May 11 (Bloomberg) -- Unrest among the Shiite Muslim majority in Bahrain, home to the U.S. Fifth Fleet, is threatening to spark a return to the wave of violence that enveloped the Persian Gulf archipelago in the 1990s.

Youths rioted and burned tires almost nightly for three months after the arrest of three Shiite leaders in January. On April 30, a homemade explosive device went off accidentally in a car outside Manama, the capital, killing one Shiite and injuring another. Police said it resembled bombs seized during the riots. Shiites complain of sectarian discrimination in housing and jobs by the ruling Sunni Muslim elite; Sunnis make up only 30 percent of Bahrain’s citizens. Political frustration is also mounting because an elected chamber of parliament set up in 2002 by King Sheikh Hamad bin Isa al-Khalifa has limited authority.

“The country is not stable,” Nabeel Rajab, president of the Bahrain Human Rights Center, said in an interview in Manama. “Stability won’t come until human rights are respected. The existing policy of the ruling elite is pushing the country into conflict.”

The riots stopped after al-Khalifa, 59, on April 11 released 178 Shiites detained on security charges. They included Shiite community leader Hassan Mushaima, cleric Mohammed al- Moqdad and 33 others arrested in late January on charges of plotting terrorist attacks and seeking to overthrow the government.

Violence Risk

The releases won’t remove the risk of violence in the Gulf financial center as long as the government quells protests and the parliamentary system is unrepresentative, Shiite leaders and human-rights activists in Manama say.

The parliament -- reinstated by al-Khalifa when he came to power in 1999 after an earlier body was dissolved in 1975 -- has no right to initiate laws. Though Shiites are a majority of the population, their party holds 17 of the 40 seats in the legislature, which can only pass laws with the assent of an upper chamber whose members are chosen by the king.

Violence between 1994 and 1999 killed 38 people and 1,000 were arrested and held in prison without trial.

The instability in Bahrain is a concern for the U.S.: Mushaima says Shiite opposition to the presence of the Fifth Fleet is growing because of U.S. support for the Al-Khalifa government.

The Fifth Fleet, which has about 20 warships and 15,000 sailors and marines, is responsible for an area of 7.5 million square miles, including the Arabian Gulf, the Red Sea, the Gulf of Oman and parts of the Indian Ocean. It is active in combating Somali pirates and countering Iran.

Saudi Concerns

Neighboring Saudi Arabia, the world’s largest oil exporter, has a restive Shiite minority in its oil-producing heartland in the east. Kuwait’s population is one-third Shiite. Concern that Iran is seeking more influence in the Gulf mounted after a senior Iranian official, Ali Akbar Nateq Nouri, said in February that Bahrain used to be Iran’s 14th province.

Shiite leaders say they are excluded from top government jobs and from key ministries, including defense and interior affairs. Only 13 percent of senior state posts are held by Shiites, down from 25 percent in 2001, according to the human- rights center.

Major-General Abdul Latif Rashed al-Zayani, Bahrain’s chief of public security, denied any discrimination and said government employees are not classified by religious affiliation.

Shiites are caught in a squeeze: While they can’t get the good jobs, immigrant laborers from India and other south Asian countries do most of the unskilled work. They are paid as little as $260 a month.

Low-Wage Carpenter

A short drive from the gleaming office towers of Manama, Said Abdullah, a Shiite carpenter, lives in a dilapidated concrete apartment building with his wife and four children.

The plywood roof leaks when it rains in winter and his teenage boy and three younger daughters have to sleep in one room. Abdullah says he can’t get work in the army or police and struggles on pay of $530 a month. “If you come from a Shiite area, you have no chance,” he said.

Security Chief Al-Zayani said only 100 to 200 youths have been involved in regular disturbances, describing them as “a radical minority.”

“We hope that with the amnesty they will come to their senses and join other forces in properly expressing their views,” he said.

Post-Boycott

Shiite legislators say they are frustrated. They boycotted the assembly from 2002 to 2006, then returned because the king persuaded them to give the political system a chance to work.

“It’s the third year now; in truth we can’t move anything,” said Abdul Hussain Al-Mutghawi of Shia al-Wifaq. It is the largest single party.

Shiite leader Mushaima, whose home is adorned with a photograph of Sheikh Hassan Nasrallah, the Lebanese leader of the Iranian-backed Hezbollah movement, warns that patience is running out. The al-Khalifa family has ruled the country since invading the Persian province in 1783.

“We are the original citizens, we deserve full rights,” he said. “The problems will start again and they will be more violent, because people are angry and upset. There is an explosion coming.”

To contact the reporter on this story: Henry Meyer in Manama via the Dubai newsroom at hmeyer4@bloomberg.net

Last Updated: May 10, 2009 17:01 EDT