Oil price and diplomacy help revive Saudi fortunes

RIYADH, June 30 (Reuters) High oil prices and feverish diplomacy have helped achieve a stunning turnaround in Saudi Arabia's political and economic fortunes, but long overdue reforms are limiting this key US ally's new-found clout.

Five years ago, Saudi Arabia's standing as a bellwether ally of the West was in ruins after the September 11 attacks, when 19 suicide hijackers including 15 Saudis flew civilian airliners into targets in US cities, killing about 3,000 people.

After the low prices of the 1990s, the government made the stark declaration to Saudis that the oil boom of the 1970s was over. Some analysts even predicted, as one book title from 1994 said, the ''coming fall'' of the House of Saud, which rules a vast, unwieldy country put together through war.

''It was all very premature. It was fashionable, but I think it's been effectively disproved,'' said Alex Munro, former British ambassador in Riyadh.

Saudi Arabia is the world's largest oil exporter and its vast crude supplies are a cornerstone of its strategic alliance with the United States.

Oil prices began to surge in 2003, the year a US-led invasion of Iraq aroused speculation in the Arab world that the eventual US target was the Saudi rulers themselves.

There were suspicions in the United States that, not only did Saudi Arabia's puritanical Wahhabi form of Islam encourage Islamic extremism, but some minor royals had helped fund the al Qaeda militants who attacked New York and Washington.

One US-based dissident said: ''The Saudis spent millions of dollars in the US on public relations campaigns in an effort to win over Congress and the American people in general.'' A militant campaign launched in 2003 to topple the Saudi rulers ultimately acted to soothe relations. Western security agencies helped the government fight the insurgents amid fears of anti-Western alternatives to Saudi rule.

STRIKING TRANSFORMATION ''Saudi Arabia has regained its position as one of the leading states,'' said London-based Saudi analyst Mai Yamani.

Saudi Arabia's economic transformation has been striking.

Figures from the Samba Financial Group show the economy growing to a conservative 350 billion dollars in 2006, nearly four times estimations for Egypt, the most populous Arab country with more than 70 million people to Saudi Arabia's 24 million.

In 1998, when King Abdullah as crown prince first said Saudi Arabia would have to tighten its belt, the gross domestic product was 6 billion. Per capita income, which stood at ,947 in 2005, was ,437.

''It's been a huge turnaround, that no one thought was going to be remotely possible,'' said Nawaf Obaid, who runs the state-run Saudi National Security Assessment Project.

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