US: Saudis, others on 'wrong track' in Bahrain

Secretary of State Hillary Rodham Clinton says Bahrain and its Persian Gulf neighbors are "on the wrong track" with the use of regional troops to help the kingdom's forces maintain order.

Clinton tells CBS News during a trip to Egypt that the situation in Bahrain is "alarming" and the use of force against peaceful demonstrators isn't an alternative to negotiations toward greater democracy.

Saudi Arabia and other Gulf countries have sent hundreds of troops to assist security forces in Bahrain, where Shiite-led protesters are protesting against the Sunni monarchy.

Officials say at least five people were killed in clashes across the kingdom.

Clinton says the U.S. has demanded that Bahrain's government exercise restraint and keep medical facilities open so the injured can be treated.

Gulf markets slump on regional unrest

Gulf Arab stock markets slumped Tuesday and the cost of insuring Bahrain's debt surged, as investor unease with the political volatility in the tiny island nation appeared poised to grow with the declaration of a three-month state of emergency.

The declines, also fueled by fears of further trouble in earthquake and tsunami-battered Japan, reflected the continuing volatility in Mideast markets, where weeks of anti-regime protests that have swept through the Arab world are crafting daily a new political dynamic while unsettling investors.

"It's to be expected, given what's happening today in Bahrain," said John Sfakianakis, chief economist for the Riyadh, Saudi Arabia-based Banque Saudi-Fransi. "The shock waves are felt throughout the region."

The latest cause for concern came after the six-member Gulf Cooperation Council deployed a Saudi-led force to prop up the monarchy in Bahrain. The nation's king declared a state of emergency on Tuesday, giving the military sweeping authority to confront the opposition movement. Also, a Saudi official said that a Saudi sergeant was shot and killed by a protester in Bahrain's capital.

Saudi Arabia's benchmark Tadawul All Shares Index closed down 3.5 percent at almost 6,012 points, while the Dubai Financial Markets index rebounded from steeper losses earlier in the day to close 1.9 percent lower. The losses affected companies in all sectors.

Investor unease with the situation in Bahrain was reflected in the cost of insuring its debt. The five-year credit default swap for Bahrain surged by 40.88 basis points, to 347.2 basis points, according to financial data provider CMA.

Leaked cable shows details of BAE Saudi arms deal

A newly-released secret U.S. diplomatic cable has alleged that British-based defense contractor BAE Systems PLC bribed Saudi officials in return for lucrative arms deals.

The cable from the U.S. embassy in Paris, released by WikiLeaks on Friday, said Britain's anti-fraud agency told a private OECD meeting in Paris in 2007 that they had evidence that BAE paid more than 70 million pounds ($113 million) to a Saudi prince with influence over arms deal contracts.

The cable, dated March 2007, says other payments were made to an unnamed senior Saudi official and to overseas agents employed by the Saudi government.

The SFO dropped an investigation into BAE's overseas dealings in 2006 after Saudi objection.

BAE did not explicitly refute the cable's content on Sunday, but said in a statement that no charges of bribery or corruption were brought up against the company.

Saudis protest outside Interior Ministry

More than 200 Saudis were allowed to protest outside the Interior Ministry on Sunday to demand the release of detainees in the largest demonstration in the capital since the regional outbreak of pro-democracy unrest.

Saudi authorities ban demonstrations and are increasingly determined to prevent the unrest, particularly Shiite protests in neighboring Bahrain, from spreading to the oil-rich Kingdom.

A massive show of force snuffed out a Facebook-based effort to stage unprecedented pro-democracy protests in Riyadh on Friday. But in heavily Shiite eastern Saudi Arabia, hundreds of protesters marched in at least four different locations, calling for the release of political prisoners and demanding reform. Saudi police opened fire to disperse one of the protests, wounding at least one man.

The protesters Sunday demanded information on the fate of mostly Sunni detainees held on security and terrorism-related charges, and their immediate release.

Unrest in the Middle East and North Africa -- country by country

Demonstrations have spread across parts of the Middle East and North Africa. Here is the latest from each country and the roots of the unrest.

Friday developments:

BAHRAIN

Hundreds of people were injured in Bahrain Friday, when rival groups clashed over an attempted march in the town of Riffa, a residential area where the ruling Al-Khalifa family lives.

The national health ministry said 774 people were injured and 107 were hospitalized in the wake of the fighting.

Roots of unrest:

Protesters initially took to the streets of Manama to demand reform and the introduction of a constitutional monarchy. But some are now calling for the removal of the royal family, which has led the Persian Gulf state since the 18th century. Young members of the country's Shiite Muslim majority have staged protests in recent years to complain about discrimination, unemployment and corruption, issues they say the country's Sunni rulers have done little to address. The Bahrain Center for Human Rights said authorities launched a clampdown on dissent in 2010. It accused the government of torturing some human rights activists.

