Quotes of the Day

As a veteran reporter on the global terrorism beat, Frank Gardner knew the dangers facing foreigners in Saudi Arabia when he ventured last week into al-Suwaydi, a Riyadh neighborhood known as a stronghold of Islamic extremists. Gardner, a BBC correspondent, and cameraman Simon Cumbers had arrived in Saudi Arabia a week earlier to cover the aftermath of the May 29 terrorist rampage in the oil-industry city of Khobar, which killed 22. As Gardner and Cumbers prepared to do some filming, a car pulled up alongside them. A man opened fire with a machine pistol, killing Cumbers and leaving Gardner fighting for his life. A photo taken by a bystander shows Gardner, his shirt and trousers soaked in blood, struggling to escape as a group of Saudis stood and watched. According to one account, he pleaded for help by claiming, "I'm a Muslim." He was eventually taken to a hospital, where he remains in critical but improving condition. The killers escaped. Almost immediately, a website favored by al-Qaeda branded the journalists "dirty infidels."

It was the latest episode in al-Qaeda's accelerating and increasingly successful campaign to wreak havoc in Saudi Arabia, the homeland of Osama bin Laden, by taking aim at foreigners working in the kingdom. Two days after the attack on the journalists, a hit squad believed to be linked to al-Qaeda gunned down Robert Jacobs, an American working on a contract to train the Saudi Arabian National Guard, outside his Riyadh home. An almost identical attack in the capital on Saturday killed Kenneth Scroggs, an American who worked for Advanced Electronics Co., a Saudi firm that supplies technology to the armed forces. And in a further escalation, al-Qaeda claimed Saturday to have taken an American, Apache-helicopter specialist Paul M. Johnson, hostage. Riyadh now resembles a fortress, with government buildings, hotels and expat compounds protected by heavily armed Saudi forces and concrete barricades. Travellers endure long queues at police checkpoints. "I get nervous when I see a group of Western-looking foreigners," says Khalid Yousef, a 22-year-old university student in Jidda. "You don't want to get caught in the cross-fire."

Nowhere is anxiety running higher than in the fortified palaces that house the country's royal rulers. Though the al-Saud dynasty has controlled the country for 72 years, the public is losing faith in its ineffectual governance and doubts its ability to snuff out terrorism. British ambassador to Saudi Arabia Sherard Cowper-Coles calls the terrorist threat "serious and chronic." One Saudi lawyer, Mansour al-Qerni, is even more pessimistic. "Is this going to end, or are my children going to have to accept this as a part of their lives?" Says a Saudi political analyst: "The way people are talking, it amounts to a no-confidence vote for the government."

Al-Qaeda's campaign to overthrow King Fahd bin Abdul Aziz al-Saud and establish a Taliban-style regime has now become a constant assault. The attacks are targeting Western experts and the oil trade — the twin pillars that have propped up the House of Saud almost since the desert kingdom was founded in 1932. The Saudis are still far from witnessing anything like Iran's 1979 Islamic Revolution — "Nothing's getting toppled," says one U.S. intelligence official — yet diplomats fear al-Qaeda's tactics may dry up foreign investment at a time when the economy sorely needs it. Anxiety about the world's leading petroleum producer saw oil prices spike to an all-time high of $42.33 per barrel on June 1 before sliding back to $38.45 last week.

The surge of attacks is prompting hundreds of expats to leave, and those who remain behind are scared stiff. "Guys are growing beards and putting 'Allah is Great' bumper stickers on their cars," says a longtime American resident. "A suit and a tie is tantamount to wearing a bulls-eye." For the third time in six weeks, the State Department issued a warning "strongly urging" some 25,000 Americans to quit the country — and a U.S. official told Time that the advisory could remain in place for years. "Al-Qaeda tells [the U.S.] to leave, and so you leave," says a dismayed senior government adviser. "This hands the terrorists a victory."

That's the way al-Qaeda sees it, too. The latest surge of violence began only days after an Internet message attributed to al-Qaeda's purported leader in Saudi Arabia, Abdul Aziz al-Muqrin, a high school dropout and veteran of jihad in Afghanistan, Somalia, Bosnia and Algeria. "We instruct the jihadi youth to direct their efforts against the Crusaders," he commanded. "Kill them wherever you find them." On May 1, four terrorists carried out an assault in Yanbu on the Red Sea, killing five foreigners.

The late May blitz on Khobar was far more devastating. Beginning about 7:30 a.m., four young fanatics shot up the offices of oil-industry firms at two locations in the Persian Gulf coastal city. They murdered the British vice president of a Saudi company, then dragged his body from the back of their car for nearly two miles around Khobar's busy streets. Then they took their terror to Oasis, a compound of luxury residences, swimming pools and palm groves. For some 20 hours they rampaged through the complex, sparing Muslim residents while stalking and executing any non-Muslims they could find with machine-gun fire and ritualistic dagger slashes across their necks. "I am al-Qaeda, I am Muslim and I am good," one of the terrorists told two of the compound's Indian employees, one Hindu, the other Christian. "You do not pray. You are bad."

The day of mayhem left the reputation of the Saudi security forces in tatters. By the time Saudi commandos dropped onto the rooftop of the Oasis, the terrorists had fled; the alleged leader was later wounded and captured but the other three members vanished. A source close to Saudi intelligence officials told TIME that officials cut a deal to save lives by allowing the terrorists to flee. And worries about collusion between al-Qaeda and sympathizers in the security forces are rising.

The House of Saud itself is riven with factions. Progress on critical issues — security, democracy, women's rights — has been hampered for close to a decade, since a stroke left King Fahd unable to govern. The government's weak response to the Khobar attack, says a Western analyst in Saudi Arabia, is in part the result of rivalries among the senior princes who control the army, national guard and police — "here you are dealing with different princely fiefdoms," he says.

Saudi officials insist that al-Qaeda is on the run. They point to the sweeping government crackdown over the past year, in which security forces have broken up cells, arrested and killed terrorists and thwarted major attacks. Yet despite well-publicized moves to curb radicals in Saudi schools, mosques and charities, the government remains reluctant to fight a war against extremist ideas. The regime continues to allow Saudi imams to rail against Crusaders and Jews in much the same manner that al-Qaeda does. When the country's de facto ruler, Crown Prince Abdullah, blamed the Yanbu outrage on Zionists, reformers felt he was once again appeasing hard-line opinion.

Prince Bandar bin Sultan, the Saudi ambassador to the U.S., seemed to acknowledge his government's shortcomings last week when he publicly called for mobilization against al-Qaeda and an end to sympathy for the extremists. "Neither the government nor the citizens are yet prepared for this crucial, fundamental stage to winning this war," he acknowledged. "We shall not win by only resorting to praying. War means war." The fate of Saudi Arabia may depend on whether his fellow princes agree.

• SCOTT MACLEOD | Riyadh
• Al-Qaeda steps up attacks on Westerners — and its campaign to bring down the House of Saud. The threat has never been greater