This report reviews allegations of Saudi involvement in terrorist financing
together with Saudi rebuttals, discusses the question of Saudi support for religious
charities and schools (madrasas) abroad, discusses recent steps taken by Saudi
Arabia to counter terrorist financing (many in conjunction with the United States),
and suggests some implications of recent Saudi actions for the war on terrorism.

Saudi Arabia is in the throes of a crisis, but its elite is bitterly divided on how to escape it. Crown Prince Abdullah leads a camp of liberal reformers seeking rapprochement with the West, while Prince Nayef, the interior minister, sides with an anti-American Wahhabi religious establishment that has much in common with al Qaeda. Abdullah cuts a higher profile abroad -- but at home Nayef casts a longer and darker shadow.

The U.S.-Saudi relationship is based on common interests that are fundamental and critical to both countries. Since September 11, however, many factions on both sides are calling for a divorce. Yet, advocating for a divorce does not take into account the powerful influence a strong U.S.-Saudi relationship has on American strategic interests and regional stability. Rather than a divorce, leaders on both sides must work to strengthen the relationship and reforge common goals.