Saudia Arabia quashes protests, neighbors fail

A massive show of force snuffed out a Facebook-based effort to stage unprecedented pro-democracy protests in the capital of Saudi Arabia on Friday but political unrest and sectarian tensions roiled neighboring Yemen and Bahrain.

Yemen's largest demonstrations in a month were met by police gunfire that left at least six protesters injured and seemed all but certain to fuel more anger against the U.S.-allied but deeply unpopular president.

In Bahrain, a conflict deepened between the island kingdom's Shiite majority and its Sunni Muslim royal family, whose security forces and pro-government mobs attacked demonstrators with tear gas, rocks and swords in the home of the U.S. Navy's 5th Fleet. Defense Secretary Robert Gates visited the kingdom to reassure its rulers that the U.S. remains committed to their partnership, officials said.

With uprisings threatening allies on its eastern and southern flanks, the Sunni Saudi monarchy appeared to be taking no chances in its effort to keep the popular push for democracy in the Arab world from spreading to the world's largest crude oil exporter.

In the heavily Shiite eastern Saudi city of Qatif, a short drive from Bahrain, armored personnel carriers and dozens of officers in riot gear surrounded several hundred demonstrators shouting calls for reforms and equality between the sects. Police opened fire in the city to disperse a protest late Thursday in an incident that left three protesters and one officer wounded, but there was no repeat of that violence.

Yemen's president of 32 years appeared to be one of the leaders most threatened by the regional unrest inspired by pro-democracy revolts in Egypt and Tunisia.

Hundreds of thousands of protesters gathered in Yemen's four largest provinces, ripping down and burning Saleh's portraits in Sheikh Othman, the most populated district in the southern port city of Aden, witnesses said.

Saudis say shortage not behind oil price jump

Saudi Arabia's oil minister on Tuesday denied the surge in oil prices reflects a shortage of crude on the market but said the kingdom is committed to tapping excess supplies if needed.

The 12-nation Organization of the Petroleum Exporting Countries has so far held its official output quotas unchanged, even as massive protests across the oil-rich Middle East have pushed global oil prices to their highest levels since late 2008. An uprising in OPEC member Libya has stoked supply concerns, increasing pressure on the producer bloc to pump more to ease prices.

The oil minister of OPEC kingpin Saudi Arabia, Ali Naimi, said the oil market remains well-supplied. In an interview with the Saudi state news agency, he reiterated the kingdom's stance that the spike in oil costs stems more from financial speculation and unwarranted investor sentiment than industry fundamentals.

"The Kingdom of Saudi Arabia has long been committed to promoting market stability in the interest of both producers and consumers, and in support of global economic growth and development," Naimi told the Saudi Press Agency.

Saudis ban protests, warn violators

Saudi Arabia’s Interior Ministry said on Saturday that protests were illegal, amid various calls for demonstrations demanding changes in the kingdom, state media said.

“Regulations in the kingdom forbid categorically all sorts of demonstrations, marches and sit-ins... as they contradict Shariah law and the values and traditions of Saudi society,” said a ministry statement carried by SPA state news agency.

The statement said police were “authorised by law to take all measures needed against those who try to break the law”.

Several hundred people protested on Friday in the town of Al Hufuf in Eastern Province, calling for the release of an arrested cleric, Sheikh Tawfiq Al Aamer, and other detainees, witnesses said.

A similar protest was held in Al Qatif, also in the Eastern Province, but was dispersed by police, witnesses said.

On Thursday night, 22 people were arrested as police dispersed a rally in Al Qatif in which protesters demanded the release of prisoners, said Ibrahim Al Mugaiteeb, head of Human Rights First in Saudi Arabia.

“The protesters demanded the liberation of nine ‘forgotten’ prisoners in Al Qatif, and also of Sheikh Al Aamer, whose picture they carried, and called for national unity,” Mugaiteeb said by telephone.

On Friday, a dozen men gathered at the exit of Riyadh’s Al Rajhi Mosque, one of the capital’s most important, chanting slogans, according to witnesses. Three men were arrested, they said.

Drops in Saudi Arabia fuel Mideast markets slide

 Investors rattled by spreading Mideast unrest drove stocks across the Arab world down sharply Wednesday, with regional heavyweight Saudi Arabia's exchange suffering another day of steep declines.

The kingdom's benchmark Saudi All Shares Index tumbled 4.4 percent in late afternoon trading, piling on to losses sustained in a 6.8 percent rout late in the previous session after most other regional markets had closed.

"Investors are very jittery. There is clearly panic selling," said John Sfakianakis, chief economist with the Riyadh, Saudi Arabia-based Banque Saudi-Fransi, who said he expects the sell-off to continue. "Whenever this jittery panic sets in, it has a snowball effect."

The Saudi index has lost about a fifth of its value since the start of the year even as oil prices - the kingdom's main source of revenue - are pushing back toward $100 a barrel on the New York Mercantile Exchange.

Investors fear the demonstrations that have shaken Bahrain and Oman could spread elsewhere in the Gulf, including OPEC kingpin Saudi Arabia, the largest Arab economy. Anti-government organizers are calling for rallies in Saudi Arabia on March 11, though it remains unclear how much support opposition groups have.

