrain's credit rating. Many expatriate bankers and lawyers were advised by their embassies to leave the country.
Local banks are beginning to re-open and the joint-GCC security effort that began last week appears to have calmed Bahrain's streets. Now the government must quickly capitalise upon the space that its security measures have created.
What is abundantly clear is that there is only one solution to this crisis: dialogue. The best way to keep the country calm is to ensure that a framework for that national dialogue is developed quickly. Then Bahrain's diverse population will understand that reform is on the way. As the Crown Prince, Sheikh Salman bin Hamad Al Khalifah, said earlier this month, only "a comprehensive and inclusive national dialogue" would address Bahrain's difficulties at their root. For Bahrain's economic and political future, all parties would do well to sit down as soon as possible.
