Bahrain has been in turmoil since pro-democracy unrest erupted in 2011, inspired by revolts in Egypt and Tunisia. The protests erupted in Bahrain are led mainly by Shia Muslim groups demanding equality with the Sunni Muslim majority, and political reforms.

Here are some political risks facing Bahrain:

PROTESTS AND CLASHES

Protests that often lead to clashes between demonstrators and police continue despite an Interior Ministry ban on demonstrations imposed in October, 2012.

At least two people have been killed and scores wounded in such confrontations this year, where police use tear gas and bird-shot pellets and protesters throw petrol bombs and stones.

Five home-made bombs went off in Manama in November, killing two Asian workers. The government blamed the Lebanese Shia militant group Hezbollah.

What to watch:

- Opposition marches in defiance of official bans

- Signs of Sunni and Shia armed groups forming

COURT CASES

Arrests and trials of activists and protest leaders continue in Bahrain.

In October, activist Nabeel Rajab was jailed for three years for leading illegal protests, which prosecutors said had led to violence. Last month another leading rights activist, Sayed Yousif al-Muhafda, was acquitted of charges of spreading false news on Twitter.

Thirteen opposition figures remain in jail on sentences of five to 25 years for organising protests. Prosecutors said six of them had contacts with Hezbollah and Iran, accusations the men dismissed as government smears.

Proceedings against security forces members accused of violence during the 2011 uprising are also ongoing. The opposition says verdicts are often too lenient and that more senior officials are escaping being held accountable.

What to watch:

- Judicial proceedings against activists

SLOW-MOVING TALKS

Bahrain's opposition and government resumed reconciliation talks in February for the first time since July 2011 but little progress has been reported in several sessions. Negotiators meet at least once a week despite opposition complaints that they are underrepresented and no representative for the king is present.

King Hamad has appointed Crown Prince Sheikh Khalifa, a champion of talks with the opposition, as first deputy prime minister in a move seen as a gesture for the opposition.

What to watch:

- Either side calling off the talks or staging a walk-out

IRAN TIES

Bahrain reinstated its ambassador to Tehran in August, a year after he was withdrawn in protest at Iranian criticism of the imposition of martial law and the arrival of Saudi and United Arab Emirates troops to help contain the uprising.

Regional Shia power Iran did not reciprocate by sending back an envoy to Bahrain. In October, Bahrain summoned Iran's charge d'affaires to protest against what it called interference in its internal affairs after the Iranian consul in Manama met Bahrain's leading Shia cleric, Ayatollah Sheikh Isa Qassim.

What to watch:

- Iranian, Gulf Arab, U.S. military moves

- Reports of Iran raising the issue of Bahrain nuclear talks

GRAND PRIX

Bahrain's government was shocked to find the revolt the focus of foreign media attention during the running of the Grand Prix Formula One race in the Gulf country held in April.

Last year, the violence cast a shadow over Bahrain's preparations for the competition as Bahrain struggled to show that life has returned to normalcy after the unrest in 2011. Preparations for the April 19-21 race this year are in full swing with sporadic unrest unlikely to affect the plans.

What to watch:

- Any escalation in violence in the run-up to the race

SLOW ECONOMIC RECOVERY

Bahrain's economic growth picked up in the third quarter of 2012 after shrinking in the April-June period, and its statistics office said the small oil producer could recover further from the impact of the social unrest.

Gross domestic product, adjusted for inflation, grew 0.7 percent quarter-on-quarter in July-September, the government said. That compares to a 1.3 percent drop in the second quarter, which was the first quarterly decline since a 6.6 percent slump in the first three months of 2011.

Analysts say the unrest has set back an economic reform programme that aimed to create a free labour market where Bahrainis have the skills and education to compete for jobs.

What to watch:

- Status of economic reform programme

- Capital flows, tourism, property market, planned LNG plant