Mideast turmoil increases EU inflation risks

European inflation risks have mounted as a result of turmoil in the Middle East, the European Commission has warned as a fall in eurozone unemployment highlighted the robust pace of economic growth across the continent at the start of the year.

Surging energy and commodity prices mean inflation this year will be "markedly" stronger than thought with risks to forecasts "somewhat tilted to the upside" because of recent geo-political tensions, the European Union's executive arm warned in its latest update on the region's economy.

Tuesday's comments came as Eurostat, the EU's statistical office, reported the eurozone annual inflation rate hit 2.4 percent in February, up from 2.3 percent in January and the highest since October 2008.

The Commission's forecasts and latest economic data strengthen the case for the European Central Bank taking a harder line on inflation threats at its council meeting on Thursday.

Saudi exchange leads drop in Mideast markets

Saudi Arabia's main benchmark stock index took an almost 6.8 percent dive on Tuesday, in a drop fueled by mounting unrest in neighboring Gulf countries and reports of the arrest of a prominent Shiite cleric in the Sunni Muslim nation.

The Saudi All Shares Index slid nearly 7.8 percent before rebounding slightly to close the day 6.78 percent down at 5,538 points. The slide built on an almost 6 percent decline over the past two days and brought the market's year-to-date losses to almost 16.5 percent. Much of that loss accrued over the past three days.

Other Gulf exchanges that take their cues from the Saudi market had closed by the time the exchange in Riyadh had changed course from a session-starting gain and shifted deep into the red. Whatever moderate gains the other markets posted Tuesday were likely to be erased on Wednesday, analysts said.

"These are huge losses for one day," said John Sfakianakis, chief economist with the Riyadh, Saudi Arabia-based Banque Saudi-Fransi, noting that a key catalyst was the unrest in Libya and other Arab countries, including Saudi neighbors Oman and Bahrain. "There is a definite selling off, and observing of the market from far away."

The unrest in the Arab region, brewing for the past few weeks, has spread to the Gulf nations, raising concerns that it could affect the OPEC kingpin. Saudi Arabia sits atop the world's largest reserves of conventional crude and crude traders and investors are worried that anti-government demonstrations in the kingdom could cause a supply cut that would send global oil prices to stratospheric levels.

Oil up above $112 as Middle East supply concerns dominate

Brent crude rose above $112 a barrel on Tuesday as continued unrest in the Middle East and North Africa threatened to further reduce crude supplies even as Saudi Arabia ramped up output to cover disruption to Libyan exports.

Gains were capped as February manufacturing growth in No. 2 oil importer China slowed to a six-month low. In top consumer the U.S., crude oil inventories likely increased for the seventh consecutive week last week on higher imports.

Brent futures for April rose 41 cents to $112.21 a barrel by 0736 GMT. The contract gained over 10 percent in February, its biggest monthly percentage rise since May 2009. U.S. crude rose 33 cents to $97.30 a barrel.

Both benchmarks surged to their highest in 2- years last week as the revolt in Libya cut supply and spurred fears that tensions could spread to other oil producers in the region.

Demonstrators blocked roads into Oman's main oil product port on Monday, although exports were unaffected.

"There's a very large fear premium in oil prices due to the geopolitical situation," said Ben Le Brun, markets analyst at CMC Markets.

"The potential is there and the risk is very high if it (the unrest) spreads to countries such as Saudi Arabia," he said, adding that in that scenario prices could "rocket up."

Crude oil shipments from Libya are at a virtual standstill as reduced output and bad weather hamper exports from the world's 12th-largest producer, shipping sources said.

Bank of America Merrill Lynch said Libya's oil infrastructure on the eastern side of the country could be prone to attacks, "creating the risk of a prolonged output loss.

The bank added that the oil market's ability to deal with further unrest in the Middle East was limited. Still, a Saudi source said on Monday that the kingdom has another 3.5 million barrels per day (bpd) of spare capacity, even after it raised output to around 9 million bpd to plug the gap left by Libya.

OIL SPIKES TO HIT GROWTH

The IMF has warned that global economic growth could suffer if the price of oil stays at its current high level for an extended period.

"A steep rise in oil prices that is caused by a supply loss is likely to be more damaging than one that is driven by robust demand," JPMorgan analysts led by Lawrence Eagles said in a February 28 note.

In China, manufacturing growth slowed in February to a six-month low, according to an official survey, as the government's sustained campaign to tame inflation weighed on industrial activity.

A slowdown was expected, but China still has strong demand for crude and products to feed its expansion, said Yuichiro Sakaki, a Tokyo-based trader at Mizuho Securities.

China is targeting 7 percent per year annual economic growth from 2011-2015, down from the average growth of 11.2 percent in the last five year period.

In the U.S., crude stocks are expected to rise 1.2 million barrels last week while inventories for oil products are likely to fall, a preliminary Reuters poll showed.