MANAMA (Reuters) - Bahraini forces backed by helicopters launched a crackdown on protesters on Wednesday, imposing a curfew and clearing hundreds from a camp that had become the symbol of an uprising by the Shi'ite Muslim majority.
Hospital sources said three policemen and at least two protesters were killed in the assault that began a day after Bahrain declared martial law to quell sectarian unrest that has sucked in troops from fellow Sunni-ruled neighbor Saudi Arabia.
A defiant youth movement, which had been leading protests at the Pearl roundabout, called for a mass demonstration from all Manama suburbs to Budaya Street in the north of the capital.
Minutes after the call was made, a military official appeared on Bahrain's state television to ban all marches and gatherings and impose a curfew from 4 p.m. to 4 a.m. 9 a.m to 9 p.m. EST) across a large swathe of Manama. A Reuters witness saw Bahraini tanks and armored vehicles move in the direction of Budaya Street.
A member of parliament from the largest Shi'ite Muslim opposition group denounced the government assault as a declaration of war on the Shi'ite community.
"This is war of annihilation. This does not happen even in wars and this is not acceptable," Abdel Jalil Khalil, the head of Wefaq's 18-member parliament bloc, said.
"I saw them fire live rounds, in front of my own eyes."
He said at least five people had been killed by security forces who fanned out across the capital. There was no independent confirmation as riot police surrounded several hospitals and checkpoints made movements difficult.
The United States, a close ally of Bahrain and Saudi Arabia, has called for restraint in the island kingdom, home to the U.S. Navy's Fifth Fleet. It sent Assistant Secretary of State Jeff Feltman to Bahrain to push for talks to resolve the crisis.
Over 60 percent of Bahrainis are Shi'ites and they complain of discrimination at the hands of the Sunni royal family, the al-Khalifa. Most Shi'ites want a constitutional monarchy but calls by some hardliners for the overthrow of the monarchy have alarmed the Sunni minority, which fears that unrest could serve non-Arab Shi'ite power Iran.
Gulf Arab ruling families are Sunni and analysts say the intervention of their forces in Bahrain might provoke a response from Iran, which supports Shi'ite groups in Iraq and Lebanon.
Iranian President Mahmoud Ahmadinejad said Bahrain's crackdown was "unjustifiable and irreparable."
"Today, we witness the degree of pressure imposed on the majority of people in Bahrain," he said according to state TV.
"What has happened is bad, unjustifiable and irreparable."
CRACKDOWN ACROSS MANAMA
Helicopters flew overhead and riot police fired teargas as they advanced from about 7 a.m. on the Pearl roundabout, focal point of weeks of protests. Youths hurled petrol bombs at police near the roundabout and scattered as new rounds of teargas hit.
The area was cleared within about two hours but protesters knocked down two police in their cars as they fled.
Wearing semi-automatic rifles and black face masks, Bahraini troops also blocked off several streets including the main road to the Shi'ite area of Sitra. Tanks guarded key intersections and the entrances to some areas. Streets were deserted, shops were closed and people queued at cash machines.
"There are shots near and far. It's not only shooting in the air, it's urban warfare," said a resident who lives near the Budaya Highway in the northwest of Bahrain, adding that forces had cut off three bridges linking Bahrain's airport, on Muharraq island, to the main island.
Riot police blocked access to Manama's Salmaniya hospital, where many civilian casualties had previously been treated, and witnesses said access to other health centers was also blocked.
It did not appear that Gulf Arab forces invited in by the government for support were involved in the operation.
The crackdown by Bahrain's Sunni-led government against Shi'ite protesters has galvanized Iraq's own Shi'ite community, exacerbating sectarian tension that led to years of war in Iraq.
Iraqi Shi'ite cleric Moqtada al-Sadr called for mass demonstrations in Baghdad and Basra on Wednesday in support of mainly-Shi'ite demonstrators in Bahrain.
Bahrain has been gripped by its worst unrest since the 1990s after protesters took to the streets last month, inspired by uprisings that toppled the leaders of Egypt and Tunisia.
Unlike those countries, where the mainly Sunni populations united against the regime, Bahrain is split along sectarian lines, raising the risk of a slide into civil conflict.
The latest crackdown raised the stakes in the crisis between the country's Shi'ite majority and its dominant Sunni minority. The arrival of Saudi troops highlighted that the conflict in Bahrain was part of region-wide hostilities between Sunni Gulf Arab countries and non-Arab Shi'ite Iran.
Swedish Foreign Minister Carl Bildt said on his blog that developments in Bahrain have in recent days become "increasingly disturbing."
"What began as a peaceful and local protest has evolved in a way that risks a wider conflict," he said. "When the Gulf states now send military units to the small and prosperous island state, there is a very critical risk that the situation will instead be seen as part of a broader confrontation."
"And, while there was most likely initially no Iranian interference, the opportunities for Iran to take advantage of the situation now undeniably grow," Bildt added.
Bahrain's stock market was closed due to the state of emergency, a day after Fitch downgraded Bahrain's sovereign ratings by two notches due to the unrest.
Bahrain 5-yr credit default swaps tightened 7 basis points to 350 basis points on Wednesday, according to Markit data.
In London, Standard Chartered and HSBC Holdings -- two of the leading foreign banks in the country -- said they have closed all their branches in Bahrain on Wednesday. Both banks said their priority was the safety of staff.
The British embassy upgraded the travel warning on its website on Wednesday as the security situation deteriorated and residents trying to flee said flights out of Bahrain were full.
The United Nations and Britain have echoed the U.S. call for restraint and the Group of Eight powers expressed concern, though analysts said the escalation showed the limits of U.S. influence when security was threatened.
Human Rights Watch urged Bahrain to exercise restraint.
"King Hamad's decree does not give the authorities a blank check to commit abuses," said Joe Stork of HRW.
Malcolm Smart, Amnesty International's Middle East and North Africa Director said: "the security forces' alarming escalation this morning, clearly using excessive force against protesters, represents a step change even from the violent tactics we saw in February, and is a move absolutely in the wrong direction."
(Additional reporting by Frederik Richter in Bahrain, Andrew Hammond in Dubai and Robin Pomeroy in Iran; Editing by Samia Nakhoul)
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