(Corrects date of meeting at Royal Court, removes phrase "a first" from the lead)
* Bahrain under pressure to end political impasse
* New talks to include senior ruling family member
* Shi'ite protesters skeptical
By Rania El Gamal
MANAMA, Jan 21 (Reuters) - Bahrain's crown prince has pulled reconciliation talks back from the brink by organising a meeting with the Shi'ite opposition, and the appointment of a royal delegate, and agreed topics for new talks, have raised some hope of progress.
However, mistrust between the Shi'ite Muslim majority and the ruling Sunni al-Khalifa family is still high three years after the government crushed pro-democracy protests and many Bahraini Shi'ites regard these reconciliatory gestures with scepticism.
Since 2011 the tiny Gulf Arab monarchy, where the U.S. Fifth Fleet is based and which is caught in the middle of a regional tussle for influence between Shi'ite Iran and Sunni Muslim powerhouse Saudi Arabia, has seen continuous unrest that political efforts have failed to quell.
Earlier this month, the government said it was suspending talks with opposition groups, who have boycotted the process since September after the arrest of a senior member.
But last week, in a surprise move, Crown Prince Salman bin Hamad al-Khalifa, seen as a moderate member of the royal family, met with, amongst others, Sheikh Ali Salman, the leader of the main Shi'ite opposition al-Wefaq group.
Just a few weeks ago, Sheikh Ali was charged with insulting the interior ministry and "spreading lies", part of what the opposition has described as a harsh crackdown on its members.
Khalil Marzouq, a senior member of Wefaq, whose arrest in September prompted the opposition to boycott the talks and who is out on bail, said the meeting had made him "cautiously optimistic".
"We are not overwhelmed with the shift but we are open for a solution and ready for a partnership," Marzouq told Reuters in Bahrain after an anti-government protest on Friday.
Both the government and the opposition blame each other for the political deadlock.
The opposition accused the ruling family of manipulating sectarian divisions to avoid democracy, while the government charged Wefaq of working for Iran.
At the new rounds of talks, both sides have agreed on five main issues as the basis for discussions, opposition officials and pro-government sources said.
These include parliament approval of governments appointed by the king, examining the powers and composition of the upper house of parliament, electoral districts, enhancing the independence of the judiciary and police and security issues.
All five points address major grievances of Bahrain's Shi'ite population against the al-Khalifah family and the government.
Marzouq said the talks would be bilateral and that senior royal family member, Deputy Prime Minister Sheikh Khaled bin Abdullah al-Khalifa, was likely to be the government's representative in future talks.
Information Affairs Minister, Samira Rajab, the government's spokeswoman, confirmed the appointment, saying there was "consensus" over the choice of Sheikh Khaled.
The first bilateral talks between the opposition and the Royal Court Minister took place on Tuesday, Wefaq said.
Marzouq said the overall structure of the talks, with the crown prince overseeing and the presence of Sheikh Khaled, was "accepted by the opposition as a representation of the king."
Last year's round table included government officials, members of the opposition and other pro-government parties but no representative of the king, who has the last say in politics. The talks were criticised by the opposition as nothing but a waste of time.
"Unfortunately, last year there were parties who did not want to listen and discuss the real issues. It was all 'he said, she said'. They could not even agree on an agenda," said a Bahraini official, who asked not to be named.
The official said the Royal Court would hold bilateral meetings with the opposition and other representatives to agree on a set agenda.
The Royal Court is headed by Sheikh Khaled bin Ahmed al-Khalifa, who is seen by the opposition as a main force in the hardliner wing in al-Khalifa ruling family.
"Having the Royal Court involved meaning that you are talking to the King directly," the official added.
"I think this new way of talks is positive."
Last Wednesday's meeting was only a first step in efforts to address a long list of grievances among Shi'ite Muslims highly sceptical of the government's sincerity in wanting to end the crisis.
Bahrain's Shi'ites have long complained of political and economic marginalisation, an accusation the government denies.
On Friday, hundreds of men and women holding Bahrain's flags and photos of protesters killed in the security crackdown took to the streets in the Shi'ite village of Diraz. Some shouted "Down with Hamad", referring to the king.
"We heard about these talks in the past and we have seen nothing out of them," said Sayed, a protester in his twenties.
"Yesterday, there were arrests in my village. A helicopter was flying over our heads and security forces breaking the doors of nearby houses. What dialogue?" (Additional reporting by Sami Aboudi and Yara Bayoumy in Dubai and Farishta Saeed in Manama; Writing by Rania El Gamal; Editing by Sami Aboudi and Raissa Kasolowsky)
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