* Opposition protests expected on Feb. 14 uprising anniversary
* Monarchy trying to revive reconciliation talks with opposition
* No sign of willingness for compromise on democracy demands
* Low-level street violence keeps US strategic ally on edge
By Farishta Saeed
MANAMA, Feb 14 (Reuters) - Three years after the eruption of a popular uprising in Bahrain that security forces subdued but have failed to stamp out, the ruling family has launched a new dialogue with the opposition but a breakthrough to end the turmoil remains elusive.
Bahrain's fellow conservative Gulf Arab states and the West have high stakes in the stability of the island monarchy because it hosts the U.S. Fifth Fleet and lies at the heart of a tussle for regional influence between Shi'ite Muslim Iran and Sunni powerhouse and world No. 1 oil producer Saudi Arabia.
But Bahrain seems trapped in a treadmill of recrimination and low-level but chronic political conflict on the third anniversary of the Feb. 14 uprising spearheaded by majority Shi'ites seeking democratic reform and an end to alleged discrimination at the hands of the Sunni Muslim monarchy.
The stand-off is played out in street protest almost daily.
Young men staged small rallies around the capital Manama in the run-up to Friday's anniversary, blocking roads with metal bars, garbage containers and cinder blocks to keep security force out of Shi'ite villages, witnesses said.
Police deployed extra forces and closed some roads leading out of some villages around Manama, and they braced for marches expected on Friday by a group called February 14 and on Saturday by the main opposition al-Wefaq movement.
"After three years since the start of the protests, we have seen no peace," said a 34-year-old clerk in the village of Saar who identified himself only as Abu Ali. "Every day there is a problem in our area. The youngsters go out and burn tires on the roads and the police attack them with teargas."
Two rounds of reconciliation-oriented dialogue between the opposition and government since 2011 ended inconclusively, and Bahrainis are now banking on a new attempt backed by Crown Prince Sheikh Salman bin Hamad al-Khalifa to revive the talks.
Crown Prince Sheikh Salman, a relative moderate in the Sunni al-Khalifa family that has ruled Bahrain since the 18th century, stepped in last month to try to narrow differences - four months after the second round of reconciliation talks was suspended in the face of an opposition boycott.
Several meetings have since been held between Royal Court Minister Sheikh Khaled bin Ahmed al-Khalifa and opposition leaders to try to pave the way for formal talks to resume.
Further sessions are expected but it is not known when, and analysts cite little sign of preparedness on either side to bridge the major substantive differences, as has been the case from the outset of the crisis.
"Each of the country's three main political conflicts - opposition versus government, Sunnis versus Shi'ites and reformists versus obstructionists within the ruling family - continues unabated," said Justin Gengler, a Bahrain expert Bahrain at Qatar University in Doha.
In boycotting reconciliation talks, the opposition accused the government of trying to sideline its leaders after at least two were investigated on incitement charges and a group of Shi'ite clerics was ordered shut down by a Bahraini court.
Concern is rising that young Shi'ites will resort more and more to violent militancy if mainstream opposition leaders fail to advance a political settlement that would give Shi'ites a bigger say in government and improve living conditions.
A tiny Gulf archipelago of 1.7 million people, Bahrain has been in turmoil since police, assisted by invited Saudi armed forces, crushed the original uprising.
The government says it has since implemented some reforms recommended by an international investigative team and that is willing to discuss further demands.
Shi'ites want wider-ranging democratisation, entailing cabinets chosen by an elected parliament, rather than appointed exclusively by the king. They also call for an end to alleged discrimination in jobs, housing and other benefits. The government denies any policy of marginalising Shi'ites.
Al-Wefaq leader Sheikh Ali Salman blamed what he called the authorities' ultimate preference for security crackdowns over a genuine political opening for the stalemate dragging on.
"This is the third year of the revolution. Had wisdom been used by the government, there wouldn't be a popular revolution and a political solution would have been reached in the first few months," Sheikh Ali told Reuters. "But by choosing the security option, we have entered the fourth year."
Information Minister Samira Rajab said: "The claims of terrorists that there is a revolution in Bahrain are all lies. Bahrainis are practicing their normal lives.
"The small clashes that started yesterday will not affect the national dialogue because these are the work of terrorists and we are not sitting at the table with them. We are sitting with the opposition," Rajab told Reuters.
Parliamentarian Adel Alasomi said the dialogue enjoyed the support of King Hamad, describing the monarch as the sole guarantor of co-existence between all communities in Bahrain.
"Everybody is entitled to peaceful activities, and this is guaranteed by the constitution," said Alasomi. But, he stressed, violent means of change had no place in Bahrain.
Pro-government Bahrainis dismissed the anniversary, preparing instead to mark 13 years since the introduction of reforms by King Hamad after he succeeded his father. Those measures expand parliament's powers to include questioning and removing ministers and withdrawing confidence in the cabinet.
Um Abdallah, a 42-year-old secretary from Isa town, said it was high time for both parties to knuckle down and produce a solution beneficial to all in Bahrain.
"I have to say that both the government and the opposition are wrong. The government should have shown more effort and sincerity in their steps towards dialogue and the opposition should have stopped terrorising innocent citizens."
Other Gulf Arab monarchies have forestalled serious Arab Spring unrest through crackdowns on opposition Islamists and lavish handouts from huge oil revenues to potentially restive sections of the population, especially the young and jobless.
Uprisings against entrenched autocracies elsewhere in the Arab world since 2011 have toppled four heads of state, while Syria has been shattered by an almost three-year-old civil war. (Additional reporting by Yara Bayoumy; Writing by Sami Aboudi; Editing by Mark Heinrich)