Country Profile: Saudi Arabia

— -- The Kingdom of Saudi Arabia is a Persian Gulf power by virtue of its oil. It has one-quarter of the world's oil reserves, more than any other country. Saudi Arabia is the world's leading oil exporter, and a key player in the Organization of the Petroleum Exporting Counties.

Saudi Arabia plays a global financial role by influencing the rate at which oil reaches the market, and therefore its price.

As the home to some of Islam's most sacred sites, including the holy cities of Mecca and Medina, to which millions of Muslim pilgrims flock every year for the hajj pilgrimage, Saudi Arabia is the spiritual heartland of the Muslim world.

Named after the ruling al Saud family, the kingdom espouses a strict interpretation of Sunni Islam known as Wahabism, and there have been widespread accusations that private Saudi money has funded extremist Islamist groups across the world.

Despite the recent stresses and strains, Saudi Arabia remains a key U.S. ally in the region. It was one of the first countries to join the U.S.-led coalition forged in 1990 to restore the Kuwaiti royal family to its palace following the invasion by Iraq. The country allowed Western and Arab troops to deploy on its soil. But the presence of U.S. troops in Saudi Arabia became a major rallying cry for the terror mastermind Osama bin Laden across the Muslim world.

U.S.-Saudi relations were strained after it was revealed that 15 of the 19 Sept. 11, 2001, terrorist attackers were Saudis and that members of the Saudi royal family indirectly provided financial support to the al Qaeda terror network.

Although Saudi Arabia is bin Laden's birthplace, the Persian Gulf nation stripped the al Qaeda chief of his citizenship in 1994. But the radical son of a prominent construction magnate remains a popular figure, especially among disaffected, unemployed Saudi youth.

Saudi Arabia values its friendship with the United States. In the 2003 war with Iraq, the Saudis allowed coalition forces use of Prince Sultan Air Force Base, but only for non-strike missions such as refueling and reconnaissance. Widespread Arab opposition to the war led Saudi officials to publicly deny allowing the U.S. military to use the air base for anything more than enforcing so-called no-fly zones over southern Iraq set up after 1991.

The outcry was instrumental in the decision to pull most U.S. troops out of Saudi Arabia by the summer of 2003, although technically, with the U.S. invasion of Iraq, Saudi officials said there was "no need" for U.S. forces in Saudi Arabia under Operation Southern Watch, which enforced the no-fly zone over southern Iraq set up after 1991.

Rising Fundamentalism and Major Security Concerns

The country has been ruled by King Fahad bin Abdul Aziz Al Saud since 1982. Political parties are prohibited, but the country has a legislative council, with 90 members appointed by the monarch, and a Supreme Council of Justice that serves as a judiciary. Saudi Arabia also has extensive military services and an annual military budget of about $18 billion.

But widespread allegations of corruption within the ruling House of Saud has led to growing resentment among pockets of the population and an accompanying rising tide of fundamentalism in the kingdom.

In May 2003, coordinated suicide bombings on housing compounds for foreigners in the capital of Riyadh left 35 people dead. Several other attacks in Riyadh and at a petrochemical company in the Red Sea port of Yanbu led to a massive Saudi crackdown on suspected al Qaeda militants in the Persian Gulf nation.

But while Saudi officials say their security services have a firm grasp on fundamentalism and are succeeding in their terror crackdown, Saudi opposition figures in exile say the royal family will be unable to tackle grassroots Saudi discontent unless critical issues such as corruption are addressed.

Oil, But Precious Little Water

Shortages of water and rapid population growth present challenges to the government in Riyadh, which last year was expected to have a $7.5 billion budget deficit, largely because of increased spending for education and other social problems.

In 1999, the government announced a plan to begin privatizing the electricity companies, which follows the ongoing privatization of the telecommunications company.

The government is expected to continue calling for private-sector growth to lessen the kingdom's dependence on oil and to increase employment opportunities for the swelling Saudi population.

Invariably, shortages of water and rapid population growth will constrain government efforts to increase self-sufficiency in agricultural products.

Virtually all of Saudi Arabia's 22 million residents are Muslims. The literacy rate is 62 percent and the life expectancy at birth is 68 years.