Tremors of Unrest Rock Long-Stable Saudi Arabia : Mideast: A cash crunch and allegations of corruption threaten the ruling family--and a vast social safety net.

The businessman was chatting amiably from behind his large desk about any number of things on the mind of a Saudi these days: Traffic jams on the expressways. The transfer of a friend to Paris. Jordan’s peace treaty with Israel.

But what, he was asked, of the reports that dozens of his colleagues had been arrested by the secret police? Was it true that thousands of Saudis had taken to the streets recently to protest the arrest of a popular Muslim cleric?

“But we have agreed not to discuss politics,” he said lightly as he reached for a yellow legal pad and scribbled something.

He passed it back with another pleasantry. He offered another cup of tea. The tablet said, “It is possible my office is being bugged.”

Then he typed on his word processor, turned on the printer and pushed over another note: “The situation is extremely dangerous and could lead to an explosion . . . even violence.”

A few minutes later, walking into the hall, the man stopped near the elevator and talked quietly. “There are now more than 400 political prisoners, most of them being held for nothing at all,” he said. “They are held in solitary confinement. They are given their food and water through a hole in the door. Really, it is like Siberia.”

He paused, turned away from the elevator, then resumed as he made for the stairs. “Everything is happening now underground. In the dark. And when everything is happening underground, there’s no way of knowing where it will lead.”

Within moments, he had climbed into his car and glided away into the blinding noon sunshine.

There is a certain air of intrigue these days in this city, a gleaming desert capital that is a modern land of Oz fashioned of mirrored skyscrapers and sleek, lighted expressways--and a medieval bastion of old Arabia, linked irretrievably to the undisciplined sands that creep against its edges.

Saudi Arabia, one of the most secretive nations in the world, bared its interior for the first time four years ago when it threw open its frontiers and hosted hundreds of thousands of international troops to prepare for the battle against Iraq.

In the years after the Persian Gulf War, it folded into privacy once more. And only recently has it become apparent the extent to which the desert kingdom’s flirtation with the outside world--combined with a new era when huge stores of petroleum can no longer guarantee unlimited luxury and stability--has left an irreversible mark.

A Gulf War debt of more than $55 billion, coming at a time when oil prices dipped below $13 a barrel for the first time in five years, has plunged the kingdom into an economic crunch that has almost consumed its once-huge fiscal reserves and forced major budget cuts. It threatens the cradle-to-grave welfare net that has been the ruling Saud family’s social contract with its citizens throughout modern history.

At the same time, allegations of corruption within the royal family and lingering resentment over massive spending on defense have produced a popular backlash that has fed Islamic fundamentalist unrest and widespread grumbling within Saudi Arabia’s increasingly cash-strapped middle class.

A kingdom that has prided itself on decades of stability has seen, in recent months:

* Foreign workers walk off government jobs because they hadn’t been paid for months.

* Hundreds of demonstrators take to the streets on behalf of a popular Muslim cleric who challenged the government.

* A soaring crime rate, with a 78% rise in thefts and a 34% increase in sex crimes in 1994 compared with 1992.

A growing number of Saudis complain about mismanagement and corruption within the Saud family, but they also blame the United States, pointing to America’s full-court press since the war’s end to get the government to sign major new defense and infrastructure contracts.

Besides billions of dollars in military orders with U.S. defense contractors since the end of the war, including $9 billion to buy F-15 jet fighters--most of which had to be rescheduled when the kingdom couldn’t afford the payments--Saudi Arabia has signed a $4.1-billion contract with AT&T; to upgrade its telephone system and ordered $6 billion in civilian aircraft from Boeing and McDonnell Douglas.

The spending comes at a time when King Fahd this week announced a 6% budget cut to shrink the growing deficit--following a 19% reduction last year and other reductions that have slashed service pacts, delayed payments on other contracts and threatened Saudis for the first time with fee increases for electricity, water and municipal services.

“I have a friend who works for an American institute of political research, and I told him it’s not for the benefit of the U.S. to get too much money from the Saudi government at the expense of its inside stability,” a Riyadh political scientist said. “So what if Saudi Arabia will buy 50 aircraft when the bill is so high? The expense will be political unrest in Saudi Arabia--not now, in the future.”

Abdullah Naseef, deputy head of the kingdom’s year-old Consultative Council--a 60-member body appointed by the king to assuage growing demands for democracy--complained that the United States probably overstated its case in October when it warned of another imminent Iraqi invasion of Kuwait.

“It was unnecessary to mobilize forces so quickly and so expensively. While it was justified when (Iraqi dictator) Saddam (Hussein) entered Kuwait, here people thought (the October military buildup) was unrealistic, unnecessary and it was a kind of show. . . . Some people say the Americans want us to go bankrupt,” he said.

This nation’s present problems contrast with its astonishing modern record.

Saudi Arabia’s transformation from a lawless land of warring Bedouin tribes to a gleaming cluster of modern desert metropolises in less than three-quarters of a century--most of it in the last three decades--has been a miracle unmatched in most places on Earth.

In the boom 1980s, officials here built airports, hospitals, freeways, universities, military bases and industrial complexes. From 1969 to 1993, the government opened an average of an elementary school daily, an intermediate school every three days and a high school every six days. Riyadh grew from a collection of mud-brick fortresses and mosques to a modern capital. Neon arcades, sun-reflecting windows and track-lit expressways dazzle the eyes. This has become one of the fastest-growing cities in the world.

