Inside the Kingdom, By Robert Lacey

As far as the Arabian Gulf is concerned, all our attention of late has been on the spectacular implosion in Dubai. But the fortunes of that flashy, tiny emirate are of minor consequence compared to those of neighbouring Saudi Arabia, the birthplace and centre of Islam, a regional power into which Dubai would fit five hundred and fifty times over, and a country whose discretion shields the enormous influence it has throughout the Muslim world.

We know all about Dubai because the emirate has been forced to face outwards – with next to no oil, it had to enter the international waters of trade and finance, with all the successes and perils that entailed. Next-door, Saudi has always been a much more closed society, fiercely guarding its borders (very limited tourist visas have only been issued since 2004) and even more, its secrets.

Robert Lacey is one of very few to have been able to unlock them, not once but twice. What he reveals is of potentially far greater import than the financial fluctuations that have transfixed the media. In the early 1980s, copies of a book with no cover were surreptitiously passed around in expat circles in Jeddah, Riyadh and Dhahran. Lacey's The Kingdom was banned in Saudi Arabia. Those returning to work there, like my parents, would tear off the outer leaves to bring it in past customs.

The Saudi authorities were always hyper-sensitive, but banning Lacey's account of the founding and history of the country was a typically self-inflicted blow. For he is one of the few Westerners to have written sympathetically about this vast, strange and seemingly alien land. No one could finish The Kingdom without having gained at least a grudging respect for the fierce, proud Al Saud, who bounded within thirty years from being Bedouin chieftains in the barren deserts of the Nejd to lords of the greatest Arabian kingdom for centuries.

Lacey's sequel is equally gripping and, with its account of how and why the country became a laboratory of international jihad, an even more urgent read than its predecessor. He begins with explaining how the sudden influx of money in the 1970s, after the OPEC boycott quintupled the price of oil, radically altered traditional Saudi society and led to the first act of violent Islamic fundamentalism within the Kingdom: the occupation and storming

in 1979 of the Grand Mosque in Mecca by a group led by Juhayman ("Angry

Face") al-Otaybi. Juhayman and his followers were salafists, who wanted to return to the time of the Prophet, as were many of the establishment sheikhs who preached the brand of literalist Islam the West calls Wahhabi after its 18th century founder, Mohammed ibn Abdul Wahhab. To Juhayman, however, even these highly conservative imams were sell-outs.

The state's reaction to this act was to have catastrophic consequences. The governing family's legitimacy rested on a pact in 1733 between its founder, Mohammed ibn Saud, and ibn Abdul Wahhab. The Al Sauds' temporal authority was given an Islamic seal of approval in return for Wahhab's interpretation of the Quran being made the basis for government.

But after 1979 the royal family was worried. They weren't seen as "pure" enough. Could they be in danger of ending up the same way as the Shah of Iran? "After Juhayman, the 1980s had seen the clerics dictating the agenda, with the Al Saud anxious to appease them". Lacey reports: "No prince would have dared stand up in those days to contradict the say-so of a religious figure." This continued in the 1990s, until 11 September 2001 showed "what happened when religion got out of hand".

Osama bin Laden was a product of the very brand of Islam the clerics had been preaching. It was only then the royal family felt confident enough to make clear that rulers rule, "and the religious must go along with that". The important message Lacey teases out, surprising to many readers, is that nearly every time, the senior Al Saud princes were on the right side of the argument.

It was they who intervened to ensure more humane verdicts in the courts, they who protected the Kingdom against Iraqi invasion in 1991 by insisting that US "infidel" forces must be allowed to deploy on their soil, they who welcomed back dissenters, stood up for the rights of women, and have been at the forefront of pioneering schemes to reintegrate and deradicalise former jihadis.

Not nearly enough, perhaps: the descriptions "liberal" and "reformist", both of which could justly be applied to the current king, Abdullah, must be seen in very relative terms in Saudi Arabia. Still, in almost every fight between modernity and rigid antiquity, the Al Saud have demonstrated they see at least some merit in the advances of, oh, just the last 500 years or so.

There are those still foolish enough to believe a brisk dose of democracy would soon sort the Kingdom out. Let Lacey quote the words of the last king, Fahd, to them: "If an election were held here tomorrow, Bin Baz would beat us without leaving his house." Abdul Aziz bin Baz is the sheikh who was the Kingdom's highest religious authority, a man who reckoned the earth was flat; who, although blind, was in charge of censoring all media; a man who had been the patron of Juhayman and was an energetic supporter of the Taliban.

Still think democracy's the answer? Lacey wonders if this book, too, will be banned in the Kingdom. I hope not. It is those outside Saudi Arabia, though, who most need to read this page-turning account of a country with a power to affect all of us, but which the rest of the world seems reluctant to know. Those who wish to dismiss it as a rogue nation protected by its wealth should make sure they're blaming the right people for what they so detest.