* Ministry says arrests for vandalism and riots
* Protest wave in 2011 was quashed by Bahraini authorities
* Bahraini and Iranian diplomats trade accusations
KUWAIT, Feb 14 (Reuters) - Bahrain said on Thursday it had arrested 29 people for rioting and vandalism in several villages, the day before the third anniversary of mass protests which could spark more street unrest.
Sunni Muslim-ruled Bahrain has been shaken by frequent demonstrations and clashes since mostly Shi'ite Muslim demonstrators took to the streets in February 2011 to call for greater democracy.
On Thursday, people burned a car, tried to block traffic and prevented people from going about their daily life, the kingdom's state news agency said, citing the Interior Ministry. They also tried to stop a school bus and tried to close schools, it added.
The ministry said it would taken action against calls to hold rallies and marches and had stepped up police patrols. Bahrain's main opposition group Al-Wefaq has called for demonstrations to mark the anniversary.
The Gulf Arab island is a U.S. ally which has long provided a base for the U.S. Navy's Fifth Fleet.
Stalled reconciliation talks between the ruling family and the Shi'ite opposition were recently revived after the intervention of Crown Prince Salman bin Hamad al-Khalifa, seen as a relative moderate in the royal family.
But mistrust between the opposition and the Saudi-backed al-Khalifa family remains high three years after the authorities subdued the first wave of protests.
Demonstrators still frequently clash with police in Bahrain, which is caught up in a regional power struggle between Shi'ite power Iran and Sunni heavyweight Saudi Arabia.
On Thursday, Bahrain's Foreign Ministry condemned "irresponsible statements" by a spokeswoman for Iran's Foreign Ministry which it said was interfering in Bahrain's internal affairs.
In comments on the state news agency, it said it had protested to Iran's charge d'affaires to the kingdom. Iran also summoned Bahrain's charge d'affaires to protest "unfounded anti-Iran allegations," on Thursday, Iran's Press TV reported.
Bahrain and other Gulf Arab states often accuse Iran of meddling in the kingdom's internal affairs, including fomenting unrest, a charge Tehran and protesters deny.
Iran has lauded the Arab uprisings, saying they were unfluenced by its own 1979 Islamic revolution. (Writing by Sylvia Westall)
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