History and geography explain why Bahrain's peaceful uprising was the early exception to the "Arab spring", which began with high hopes in Tunisia and Egypt but now faces bloody uncertainties in Libya and Syria.

Sitting astride the faultline between the Shia and Sunni worlds, the small Gulf island state lies at the heart of a strategically sensitive region that is dominated by bitter rivals Iran and Saudi Arabia – both very tough neighbours.

Bahrain was always going to be a prime candidate if unrest erupted in the Arabian peninsula. But it was not easy to predict that the Al-Khalifa dynasty, Sunnis who rule over a restive 70% Shia majority, would react so brutally when protests mushroomed in February. Still, the activists who streamed to Manama's Pearl roundabout in a deliberate echo of Cairo's Tahrir Square were demanding reform, not the overthrow of the regime.

By regional standards, King Hamad was not the most repressive of rulers. Bahrain, unlike Saudi Arabia, has a parliament and a legal opposition. Bahrain's press operated within "red lines" but had a margin for manoeuvre. Expensive western PR companies were employed to promote the country's image.

Prospects for political change looked reasonable until last summer when a sudden security crackdown began. The government was alarmed by joint Shia-Sunni demands to investigate the acquisition of prime real estate by the royals: Google Earth showed just how much of the island – where public beaches are rare – was already owned by the Al-Khalifa family.

Last October the mildly Islamist Shia opposition party al-Wefaq won a plurality of seats in the lower house of parliament – despite being smeared by the government as Hezbollah-type extremists. But progressives in Bahrain emphasise nationality, not religious sect – thus the catchy slogan "not Shias, not Sunnis, we are all Bahrainis".

Bahrain's politics are as local as any other country's, though international pressures count for a lot, too. Projecting an image of stability also mattered hugely for a leading financial centre that has been struggling to compete with flashier and wealthier Dubai.

As the base for the US Fifth Fleet, Bahrain is important to Washington, which values Hamad's bellicose attitude towards Tehran – revealed in WikiLeaks' releases of state department cables. The king's choice of a Bahraini Jewish woman as ambassador to the US was a savvy move.

Long-standing claims of Iranian meddling have not been substantiated. But Saudi concerns about Bahrain quickly became apparent in the face of the unrest just across the causeway from the kingdom's oil-producing Shia eastern province. What the Bahraini opposition calls an "occupation force" was deployed by agreement with the Saudi-dominated Gulf Co-operation Council and portrayed as answering the call of a sister nation in need.

The Saudis were already unsettled by the way Barack Obama had washed his hands of Egypt's Hosni Mubarak. Thus their insistence on maintaining regional order – triggering the grim repression that has now become a permanent feature of Bahraini life.

Britain and France have announced reviews of arms sales and the European Union is speaking out. The US has expressed concern but its public comments have been muted. Washington's tone, similar to that it uses with Israel, is of a candid friend. It has conspicuously failed to support the demands of the protesters. The contrast with Libya could hardly be greater.

Arab leaders back Bahrain to the hilt. Only Iraq's Shia prime minister, Nouri al-Maliki, has dared to criticise Hamad's crackdown. Iran – ignoring its own appalling record of crushing peaceful protests – is warning gleefully that the Saudis are "playing with fire".

For most observers, the lesson is clear: western and Arab governments alike badly need the Gulf region's energy and financial resources. That's why Bahrain's spring is already over.