AMERICA COPES WITH STRIFE IN SAUDI ARABIA.

Byline: Elaine Sciolino The New York Times

When a bomb struck Saudi Arabia's National Guard headquarters in November, killing five Americans, King Fahd was thunderstruck. ``Catastrophes are coming at us one after the other,'' he confided to a close associate.

Two weeks later the king experienced a catastrophe of his own: He suffered a debilitating stroke, forcing the royal family to grapple with the issue of who will rule the country.

Until recently, the United States took for granted the stability of its most strategic Arab ally. But a decade of overspending, the rise of a militant domestic opposition and uncertainties about the royal succession have opened new cracks in the House of Saud.

This week's catastrophe - the truck bombing that killed 19 U.S. military personnel in Dhahran - deepened the worries in Washington about the future of the world's largest oil producer and raised hard questions about how the United States can best protect its enormous stake in Saudi Arabia.

``There has been an unwillingness to confront the Saudis,'' one senior administration official said. ``We all know they're in transition, but no one wants to go to them and say that there is a danger in the kingdom and ask, `Who's in charge?' An episode like the bombing forces you to think hard about doing these things.''

There are limits to what the United States feels it can do to effect change in the country.

Greater tolerance of political and religious voices, an American goal elsewhere in the world, might open the door to broader unrest. The dispatch of additional U.S. troops, either to improve security at U.S. bases or to help strengthen the government, could prove counterproductive in a country where much of the population views foreigners with suspicion.

For the moment, the official administration policy is to refrain from putting pressure on the royal family.

In an interview shortly before he left for Saudi Arabia, Defense Secretary William Perry said he did not plan to press the Saudis on the issues of succession or internal opposition.

``I certainly don't push them on either of those issues,'' he said. ``This, as far as I'm concerned, is an internal Saudi problem.''

The Alliance The U.S.-Saudi relationship is based on a series of delicate balances.

The defense of the country and its oil fields depends on the United States' military presence in the region. But the Saudis barely tolerate the visible presence on their soil of roughly 5,000 U.S. troops, which stems from the Iraqi invasion of Kuwait in 1990, and two years ago they refused to house an armored brigade's worth of equipment needed for U.S. security plans.

To preserve this crucial relationship, the United States does not press the kingdom on a whole range of issues, from human rights problems to the lack of political and religious freedom.

While U.S. military contractors have benefited greatly from Saudi purchases of equipment, these arms imports have contributed to Saudi Arabia's financial woes and have become a source of friction within the royal family.

Even so, the consensus among outside experts and U.S. officials is that the royal family maintains a firm grip on power and that Saudi Arabia's fundamental alignment with the United States is unlikely to change.

Any questions about the kingdom's stability take on disproportionate weight because of its irreplaceable role as the world's largest oil producer by far - pumping 8 million barrels a day. If anything, uncertainty is likely to tighten the embrace of the United States and the Saudis.

``There are places in the world where our national interest is in doubt,'' said Ray Mabus, the former Mississippi governor who recently left his post as ambassador to Saudi Arabia. ``This isn't one of them. That's because of the impact oil has on the world economy and on our economy. We went to war over that principle.''

The Economy In the past, the Saudi government has dealt with problems like internal royal family disputes, popular discontent and external threats in a straightforward way: It has thrown money at them.

The estimated 17 million residents of Saudi Arabia live in one of the world's most generous welfare states. They pay no taxes and enjoy an elaborate array of subsidies from education to housing to health care.

Now the country suffers from diminished financial resources, the result of 12 consecutive years of budget deficits and the $55 billion cost of the Persian Gulf War against Iraq, an amount that exceeded the government's total revenues in 1992.

The transformation of Saudi Arabia from a country of unlimited economic horizons to one suffering from financial problems is captured in the most recent confidential analysis by the International Monetary Fund.

The fund's annual review in September found that even though Saudi Arabia had made progress in reducing government spending, the government's debt continued to increase because of large trade and budget deficits.

Domestic debt - what the government owes to local lenders - was almost $100 billion in 1994, 77 percent of the country's gross domestic product. The monetary fund's staff projected that the proportion would reach 110 percent by 2000. This means that Saudi banks will have great difficulty financing private enterprise.

Since the fund's report was written, oil prices have risen, improving the prospects that the kingdom might be able to achieve a balanced budget in 1996. But the country's per capita income has declined by 50 percent in the last 12 years, and structural financial problems remain, which contribute to a sense of uneasiness in the country.

Although the Clinton administration applauds Saudi efforts to control spending, officials acknowledge that those efforts are insufficient.

``They are controlling the overall budget much more carefully than they did over the last few years,'' said Jeffrey Shafer, the undersecretary of the Treasury for International Affairs. But, he added, ``there is more they need to do.''

One of the most widely criticized aspects of the Saudi relationship with Washington is arms deals. In the 1980s the kingdom paid more than $28 billion to the Pentagon for military goods and services from U.S. contractors. By 1993 the total of pending Saudi military orders was roughly equal to what the Pentagon spent for itself that year on major weapons systems.

Those days ended abruptly. The Saudis have placed no significant new arms orders in the last few years, following the advice of Pentagon officials to curb their appetite for weapons.

The Saudis' financial problems became so great that they have had to stretch out the repayment schedule for pending orders, avoiding the shutdown of U.S. production lines.

