WILLIAMS: Saudi Arabia, the birthplace of Islam, home to its holiest sites. The world's biggest supplier of oil and to some US officials the epicentre of Islamic terror. The Saudi government denies that charge but the growth of Saudi extremism affects us all and as we'll see is now thought to have links to the Bali Bombing. This is Abha, fifteen of the nineteen September 11 hijackers came from here in Saudi Arabia's rugged and conservative south-west. Many believe Osama bin Laden chose them deliberately in an attempt to destroy strong US Saudi relations but there are much bigger problems. In rare access to the closed kingdom, we confront charities designated by the United States as fronts for funding Islamic terror and discover a deep-rooted anger at United States policies across the Middle East. Just outside Abha is the tough industrial town of Khamis Mushayat. It has little to offer, yet it's now on the map of international terror. It was here in the town's main mosque, that five of the September 11 hijackers were recruited by the extremism of its preacher Sheik Ahmed Al Hawashi. We are told he's out of town but confirmed that despite his alleged links to terror, he still preaches here. What do you think of Sheik Hawashi?

MAN OUTSIDE MOSQUE: Good, very good.

WILLIAMS: Good man?

MAN OUTSIDE MOSQUE: Good, good man.

WILLIAMS: The Sheik's links to September 11 are simply denied.

MAN OUTSIDE MOSQUE: No, no, no. I won't talk about politics, talk about something else.

WILLIAMS: But for many here politics is religion and if you're not a Muslim, you're not welcome.

ANGRY MAN OUTSIDE MOSQUE: How come you bring Godless people near the Mosque and you are all talking to them Indians, Bengalis, Saudis talk to me, listen to me, you are talking to Godless people – shame on you – you want to teach me what is the shame – what is the shame?

WILLIAMS: Saudi Arabia is dominated by men like these – they propagate a puritanical form of Islam known as Wahabbism. It controls much of the education system and social life, at times calling for Jihad against a disbelieving west. Criticising them has sparked death threats but one who dares to is Abha journalist, Sa'ad Asswaillim.

SA'AD ASSWAILLIM: Through mixing ideology with politics they push the younger people towards the extreme form of Islam. I believe they force politics into religion. They dress politics as religion and they present political programs, political ideologies as the essence of religion.

WILLIAMS: Saudi Arabia is an absolute monarchy – there are no elections here. Its centre of power, Crown Prince Abdullah bin abdul aziz al-Saud. As is his royal obligation, once a week Crown Prince Abdullah receives supplicants seeking direct aid. A hundred years ago, his family unified the nation with the backing of strict Wahhabi clerics and they cut a deal. The Royals would run politics and the economy, the clerics could dictate social policy. It's a deal many believe fostered Islamic extremism. Since September 11, the United States has pressed Saudi rulers to curb the most militant mullahs and in a rare interview, Crown Prince Abdullah says he is. What do you say to some critics outside Saudi Arabia who say that Saudi Arabia is not doing enough to stop the funding and the support for Islamic terrorism around the world?

CROWN PRINCE ABDULLAH: What we say is we are very serious about stopping any funds going to any terrorist group. If there was we have never been aware of any funds going to any terrorist group but whatever the campaign is now – you know and I know who is behind it.

WILLIAMS: But blaming a Jewish American smear campaign is no longer enough – Saudi Arabia's problems start at home. A deeply religious society, Saudi Arabia is struggling with change. Until now, largely closed to the outside world, the more contact they have with a decadent west, the more vocal the clerics become.

SULAYMAN AL-HATTLAN: [Walking through Riyadh market] A woman use to be a very significant part of local markets like this one.

WILLIAMS: Returning to Riyadh from his home in Boston, Saudi writer Sulayman al-Hattlan laments what he sees as a growing conservatism curbing public debate.

SULAYMAN AL-HATTLAN: It's not only a political censorship that we fear, more important and more dangerous actually, more alarming is the social and self censorship which resulted from focussing on religion all the time – don’t do this because you may upset God.

WILLIAMS: For many Saudis, pleasing God means defending fellow Muslims and what they see as biased US policies, only increases support for the extremists.

SULAYMAN AL-HATTLAN: The more the Palestinians are oppressed and the more the Americans are supporting Israel, the more popular bin Laden and his like becomes. I think the core issue is Palestine so definitely the trend of fanaticism or extremism cannot stop at any point before we really look seriously at the Palestinian issue.

WILLIAMS: Two decades ago, the Saudi Royals gave even more power to the clerics to sure up their own political position after Iran's Islamic revolution. Religion's creeping control and a lack of open debate have fuelled a fundamentalist youth.

