ABSTRACT
Concerns over Iranian-inspired subversive activity were revived by the attempted sabotage of an oil installation in December. Motivated by a growing awareness of its own defense needs, Bahrain pursued a relatively high level of military development. The repercussions of the previous year's recession, caused by the global drop in oil prices, continued to affect Bahraini economic activity. Effects of the recession were also discerned in the banking sector, considered to be a regional center for monetary activity. The cheaper and easier transportation enabled local companies to increase their exports to regional states. Gulf war threats pushed Bahrain to further consolidate its ties with the US in terms of military coordination and arms procurement. Bahrain continued its substantial military and intelligence gathering coordination with the US, while attempting to keep these links as discreet as possible. The US Navy's Middle East Force headquarters continued to be based in Bahrain.
