-- There is enough momentum behind Saudi reform so that the United States can accomplish far more by encouraging internal reform and reformers than by attempting to impose its own solutions.

-- Saudi Arabia still has much to do in fighting terrorism � as does the United States � but is making progress and encouraging the Saudi process of reform, again, is the best approach to dealing with the need for added Saudi action.

-- Saudi Arabia does face mid to long-term demographic, social and economic pressures that make economic diversification and reform critical to its stability and its people. This not only requires active U.S. and Western support of the Saudi reform process but major flows of foreign direct investment that can only come from the private sector. If Saudi Arabia does not get such encouragement and investment, the destabilization of Saudi Arabia will become a self-fulfilling prophecy.  

-- On May 12, 2003, a series of tragic bombings took place in Riyadh. Saudi Arabia reacted with a series of new efforts to combat terrorism, and more than 200 suspects were arrested in connection with the Riyadh bombings between May and September 2003. Since September 11, Saudi Arabia has questioned thousands of suspects and arrested more than 600 individuals with suspected ties to terrorism.

• In May 2003, three clerics, Ali Fahd Al-Khudair, Ahmed Hamoud Mufreh Al-Khaledi and Nasir Ahmed Al-Fuhaid, were arrested after calling for support of the terrorists who carried out the Riyadh attacks.  In November 2003, Ali Fahd Al-Khudair recanted his religions opinions on Saudi TV.  Shortly after, a second cleric, Nasir Ahmed Al-Fuhaid, recanted and withdrew his religious opinions describing them as a �grave mistake.�  On December 16, 2003, Ahmed Hamoud Mufreh Al-Khaledi became the third cleric to recant on national television. 
• Eleven suspects were taken into custody on May 27 and May 28 in the city of Madinah. Weapons, false identity cards and bomb-making materials were confiscated. In addition, Saudi national Abdulmonim Ali Mahfouz Al-Ghamdi was arrested, following a car chase. Three non-Saudi women without identity cards, who were in the car he was driving, were detained.
• Yousif Salih Fahad Al-Ayeeri, a.k.a. Swift Sword, a major Al-Qaeda operational planner and fundraiser, was killed on May 31 while fleeing from a security patrol.
• Ali Abdulrahman Said Alfagsi Al-Ghamdi, a.k.a. Abu Bakr Al-Azdi, surrendered to Saudi authorities. Al-Ghamdi, considered one of the top Al-Qaeda operatives in Saudi Arabia, is suspected of being one of the masterminds of the May 12 bombings in Riyadh.
• Turki Nasser Mishaal Aldandany, another top Al-Qaeda operative and mastermind of the May 12 bombings, was killed on July 3 along with three other suspects in a gun battle with security forces that had them surrounded.
• Saudi security forces raided a terrorist cell on June 14, in the Alattas building in the Khalidiya neighborhood of Makkah. Two Saudi police officers and five suspects were killed in a shootout. Twelve suspects were arrested, and a number of booby-trapped Qur�ans and 72 homemade bombs, in addition to weapons, ammunition and masks were confiscated.
• On July 21, the Ministry of Interior announced that Saudi authorities had defused terrorist operations which were about to be carried out against vital installations and arrested 16 members of a number of terrorist cells after searching their hideouts in farms and houses in Riyadh Province, Qasim Province, 220 miles north of Riyadh, and the Eastern Province. In addition, underground storage facilities were found at these farms and homes containing bags, weighing over 20 tons, filled with chemicals used in the making of explosives.
• Three men were arrested on July 25, at a checkpoint in Makkah for possessing printed material that included a �religious edict� in support of terrorist acts against Western targets.
• On July 28, Saudi security forces killed six terrorist suspects and injured one in a gunfight at a farm in Qasim Province, 220 miles north of Riyadh. Two Saudi security officers were killed and eight suffered minor injuries. Four people who harbored the suspects were arrested. Nine security officers have been killed and 19 injured in counter-terrorism activities since May 12.

-- In May 2003, SAMA issued instructions to all Saudi financial institutions to strictly implement 40 recommendations of the FATF regarding money laundering and the numerous recommendations regarding terror financing. Furthermore, SAMA issued instructions to all Saudi financial institutions prohibiting the transfer of any funds by charitable organizations outside the Kingdom.  SAMA has also created a committee to carry out self-assessment for compliance with the FATF recommendations and these self-assessment questionnaires have been submitted.  The FATF conducted a mutual evaluation on September 21 � 25, 2003.

-- In May 2003, a Saudi-U.S. task force was organized from across law enforcement and intelligence agencies to work side-by-side to share �real time� intelligence and conduct joint operations in the fight against terrorism. Saudi authorities worked closely with U.S. and British law enforcement agents who came to the Kingdom to assist in the investigation. The U.S. Ambassador to Saudi Arabia, Robert Jordan, described the cooperation of Saudi investigators with the U.S. law enforcement representatives as �superb.�

-- Saudi Arabia redeployed Special Forces to enhance security and counter-terrorism efforts.

