Saudi Arabia and the UAE between them sit on tens of billions of dollars worth of state-of-the-art military equipment. They have both backed calls for UN-sponsored "no-fly zones" over Libya.

Even if they are now willing to risk their expensive toys against the relatively meagre threat from Colonel Gaddafi's air defences, they will play a junior role to western forces.

It will be the second military intervention by the Gulf states in a few days, but the first was on a far more primitive level: teargas grenades fired at point-blank range into the faces of unarmed demonstrators; punishment beatings for injured protesters in their hospital beds; violence and intimidation against the wives and children of opposition activists in their village homes.

Hypocrisy is one word for the motives behind the deployment of the "Peninsula Shield" forces in Bahrain last week. Cowardice is another.

When I watched Saudi soldiers rolling over the causeway linking the two kingdoms on Monday, they were giving victory signs to local TV cameras. Bahrain TV showed archive footage of King Abdullah of Saudi Arabia and King Hamad of Bahrain performing a traditional Bedouin war dance together.

Despite the official stance that the Saudis and UAE troops had arrived to guard essential infrastructure and restore order on the streets, there was little doubt as to the real purpose: to put down, by whatever means necessary, a growing rebellion by the kingdom's majority, but deprived, Shia citizens.

The day before, unarmed demonstrators had effectively beaten the security forces in Manama. A move to clear a protesters' camp on the fringes of the main gathering at Pearl roundabout had led to an influx of protesters to the city, determined to defend their turf. The police withdrew when they ran out of teargas canisters.

The sight of the police – many of whom are hired guns from Pakistan, Syria and other parts of the Sunni world – running from Shia demonstrators reawoke the fears of Gulf governments that the "party of Ali" was on the rise again.

It is impossible to exaggerate the level of paranoia that exists in the minds of Sunni Arabs about the threat from Shia Islam and its homeland – Iran. Even the most well-educated and progressive of Gulf Arabs believe that Bahrain's uprising is being organised by Tehran and that the protesters are fifth columnists for a regime of ayatollahs.

In Saudi Arabia the paranoia is all-embracing. With a sizeable Shia population, mainly in the key oil-producing east, any assertion of Shia rights is exaggerated into an insurrection.

So the Saudis watched in panic as the opposition in Bahrain grew more audacious. Last Sunday I saw protesters make their most ambitious move yet; blockading the financial district a couple of kilometres from Pearl, bringing downtown Manama to a halt. Banks, five-star hotels and corporate headquarters found themselves behind the makeshift barricades and exports of refined oil products dried to a trickle.

The protesters' demands have grown since seven were killed on St Valentine's Day when police first tried to clear Pearl roundabout. "National dialogue" was offered by the Crown Prince, Sheikh Salman, but by then grieving Shia protesters had moved on. Many now want the end of the al-Khalifa monarchy, and the establishment of a republic. Even the most moderate now refuse dialogue without concessions first, the most important of which is the removal of the hated prime minister, Sheikh Khalifa.

Any centre ground has been wiped away by the military intervention. Sunnis are emboldened by the arrival of "big brother" to impose a military solution, while increasingly large numbers of protesters wear the white burial shroud of Shia Islam, indicating their willingness to die on the spot.

Into this cauldron are thrown Saudi and Emirate troops – the "thin beige line" as some westerners call them. Judging by their first few days, their orders seem clear: brutalise and intimidate protesters and their families. It's hard to interpret in any other way a "peacekeeping" force that uses helicopter-mounted machine guns against a medical centre. The protesters have responded in a mainly non-violent way.

Perhaps the first sign of real Iranian involvement will come when protesters look across the Gulf for materiel to fight off the government and foreign forces. If an Iranian "relief" shipment were confronted by Saudi naval forces, for example, it could spark open conflict between Shia and Sunni.

With Libya in the west and Bahrain in the east, the Arab world faces the awful spectre of war on two fronts.

William Butler (not his real name) is a writer who has lived and worked in the Gulf for many years