MANAMA (Reuters) - Bahrain's Sunni rulers hope their reform promises and tough punishments will deter more pro-democracy protests, but majority Shi'ites are still seething, seeing scant progress on their demands for change in the deeply polarised Gulf island.
In a sign of Shi'ite radicalisation, activists in the February 14 Youth Coalition have called for civil disobedience.
The Shi'ite religious occasion of Ashura, in late November and early December, could become the next flashpoint. The protesters' ultimate goal is to retake the Manama roundabout that became the symbol of this year's failed uprising.
The Gulf Arab state, ruled by the Sunni Al Khalifa family, says it will give parliament greater powers of scrutiny over cabinet ministers after a "national dialogue" held in June.
The authorities say any more reforms must emerge via that framework, limiting scope for progress on the two key opposition demands -- giving the elected chamber real legislative power and removing Prime Minister Sheikh Khalifa bin Salman, King Hamad's powerful uncle, from a post he has held since 1971.
Parliament will convene on Sunday for the first time since the uprising in February and March inspired by successful revolts that toppled Arab autocrats in Egypt and Tunisia.
In Bahrain, the outcome was starkly different. Martial law and an influx of Saudi troops halted street protests.
Saudi Arabia acted with unaccustomed forcefulness because it feared that Bahraini rulers might make power-sharing concessions to Shi'ites seen by Riyadh as proxies for Shi'ite Iran.
At least 30 people were killed, hundreds wounded and more than 1,000 detained during or after the unrest.
In the last few days, military courts have ordered lengthy prison terms for dozens of Shi'ite dissidents and protesters, as well as 20 doctors and nurses, for their part in the revolt.
The sentences, especially those for hospital staff, have drawn stiff international criticism, while Bahrain fights to counter the narrative of an oppressed majority Shi'ite population fighting for political and economic rights.
Bahrain's global reputation as a business hub has also taken a hit, but the government is resisting calls for deeper reforms, bolstered by support from its Sunni-ruled Gulf neighbours.
"They do feel they are not out of the woods yet -- but they are moving out," said a Western diplomat. "Many in government will calculate that they have political and economic coverage from the Gulf Cooperation Council."
The diplomat pointed to signs that a hardline faction within the government is digging its heels in. The prime minister has increased his public profile in recent weeks and a leading Sunni cleric said last week that removing him was a "red line."
The government says the Shi'ite opposition, led by the Wefaq party, are a minority, arguing that the National Unity Rally, a Sunni-led group set up this year to counter Wefaq, represents a majority who favour reforms at a pace set by the rulers.
"Where we are today is that the slight majority of the people living in Bahrain, the majority who voted for parliament, and many others who live in Bahrain, don't want regime change or to strive for reforms through violent means," one official said.
In the heated sectarian environment of post-uprising Bahrain, many Sunnis argue they are a numerical majority and that all those who joined the protest movement were driven by the desire to establish an Islamic republic akin to Iran.
The diplomat voiced concern at such views. "If they say the Shi'ites are a minority, then they can say that they are in the right and these are a minority of troublemakers," he said.
U.S. pressure could perhaps nudge the government towards concessions on talks with opposition parties, but democratic change in Bahrain may be a lower priority for President Barack Obama than dealing with the tumult in Syria, Yemen and Libya.
A strategically important island off Saudi Arabia's main oil-producing region, Bahrain is home to the U.S. Fifth Fleet that secures Gulf shipping lanes in the vicinity of Iran.
Wary of Shi'ites gaining ground, pro-government writers in Bahraini newspapers have accused Washington of plotting to overthrow the system. They want to stop King Hamad from making a new pact with Wefaq, the main Shi'ite opposition group.
Blogger Justin Gengler, a Bahrain scholar at Michigan University, said some in the Sunni elite still want Wefaq sidelined -- the government shelved plans to close it down in April only after a public rebuke from Washington.
"There is a certain amount of pressure to get rid of them (Wefaq) as a legal entity altogether," he said.
Gengler said the national dialogue recommendations could strengthen the prime minister since he can now appoint new ministers while remaining above parliamentary scrutiny himself.
A commission of international lawyers set up by King Hamad to investigate the protests and their aftermath is to deliver its report this month. Its head Cherif Bassiouni has said he did not believe there was a policy of systematic torture, provoking Shi'ite protests outside the commission's offices in Manama.
The diplomat said the inquiry, which pre-empted any move to send United Nations investigators, would probably try to apportion equal blame, saying some protesters used violence but the government abused human rights in its response.
"What each side needs to do is read the bit about themselves, not the other side," he said, though he added: "If the king acts on it, it will be good news."
Hardliners could block moves for reconciliation -- Shi'ite say the king's orders that many of those dismissed during the unrest should get their jobs back have been ignored.
With no sign of political progress, many Shi'ites and other opposition figures say their only recourse is street action.
The government and its supporters counter that such tactics are unpatriotic and harm the economy -- some banks have already withdrawn from what was a tourism and banking hub.
"This crisis has damaged all Bahraini society and especially the Sunnis, the biggest group," says Sunni cleric Jassim al-Saeedi. "I think it would be a big political mistake to continue (protests). Islam is cleaner than the methods of this group."
Tewfik al-Saif, a Saudi commentator from the mainly Shi'ite Eastern Province, said it could be difficult for Saudi Arabia to send in troops again if protests erupt on the same scale as in February. The Shi'ite response could also be more bellicose.
"There would be no point in sending more troops unless there was a foreign intervention, or a kind of military uprising, which is unlikely," he said.
(Writing by Andrew Hammond; Editing by Alistair Lyon)