-- In May 2003, SAMA distributed  �Rules Governing Anti-Monetary Laundering and Combating Terrorist Financing� to all banks and financial institutions in Saudi Arabia requiring the full and immediate implementation of nine new policies and procedures. The new regulations include the following:

• All bank accounts of charitable or welfare societies must be consolidated into a single account for each such society. SAMA may give permission for a subsidiary account if necessary, but such an account can only be used to receive, not to withdraw or transfer, funds.
• Deposits in these accounts will be acceptable only after the depositor provides the bank with identification and all other required information for verification.
• No ATM or credit cards can be issued for these accounts. No checks and drafts are permitted from the charitable institution�s account, and all checks and drafts are to be in favor of legitimate beneficiaries and for deposits in a bank account only.
• No charitable or welfare society can open or operate these bank accounts without first presenting a valid copy of the required license.
• No overseas fund transfers are allowed from these bank accounts.
• SAMA�s approval is required to open a bank account.
• Only two individuals who are authorized by the board of a charitable institution shall be allowed to operate the main account.

-- Another major institutional initiative is the creation of a specialized Financial Intelligence Unit (FIU) in the Security and Drug Control Department of the Ministry of Interior. This unit is specially tasked with handling money-laundering cases. A communication channel between the Ministry of Interior and SAMA on matters involving terrorist-financing activities had also been established.

-- In August 2003, the Council of Ministers approved new legislation, which puts in place harsh penalties for the crime of money-laundering and terror financing. This legislation requires jail sentences of up to 15 years and fines up to $1.8 million for offenders. The new law:

• Bans financial transaction with unidentified parties.
• Requires banks to maintain records of transactions for up to 10 years.
• Establishes intelligence units to investigate suspicious transactions.
• Sets up international cooperation on money-laundering issues with countries with formal agreements having been signed.

-- In August 2003, Saudi Arabia and the United States established another joint task force aimed at combating the financing of terrorism. The task force, which was initiated by Crown Prince Abdullah, is further indication of the Kingdom�s commitment to the war on terrorism and its close cooperation with the United States in eradicating terrorists and their supporters.

• On September 23, 2003, security forces surrounded a group of suspected terrorists in an apartment in the city of Jizan. During a gun battle, one security officer was killed and four officers injured.  Two suspects were arrested and one killed. The suspects were armed with machine guns and pistols and a large quantity of ammunition.
• On October 5, 2003, security forces arrested three suspects during a raid in the desert to the east of Riyadh. 
• On October 8, 2003, security forces raided a farm in the northern Muleda area of Qasim Province and were able to arrest a suspect.  Three other suspects fled the scene.  Two security officers suffered injuries. 
• On October 20, 2003, security forces raided several terrorist cells in various parts of the country, including the city of Riyadh, the Al-Majma�a District in Riyadh Province, Makkah Province, the Jeddah District of Makkah Province, and Qasim Province.  Security forces confiscated items including C4 plastic explosives, homemade bombs, gas masks, and large quantities of assault rifles and ammunition.
• On November 3, 2003, Saudi police arrested six suspected Al-Qaeda militants after a shootout in the holy city of Makkah in Saudi Arabia. The raid on an apartment triggered a shootout that left two suspected terrorists dead, and one security officer wounded.
• On November 6, 2003, security forces investigating a suspected terrorist cell in the Al-Suwaidi district of the city of Riyadh came under fire from the suspects, who attempted to flee while attacking security forces with machine guns and bombs. In the exchange of fire, one terrorist was killed, and eight of the security officers suffered minor injuries. On the same day, in the Al-Shara'ei district of the city of Makkah, two terrorist suspects, who were surrounded by security forces, used homemade bombs to blow themselves up. Their suicide followed a firefight during which they refused to surrender when requested by the security officers.
• On November 20, 2003, Abdullah bin Atiyyah bin Hudeid Al-Salami surrendered himself to security authorities. He was wanted for suspected terrorist activities.
• On November 25, 2003, a car bomb plot was foiled in Riyadh. The encounter with security forces led to the deaths of two wanted terrorist suspects: Abdulmohsin Abdulaziz Alshabanat, who was killed in the exchange of fire, and Mosaed Mohammad Dheedan Alsobaiee, who committed suicide by detonating the hand grenade he was carrying. The vehicle that was seized was loaded with explosives and camouflaged as a military vehicle.
• On November 26, 2003, a suspected terrorist was arrested. The suspect�s hiding place was linked to the terrorist cell involved in the November 9 car bombing at the Al-Muhaya residential complex in Riyadh.  Search of the hiding place revealed large quantities of arms and documents. Items discovered by security forces included one SAM-7 surface to air missile, five rocket-propelled grenade launchers, 384 kilogram of the powerful explosive RDX, 89 detonators, 20 hand grenades, eight AK-47 assault rifles, 41 AK-47 magazines, and 16,800 rounds of ammunition.  Also recovered were four wireless communication devices, three computers, computer disks and CDs, and SR 94,395 in cash, as well as numerous identity cards and leaflets calling for the perpetration of acts of terror.
• On December 6, 2003, the Ministry of Interior published the names and photos of 26 suspects wanted by security forces in connection with the terrorist incidents that have taken place in the Kingdom in the past few months, urging them to surrender to the authorities. The Ministry called on all citizens and residents to report information they may have about any of the wanted suspects. Immediate financial rewards of up to $1.9 million are being offered for information leading to the arrest of any wanted suspect, or any other terrorist elements and cells.
• On December 8, 2003, the Ministry of Interior announced that Ibrahim Mohammad Abdullah Alrayis, whose name was on the December 6 list, had been killed by security forces. The Ministry statement praised citizens� cooperation with the security forces, who are pursuing those wanted and those who are trying to undermine the country�s security and safety.
• On December 30, 2003, Mansoor Mohammad Ahmad Faqeeh, whose name had been published in a December 6 list of 26 wanted terrorist suspects, surrendered himself to security authorities.