That Saudi Arabia has maintained its stability under a single royal family since its inception in the political tinderbox of the Middle East is also hardly short of fantastic.

The Saud family points to decades in which the kingdom survived countless attempts at destabilization--from the booming criticisms of former Egyptian President Gamal Shawki Abdel Nasser over Voice of the Arabs radio in the 1960s to attempted insurgencies by Communists, Baathists, Shiite Muslims, Sunni Muslim fundamentalists and neighboring Yemenis.

“We’ve had everything in the world . . . thrown at this country over the years, and there is no country in the world that has had stability like this country,” said a member of the royal family active in the government. “We continued. People never lost sight of trying to improve themselves.”

Stability was negotiated with a careful contract among the factions of the population that probably could exist only in the kind of exquisite isolation that was possible here before the Gulf War. The Saud family--many of them notorious boozers, gamblers and lechers when abroad--acceded at home to the ultraconservative Wahabi sect of Islam, which imposed some of the strictest standards of Islamic conservatism known anywhere in the Muslim world.

Alcohol is banned here, as is almost all public contact between men and women. Women usually wear full veils, cannot drive and cannot travel outside the kingdom without permission from their husband or father. Thieves get their hands cut off; murderers are beheaded under dictates of Islamic law.

For years, the royal family--which now numbers more than 5,000 princes--has collected commissions on government contracts, enough to buy opulent villas, luxury yachts, private jets and fast cars around the world. Saudis accepted this with little complaint because of the fabled welfare net offered the kingdom’s citizens. It includes free health care and education through the university level, with each student receiving a monthly stipend of $270. Students outside the cities get free housing.

Air travel inside the kingdom costs next to nothing. The government offers interest-free loans for new homes, as well as free farmland to anyone willing to cultivate it. Electricity, water, gasoline and basic foodstuffs are all available at a fraction of their cost, thanks to massive government subsidies.

But could this go on forever, especially when oil prices plummeted and billions of dollars had to be pumped into an international defense effort?

Already, the famous Saudi infrastructure is beginning to creak under a population growing at a rate of 3.8% annually. For the first time, Riyadh now has rush-hour traffic jams, and electrical brownouts have been forecast for this summer. New houses and offices in Jidda can’t get electrical and telephone hookups; many builders are installing private generators.

The government has responded to its cash crunch with heavy domestic borrowing and heavy budget cuts, likely to dampen at least temporarily the vitality of the private sector and to further threaten an increasingly gloomy employment picture.

While the government has pledged not to cut into its basic programs, the new budget announced this week raises charges for gasoline, electricity and cooking oil, and officials said the imposition of user fees on some municipal services is also likely. Already there are lines at some specialty hospitals. Loans for industrial, agricultural and real estate projects were cut by almost half from last year.

The government is examining how best to make further cuts, “but we don’t want to, by any means, harm the limited-income people,” said Hussein A. Sejini, deputy minister of planning.

Officials here hope to focus on developing the private sector, expanding the Saudi presence in the work force by replacing about 4.5 million imported foreign workers, privatizing some enterprises and capping government administration costs, Sejini said.

The government has also had to cut subsidies on wheat, threatening livelihoods in the volatile Koran belt, north of Riyadh, that has been a hotbed of fundamentalist Islam.

It was, perhaps, not coincidental that amid a rising wave of Islamic fundamentalist opposition in the kingdom since the Gulf War’s end, the most serious outbreak was in the farming region of Buraida. There, hundreds--opposition sources say 10,000--citizens angrily gathered outside the mosque in September when Sheik Salman Auda, a popular firebrand and cleric critical of the government, was arrested.

More than 130 people were taken into custody; two dozen remain in detention.

Islamic militants, now forced largely underground, believe the kingdom should become even more conservative--closing banks that pay interest (in conflict with Islamic law), stemming the tide of military cooperation with the West and holding a firmer line against Israel.

Their demands have won sympathy among the liberal intelligentsia, who share their concerns about lack of democracy, mismanagement and corruption in the royal family.

Yet the dramatic events in Buraida in September seem to have effectively isolated Islamic militants. Many liberal Saudis these days say they are glad the government clamped down.

Islamic activists continue to circulate underground tapes of the jailed clerics, and a London-based opposition group faxes damaging information about the royal family to households and offices throughout the kingdom.

Activists say the government has responded by paying large bribes to clerics to denounce the militants. They say the situation in the kingdom has not improved, despite the appointment of the Consultative Council last year.

“What many of us are afraid of,” said one man arrested during the crackdown, “is that if there is not some improvement in the situation, the young people will start forming groups like what you see in Algeria or in Egypt. And once that begins, there is nothing to stand in the way of a complete breakdown.”

Most Saudis try to look at the current situation with perspective. In their view, it isn’t a crisis. How could it be, when Saudi Arabia still sits atop a quarter of the world’s known oil reserves, worth more than $4 trillion?

Meantime, if there must be a little belt-tightening, they say Saudis are ready for it.

“This country is still in good shape. We really are not in a crisis,” said Abdul Mohsen Akkas, political scientist, economist and managing director of Saudi Research and Marketing.

“Between 1974 and 1982, some kind of cultural change set in. People’s expectations became high, and they were justified, because every opportunity was available. But human beings have this strange capacity to adapt. Put them in luxury, and they will change their clothes three times a day. Put them in misery, and they will sweat.”