Saudis Ready to Renew Formal Ties to Moscow : Diplomacy: The Kremlin’s new role is helping to end 50 years of estrangement from the kingdom.

Saudi Arabia, in a dramatic demonstration of how the Persian Gulf crisis has transformed the Middle East, is on the verge of re-establishing formal diplomatic relations with the Soviet Union after a break of more than 50 years, informed sources told The Times on Thursday.

Senior U.S. government officials said the Saudis may even consider providing financial help for the Soviets’ crippled economy.

An announcement that formal diplomatic relations are being restored could come within the next 10 days, said the ambassador of one Persian Gulf state. A Soviet Embassy spokesman and a source close to the Saudi government both confirmed that the two countries are moving much closer to establishing formal ties, but they said they are not certain of the timetable.

Saudi Arabia, home of Islam’s holiest shrines, has always considered communism to be anti-Islamic. It broke off relations with the Soviets in 1938. Since then, the Saudis have continually used their vast oil wealth to encourage and finance anti-communist causes throughout the world.

Moscow, by contrast, has long coveted relations with Riyadh, the dominant power and the largest oil producer on the Arabian Peninsula and an important capital in the region of the world where the Soviets had the least influence in the Cold War era.

The conservative desert sheikdoms have long-standing relations with the West, particularly the United States, which until recently has resisted efforts by the Soviets to establish closer ties in the region.

For decades, the Soviets have pressed in vain to renew ties to the oil-rich kingdom. Only in the last year, however, as profound changes swept the Soviet Union and its East European empire crumbled, have the two countries gradually begun moving closer together.

The Soviets’ opposition to Iraq’s invasion of Kuwait and virtual abandonment of their longtime alliance with Baghdad have drastically accelerated the process.

The impending rapprochement between Moscow and Riyadh is all the more significant, according to U.S. officials, because of the wrenching change represented by the Soviets’ decision to condemn the Iraqi invasion. For the Kremlin, it meant breaking military and other ties with Baghdad that stretched back more than two decades and included a 15-year friendship treaty.

“It was fairly easy for us because our relationship with the Iraqis was always a very tenuous one and one that did not run very deep,” said a senior U.S. government official.

“If we did things with the Iraqis, it was primarily very opportunistic, and it was primarily based on trade: buying their oil, selling them food. But it was not very deep,” he said. “The Soviets, I think, were a lot deeper, so it was much more serious, a much more important event for them.”

Of the six countries in the Gulf Cooperation Council, Moscow has had relations only with Kuwait.

While the Soviet Union has the fifth largest Muslim population in the world--more than 50 million people composing 17% of the Soviet population--its Marxist suppression of religion has long poisoned its relations in the Mideast.

Under President Mikhail S. Gorbachev’s program of glasnost, or openness, however, the Soviets have allowed greater freedom of worship. And, in a symbolic gesture to the Muslim Middle East, Moscow last year allowed Saudi Arabia to ship a million copies of the Koran, the Islamic holy book, to the Soviet Union.

Some U.S. officials, as well as the Kuwaiti ambassador, Sheik Saud al Nasir al Sabah, predict that the Saudis may provide financial assistance to the Soviets. However, a source close to the Saudi government said that with all its other commitments, including helping to finance the military buildup in the Persian Gulf, he would be surprised if it undertakes economic aid to Moscow any time soon.

Further, with other Arab countries suffering from abject poverty, it could create serious political problems for the Saudis in their own region if it became known that they had allocated funds to the Soviet Union.

In the past, Iraqi President Saddam Hussein has managed to whip up popular support among Arab populations by criticizing the oil-rich gulf states for economic relations that have profited wealthy Western nations while doing little or nothing for their poverty-stricken “Islamic brothers.”

Nevertheless, some U.S. officials believe the Saudis ultimately will provide economic support for the Soviets. One senior official, describing the Soviets’ economy as “a disaster that’s going to get worse,” said he thinks it is inevitable that the Saudis will provide some kind of aid.

He suggested that despite other commitments, the Saudis will have extra funds to allocate in the coming year because the steep increases in oil prices brought on by the gulf crisis will yield at least $14 billion in additional revenue for Riyadh.

“The Saudis use money; that’s what they have, after all,” the official said. “They don’t have much else to offer. So . . . I think they will find a way to deal with them (the Soviets), whether it’s loans or aid or grants or whatever it is.”

On Thursday, the Saudi monarchy told visiting Secretary of State James A. Baker III that it would make a multibillion-dollar payment for U.S. military operations in the Persian Gulf and to ease the impact of the crisis on poor countries affected by the gulf crisis, such as Egypt and Turkey.

President Bush is expected to discuss Saudi Arabia in the context of the Persian Gulf crisis with Gorbachev when they meet Sunday in Helsinki. But a White House official said he does not expect the two leaders to discuss the possibility of Saudi aid to the Soviets.

“The Saudis don’t need our advice on that,” the official said. “They can take care of any aid themselves.”

Ambassador Saud said he sees no reason why Riyadh should not provide financial assistance to the Soviets. The Kuwaitis, he said, “have been giving aid to the Soviet Union for years. I don’t think there are any obstacles to the Saudis giving aid, in principle. It’s not a problem anymore.”

Times staff writer Robin Wright contributed to this story.