-- By December 2003, Saudi security forces had conducted over 158 raids on various terrorist elements and groups.

-- In December 2003, Saudi Arabia and the United States took steps to designate two organizations as financiers of terrorism under United Nations Security Council Resolution 1267 (1999).  These organizations are the Bosnia-based Vazir and the Liechtenstein-based Hochburg AG. On January 22, 2004, in a joint press conference, U.S. Treasury Secretary Snow and Adel Al-Jubeir, Foreign Affairs Advisor to Crown Prince Abdullah, called upon the United Nations Sanctions Committee to designate four branch offices of the Al-Haramain Islamic Foundation as financial supporters of terrorism.  This was the fourth joint action taken against terrorist financing by the United States Treasury Department and the Kingdom of Saudi Arabia.

-- The level of popular tension between the United States and Saudi Arabia has reached the point where it actively encourages Saudi hostility to the United States in ways that aid extremists and terrorists. This has been compounded by a failure to create immigration and visa procedures that combine protection against terrorists with rapid and effective procedures for encouraging legitimate cultural, business, medical, and student entrants to the United States. The United States badly needs to reshape its focus on counterterrorism to strengthen the ties between the U.S. and Saudi and Arab moderates throughout the world and ensure that students continue to be educated in the United States and that the United States preserves its ties to the most progressive and moderate forces in countries like Saudi Arabia and to ensure that legitimate medical cases are screened and expedited on a humanitarian basis.  

-- The Arab-Israeli conflict -- and Israeli-Palestinian War in particular � have created serious tensions between the United States and Saudi Arabia that are unlikely to be resolved for the next 5-10 years. Both Saudi Arabia and the United States are going to have to live with this fact, and inevitably, most Saudis will see movements like Hamas and the Hezbollah more as �liberators� or �freedom fighters� than as terrorists. Whatever the U.S. and Saudi governments say in public about this aspect of the war on terrorism, there will be inevitable limits to their cooperation. This will, inevitably, lead to Israeli and pro-Israel demands for Saudi action in dealing with such groups.  Saudi Arabia will not comply with them, triggering more political and media attacks. Equal hostility will exist in Saudi Arabia over U.S. ties to Israel. No amount of pressure can resolve this situation. Strong parallel efforts to revitalize the Arab-Israeli peace process can � to some extent � ameliorate it.  

-- The mid- and long-term key to U.S. efforts to help Saudi Arabia fight terrorism is not government-to-government cooperation but rather cooperation between the Saudi and U.S. private sectors. It is investment and trade that create jobs in Saudi Arabia and reduces the social and economic pressures that help encourage extremism and terrorism. Saudi Arabia needs to be more realistic about the ROI, risk premiums, contract structures and security necessary to create suitable incentive for U.S. and foreign investment at the level and speed required. The United States, however, must do more to assist U.S. industry and may have to provide some form of guarantees. A �business as usual� approach will not do enough business at the rate required.  

-- The fall of Saddam�s regime and the rise of active terrorism within Saudi Arabia are both key factors that illustrate the need to recast Saudi security in the broadest sense. The IISS estimates that Saudi Arabia is still spending some $18 to $24 billion on defense. Declassified estimates of Saudi arms buys indicate that the Kingdom bought $6.6 billion worth of new arms during 1995-1998 ($4.9 billion from the United States) and signed $4.1 billion worth of new arms agreements during 1999-2002 ($2.8 billion with the United States). If these figures are even approximately accurate, they are far too high levels of spending. They indicate that Saudi security efforts cost so much that they are a serious threat to Saudi security. They also indicate that the United States needs to actively help Saudi Arabia to refocus its security efforts on internal security � which is generally an order of magnitude cheaper than a conventional military build-up � and shift resources to economic growth and social programs.