Bahrain's small size and central location among Persian Gulf countries require it to play a delicate balancing act in foreign affairs among its larger neighbors. Facing declining oil reserves, Bahrain has turned to petroleum processing and refining and has transformed itself into an international banking center. The new amir, installed in 1999, has pushed economic and political reforms and has worked to improve relations with the Shi'a community.

PEOPLE
One of the most densely populated countries in the Middle East, about 89% of the population of Bahrain lives in the two principal cities of Manama and Al Muharraq. Approximately 66% of the indigenous population is originally from the Arabian Peninsula and Iran. Bahrain currently has a sizeable foreign labor force (about 38% of the total population).

HISTORY
The site of the ancient Bronze Age civilization of Dilmun, Bahrain was an important center linking trade routes between Mesopotamia and the Indus Valley as early as 5,000 years ago. The Dilmun civilization began to decline about 2,000 B.C. as trade from India was cut off. From 750 B.C. on, Assyrian kings repeatedly claimed sovereignty over the islands. Shortly after 600 B.C.,

ECONOMY
The first Gulf state to discover oil, Bahrain has worked to diversify its economy over the past decade. Bahrain has stabilized its oil production at about 40,000 barrels per day (b/d), and reserves are expected to last 10-15 years. Revenues from oil and natural gas currently account for 16.5% of GDP and provide about 60% of government income.

U.S.-BAHRAINI RELATIONS
The American Mission Hospital, affiliated with the National Evangelical Church, has operated continuously in Bahrain for more than a century. Bahrain has also been a base for U.S. naval activity in the Gulf since 1947. When Bahrain became independent, the U.S.-Bahrain relationship was formalized with the establishment of diplomatic relations.

Area: 620 sq km
Population: 600,000
People: Bahraini (63%), Asian (13%), Iranian (8%), other Arab (10%)
Language: Arabic, Persian, English
Religion: Shi'a Muslim (70%), Sunni Muslim (15%), other religions and indigenous beliefs
Government: constitutional hereditary monarchy
Head of State: King Sheikh Hamad bin `Isa Al Khalifah
Head of Government: Prime Minister Khalifa bin Salman Al-Khalifa
GDP: US$7.7 billion
GDP per capita: US$13,000
Annual Growth: 3%
Inflation: 0%
Major Industries: Petroleum processing and refining, aluminum smelting, offshore banking, tourism
Major Trading Partners: Saudi Arabia, India, US, Japan, UAE