SULAYMAN AL-HATTLAN: Bin Laden has become an alternative, whether it is a political alternative or religious alternative, or intellectual alterative for hopeless humiliated young Arabs in Saudi Arabia and beyond.

WILLIAMS: And it's not just the youth. At Riyadh's ancient camel market, grassroots opinion is swinging further against the west. No fans of Saddam – Saudis feel the looming war in Iraq is just another unwanted American intervention in Muslim affairs.

MAN AT CAMEL MARKETS: I think the government of America is coming crazy now.

ANOTHER MAN AT CAMEL MARKETS: No, no we don’t agree with it. It is an Islamic country and it's not acceptable to put an Islamic country under that sort of pressure – to us it is illegal.

WILLIAMS: As tension between Arabs and America grows, one man stands out as seeing it from both sides. And so why the TVs?

PRINCE ALWALEED BIN TALAL: I have to watch so many channels simultaneously, whether it's in business, economics or politics or finance.

WILLIAMS: Prince Alwaleed bin Talal is the world's richest non-American, so rich the TV room in his $200 million Riyadh palace is full of wildlife. This old giraffe here, how hard was that to shoot?

PRINCE ALWALEED BIN TALAL: This was shot and hunted in South Africa.

WILLIAMS: Prince Alwaleed is the biggest single foreign investor in New York, a major shareholder in western entertainment and a generous supporter of Palestinian charities.

PRINCE ALWALEED BIN TALAL: When bin Laden undertook incredible and horrendous terrorist act, many people in the Arab world, let alone Saudi Arabia, were joyful. Were joyful not because they liked the act per se, but they just wanted to give a message to America and that's what we try and tell America – please stop your blind approval of what Mr Sharon is doing in Palestine and let the resolution of the UN 242 338 be implemented as quickly as possible.

WILLIAMS: Prince Alwaleed's new $700 million tower stands alone in Riyadh as a symbol of confidence in the country. Few of the oil billions have been reinvested here and while Saudi Arabia aspires to the spoils of wealth, its society struggles with contradiction. Saudis admire much of what the west has to offer, in fact many are rich enough to buy what they want of it. But 60% of the population is under 25, a third of them, or 2.5 million people can't find jobs and without alternatives, wealth does not preclude extremism.

PRINCE ALWALEED BIN TALAL: Unemployment in any country in the world is a breeding ground for social trouble potentially, no doubt about that and Saudi Arabia's no different. There's an imbalance here that has to be looked at and that's another item that we're looking at very seriously.

WILLIAMS: Riyadh's fanciest shopping mall may look like anything in the west, but beneath the surface run fanatical social controls. Life is patrolled by the feared Mutawa, or morality police, who have the power to gaol those not behaving with proper piety.

MUTAWA MAN: Don’t follow Jews and Christians, they will not accept you when you follow them. They will only accept you when they are planning to destroy our traditions, our girls and our wives – did you get that.

WILLIAMS: Girls and wives are covered, we're told, for their protection. . . speaking to strangers forbidden. To test their views though, we gained rare access to a private girls college, only three obtained parental permission to be filmed. 20-year-old Maha Khalawi and her friends are all studying graphic design, yet differ on the impact of bin Laden.

GIRL 1: He stood up for people who were quiet – angry people.

WILLIAMS: Muslims?

GIRL 1: Yeah, no.

GIRL 2: No, this is not a Muslim action.

MAHA KHALAWI: He's basically saying, he's telling the States I'm not afraid of you.

WILLIAMS: Even for these young women, Islam defines their difference with what they see as an aggressive west.

MAHA KHALAWI: It's like you have to choose sides. You know the way Bush is acting, it's like you're either with me or against me. The way they are, you know, if you make us choose between our religion or helping you hurt our people, we're going to choose our religion basically because you stick with your people.

WILLIAMS: Sticking with your people is what Muslim charity is all about. One of Saudi Arabia's biggest Islamic charities al-Haramain raises $200 million a year, it says builds mosques and helps Muslims around the world but al-Haramain is accused of also funding al Qaeda, to find out why you have to talk to investigators in the United States.

MATT LEVITT: Some of these organisations were established for the purpose of financing terrorism, others have been co-opted some point along the way and now they are serving as fronts for terrorist organisations.

WILLIAMS: Two of al-Haramain's offices have been closed after the US and Saudi governments named them as fronts for funding al Qaeda. Yet al-Haramain's Riyadh headquarters remains open, its director denying any links with bin Laden.

AL-HARAMAIN DIRECTOR: We are against terrorism and violence. I cannot imagine one of our branches can help al Qaeda. Maybe something happened without our knowledge but until now we have not received any proof.

