By: Margaret Warner

MANAMA | It's Thursday night in Bahrain, and we're in Manama's air-conditioned Seef Mall -- a gleaming glass and steel emporium of consumer pleasures, from its Costa Coffee shop to a haute couture Islamic dress store. There are women wearing everything from full black abayas to form-fitting shirts, men in jeans, others in traditional white thobes. Many of the couples are walking hand-in-hand, or arm-in-arm. It's a sight you'd never see in either of Bahrain's big-boy neighbors, Saudi Arabia to the west or Iran to the east.

But for the first night of the Muslim weekend, the mall is awfully quiet. Waiters stand at the entrances to trendy restaurants with nary a patron inside. "It's the crackdown," said a Shiite teenager from Saar. "People are really afraid."

The crackdown was this tiny Gulf kingdom's response to Bahrain's version of the "Arab spring," mid-February demonstrations calling for greater political freedoms and for equality for the majority Shiites. They were tolerated for a time, but when protestors moved to cut off the capital's financial district -- the lifeblood of this island nation -- Bahrain's Sunni king declared a state of emergency, and a Saudi-led Gulf force rolled in to help restore order.

Since then, government security forces have detained hundreds of people, from protest leaders to bloggers to doctors and nurses accused of letting politics interfere with their duties. Nearly two dozen Shiite mosques have been destroyed. Some of those released have alleged beatings and torture in prison. Some have been convicted in closed military-civil courts, other trials loom.

But we've arrived on the heels of an unexpected announcement by Bahrain's King Hamad -- that he'll lift the state of emergency on June 1. Just before leaving Washington, I spoke with Assistant Secretary of State Jeffrey Feltman, the U.S. official who's been working hardest to get the two sides into dialogue rather than confrontation. "I think it was a positive development," he said, "but I do need to note that we still have some pretty deep concerns about the fact that, in our view, security alone is not going to address the challenges that face Bahrain today."

Security clearly remains a concern to the ruling family, even those members who hope to get a dialogue going with the opposition. We sat down for tea last night with Shaikh Abdul Aziz al-Khalifa, a former ambassador who's now in the information ministry. Lifting the state of emergency will dramatically change the atmosphere here, he said, leaving security on the streets to the regular police and ending the checkpoints that now dot the cities and ring the Shiite village areas. "No more military on the streets," he said. But when it comes to the Saudi forces -- mostly out of sight protecting major installations -- "I think there is no definite date on when they will go."

After a day of talking to some of the players here -- including Sheikh Ali Salman, leader of the main opposition group, Al Wefaq -- the path ahead seems more muddled than ever. Wherever things are headed, the last three months have already done damage, exacerbating and embittering the divide between the minority Sunni elite and the majority Shiites.

Tonight, I heard a disheartening tale from a group of ebullient Sunni 4th-graders cruising the mall. "We're not allowed to be friends with our Shia friends anymore", one boy said, "and they aren't allowed to be friends with us." How do you hope this will end, I asked them. "I hope we all forget about the past and live a new life," said one. "I hope we open a new page," said another. Wise words from small boys, but it's up to the grownups to decide what that new page will be.

Tune into Friday's NewsHour for more of Margaret Warner's reporting. Video edited by Larisa Epatko.