Proportionally to the size of their economy, the Saudis still spend as much on defense as any other country in the world. Yet a forthcoming book on Saudi security by Anthony Cordesman, a military analyst, argues that the kingdom will always need the United States to defend it against an ever-present external enemy, whether Iraq or Iran, and that its primary security threats are internal.

One key to resolving them, the book says, is to create more private-sector jobs to meet the needs of a population that is growing at a staggering rate.

The opposition What is the favorite target of the discontented? The U.S. military presence on Saudi soil.

``America - we urgently call upon God almighty to destroy its economy and society, to transform its states into countries and turn them against each other and to make it an example to all nations.''

That anti-U.S. diatribe was contained in a much-circulated sermon delivered in early 1993 by a man who is considered the most charismatic cleric in Saudi Arabia, Sheik Salman al-Awdah.

Militant preachers like him and Sheik Safar al-Hawali, the former dean of Islamic studies at Umm al-Qura University in Mecca, have exposed deep pockets of opposition to the current rulers, and worry the Saudi leadership.

Although there are divisions among the dissidents, much of their message is the same: The royal family is secular and corrupt and has betrayed the laws of Islam; the presence of infidel U.S. troops is against Islam, and they must go.

Rather than open up the rigid political system after the Gulf War, the response of the Saudi leadership has been to muzzle all dissent.

In the fall of 1994, the two sheiks were arrested with more than 400 others termed dissidents as part of a major crackdown against religious opposition. The two men are believed to be in prison - although they have never been tried - according to the state department's 1995 global human rights report.

Despite the government's efforts to snuff out their message, cassette tapes of the two sheiks' sermons circulate clandestinely in pockets throughout the country.

``The most charismatic of the preachers is al-Awdah,'' said Richard A. Smith, a former U.S. government analyst on Saudi Arabia who has prepared CD-ROMs about the kingdom for his consulting company, Ardaman Industries.

It is impossible to judge how much of a following the dissidents have.

In confessions - which may have been coerced - the four Sunni Muslim Saudis convicted last month for the bomb blast against the National Guard in November said they had read the writings of Islamic extremists abroad.

The men, who were later executed, said they had smuggled the explosives used in the bomb attack from Yemen. Three said they had served with Islamic fighters in Afghanistan, and one of the three in Bosnia as well.

While it is still not known who carried out last Tuesday's attack that left 19 Americans dead, Perry says the investigation is centered on the possibility that it was the same group that carried out the November bombing.

Whatever the case, the gap between the kingdom's rulers and its people seems to be growing, and a generation of Saudis radicalized by militant Islamic teachings may have the will and the capacity to carry out more violence in the future.

Indeed, given the extensive U.S. arming and training of Islamic fighters challenging the Soviet military in Afghanistan, it is not inconceivable that the killers who attacked the Dhahran air base had earlier worked in concert with the CIA.

``There are so many underground parties - so many splinter groups, many of them made up of people who fought in Afghanistan,'' said Mohammed al-Masaari, an exiled Saudi religious militant, when asked in an interview in London about who might have been responsible for the recent bombing. ``I expect more of the same. The political environment breeds it.''

The leadership The Saudi government is worried by the ease with which explosives are smuggled into the country.

In March, Saudi border guards intercepted a Chevrolet Caprice from Jordan that was packed with sophisticated high explosives.

The royal family has begun to face the same kind of violence that has wracked other countries in the region at a time when its leadership is in transition.

King Fahd, who is in his mid-70s, is not always lucid, Western associates close to the royal family say, and a transfer of power is already under way. Crown Prince Abdullah, the king's half-brother and designated heir, has essentially assumed the day-to-day operations of the government.

But there are underlying tensions among the senior royals, particularly between the crown prince on one side and the king's full brothers Prince Sultan, the defense minister, and, to a lesser extent, Prince Nayef, the interior minister, on the other. Some of the royals have urged the king to retire to Spain, U.S. officials say.

``The crown prince's support structure is simply not in place,'' said one administration official who knows Prince Abdullah. ``He will be king, but in terms of how things get done, there is a competition for influence and he is not as good a player.''

The crown prince, who is head of the National Guard, is an austere, no-nonsense leader who is uncomfortable making small talk because of a noticeable stutter, say administration officials who have dealt with him.

Prince Sultan, by contrast, is expansive, effusive and very comfortable with foreigners.

The tension between the two princes is most dramatically illustrated in their different attitudes to military spending.

Prince Abdullah has been struggling to rein in military spending even more. His efforts have alienated family members aligned with Sultan, who have much to lose financially if new projects do not go forward.

Prince Sultan, on the other hand, is much more willing to spend. In the wake of the 1991 Gulf War, he came up with a number of ambitious military projects that were approved by the king but apparently not by other important ministers.

The crown prince seems determined to forge strategic relationships with other Arab countries without becoming anti-American.

U.S. military contractors train his National Guard, and the five Americans who died were among those killed in November's bombing of its headquarters. When Thomas McLarty, a close aide to President Clinton, paid a call on the crown prince several weeks ago and asked for help financing the arming and training of the Bosnian government, Abdullah pledged $50 million.

After the most recent bombing, Clinton and other senior administration officials have expressed the United States' firm commitment to the stability of the kingdom and to a continued U.S. presence there.

This ferment has not moved the administration to press the Saudis harder, underscoring the mutually dependent, if reluctant, relationship.

``We're not doing them a favor by being there,'' Perry said in the interview just before he left for Saudi Arabia. ``They're not doing us a favor in letting us stay there. Each of us believes that this contributes to the stability of the region.''