WILLIAMS: A former FBI analyst, Matt Levitt, says al-Haramain has funded Islamic terror in South East Asia.

MATT LEVITT: We now know through the confessions of Omar al-Farouq who was al Qaeda's primary liaison to Jemaah Islamiyah in South East Asia that the Jemaah Islamiyah was being funded in large part by wealth Saudis, primarily through the al-Haramain Islamic Foundation there.

WILLIAMS: So we've confirmed that Omar al-Farouq visited al-Haramain in Makassar, but that's all.

AL-HARAMAIN DIRECTOR: One or two times they told me.

WILLIAMS: And did he receive money from them?

AL-HARAMAIN DIRECTOR: No, no he was jobless. He was an Arab and jobless in Indonesia and he was searching for any Arab community and trying to contact them.

WILLIAMS: The World Assembly of Muslim Youth is another Saudi charity suspected of funding Islamic terror in Asia. Since September 11, the Saudi government says it's imposed tight new controls on Saudi charities to stop their funds reaching terrorists. But the Charity's Deputy Director, Saleh Babear reveals the cash flowing through Muslim charities is beyond government control.

SALEH BABEAR: If a Muslim has $1,000 in his account, he wants to spend it on, for example give it to anybody, you have no way, no system can stop that, not even a government – it's very hard to really stop this.

WILLIAMS: So there's no new government system of control?

SALEH BABEAR: I would not say that there is a new system, there is no control because I mean this is a charitable organisation – we are actually working along with the government and along the same lines. We are not simply accepting the fact, we do not want to just live by what the western media is telling us to do.

WILLIAMS: To many Saudis, charity can include funding militants in Palestine.

SALEH BABEAR: I am not actually saying here that we want to legitimise terrorism or we want to go after killing civilians, but when you have someone seeing his own family being killed, his own house destroyed, then you cannot ask him to just sit down and talk logic.

WILLIAMS: But there's new pressure on these links. Working for the families of the victims of September 11, Washington lawyer Allan Gerson is suing Saudi charities, banks and even royal family members for $2 trillion for allegedly financing the attack.

ALLAN GERSON: In many respects having money around and allowing the money to go the wrong sources, it's like providing a gun.

WILLIAMS: As well as links to September 11, Gerson has discovered disturbing new claims that Saudi money funded the bombing in Bali.

ALLAN GERSON: We have seen evidence of money that went from Saudi sources, that went through the medium of various entities in Europe to support terrorist cells there. If you connect the dots between terrorist cells in Europe and terrorist cells in Europe that receive financing from individuals and entities in Saudi Arabia, those terrorist cells in Europe definitely had connections with Bali.

MATT LEVITT: There have been several reports, the most recent of which was written at the request and for the United Nations which document the fact that Saudis have over the years agreed to finance certain radical Islamic organisations on the silent condition that their operations and that their recruitment would be abroad and not at home.

PRINCE ALWALEED BIN TALAL: No look you are referring to the media reports that said Saudi Arabia bribed or Saudi Arabia paid off bin Laden and al Qaeda to be outside Saudi Arabia. That's not correct at all. This is just media reports, completely incorrect because bin Laden's official position years ago was not only to hit America but also to hit Saudi Arabia. He is anti-Saudi Arabia, he's anti ruling family, he is anti presence of America, American troops in the Gulf region so how could we, I mean how could someone dare to say that we were financing him and telling him to be outside of our country when he is trying to topple our regime here.

WILLIAMS: The regime's future is of immediate concern. Saudi Arabia's ruling royals unified the nation at the point of the sword, a campaign they come together once a year to celebrate. But today their security depends on US bases, an insult to many Muslims and the main reason bin Laden launched his Jihad against the west. War in Iraq, they fear, could further fuel extremism, Australia's support sparking a special rebuke.

CROWN PRINCE ABDULLAH: My regards to the Australian people and the Australian government but I wish the government would calm down about these things.

WILLIAMS: Many consider Crown Prince Abdullah more progressive than his society but he's caught in a dilemma – crack down on extremism and risk a Muslim backlash, don’t do enough and upset the west.

PRINCE ALWALEED BIN TALAL: Some voices we have in the US administration are really becoming anti Saudi Arabia but the pressure that's being exerted from outside is not helping because no community would like to change if it's looked upon by its people and its region like it's coming from outside, that it's being dictated upon

WILLIAMS: The Saudi system produced bin Laden and his suicide fighters, but American policies have given him a popular reason to fight. While neither change, it's likely the money will continue flowing to Islam's extremist cause.
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