Almost unnoticed by the news media, a civil war in one of the smallest nations on earth may lead to profound changes in the world economy. The country is Bahrain, whose neighbors in the Arabian peninsula are eyeing its turbulence with growing alarm. PNS associate editor William O. Beeman is an anthropologist at Brown University specializing on the Middle East.

A civil war smoldering in the island sheikhdom of Bahrain, just off the coast of Saudi Arabia, could spell trouble for the nations of the Arabian peninsula. The conflict -- barely noted by the news media -- may prove to be more significant for the United States than the Iraqi takeover of Kuwait that led to the Gulf War.

The principal demand of the rebels is that the ruling Al-Khalifa family restore the national constitution, suspended in 1973. The constitution guaranteed a parliamentary democracy with free elections. The civil conflict was also precipitated by declining oil revenues and Saudi Arabia's increasing hegemony over life in Bahrain. If the anti-government forces eventually prevail, they could spur similar conflicts in Qatar, the seven United Arab Emirates, and even Kuwait, and ultimately destabilize Saudi Arabia itself.

Fighting between Bahrain security forces and rebel leaders has been concentrated in villages outside of the capital, Manama, but it threatens daily to engulf the major commercial and tourist areas in the city center.

Demographics complicate the situation. Much of the oppositionist activity is based in Shi'a villages and is centered in mosques. Shi'a Muslims make up a large proportion of Bahrain's population and the royal family has been quick to blame the conflict on outside interference by Iran's Islamic government. The rebels deny this, claiming the impetus is entirely indigenous.

The real desire of the revolutionaries is not so much a desire for democracy as a desire to eliminate the influence of the Saudi Arabian government in their economy and their everyday lives.

Each of the small sheikhdoms of the Arabian peninsula is ruled by a single family, descendants of tribes that migrated to the Gulf coast from the inland. None of the ruling tribes are indigenous to the regions they rule.

The economies of all these nations depend on oil. The ruling families receive all profits from the sale of oil and dispense money to the government for public works and social welfare. Social benefits like free education and health care are available to all citizens but not to immigrants, and it is virtually impossible to become a naturalized citizen in these states. Since non-citizens make up the majority of the populations, their marginalized status is a major source of grievance.

Even among the indigenous citizenry, minority populations are heavily discriminated against. The Shi'a Muslims in Bahrain are poorer and have less access to education and jobs than the Sunni population, prompting Iran's Islamic government to agitate on their behalf.

But more than Islamic fundamentalism, what has fueled discontents in all these countries has been a dramatic reduction in oil income. With a worldwide glut of oil, market prices which have dropped to record low levels.

Bahrain has the smallest oil reserves among all the Arabian oil producers. But while the Al-Khalifa family has systematically scaled down the money available for the government and social services, it has maintained its own lavish lifestyle. With lush gardens known since ancient times, it has also sought to generate revenue from tourism, opening the country up to outside influences. Bahrain is now the only Arabian peninsula nation that allows the sale of liquor. A new causeway linking Bahrain and Saudi Arabia has produced a flourishing night life in Manama. Private enterprise is gradually emerging from the heavy paternalism of the Al-Khalifa family.

The Saudi government is wary of the nightly flow of "tourists" from the mainland to Manama's bars and nightclubs and has increasingly tried to establish direct control of commercial and social life in Bahrain. The combination of declining government revenues, an increasingly open, liberal and independent private sector, and the heavy-handed influence of the Saudis has further fueled the revolution.

Neighbors are eyeing Bahrain with alarm. Saudi Arabia is particularly nervous about festering grievances among its own minority populations -- including a large concentration of Shi'a Muslims in its principal oil-producing region.

At present Western nations can count on an uninterrupted supply of oil from throughout the region guaranteed by absolute rulers with whom they are on good terms. If oil supplies fall under the control of messy parliamentary governments, neither prices nor supplies from the region will be as predictable. Nor will regional security. The U.S. may also lose its bases in the Middle East as new democracies struggle to establish themselves.

The result of a successful revolution in Bahrain may spell the end of foreign influence in the region -- something Washington, given its long involvement in this part of the world, will not willingly accept.