Faced with severe economic difficulties and under greater outside scrutiny following the September 11, 2001, attacks on the United States, the Saudi government in 2002 introduced some changes to its oppressive criminal code, introduced minor labor reforms, and ended the clerical establishment's control of female education. However, there does not appear to be a consensus within the royal family in favor of further-reaching reforms.

The origins of the Kingdom of Saudi Arabia date back to a 1744 pact between the ruler of the small central Arabian town of Diriyah, Muhammad ibn Saud, and a puritanical Islamic revolutionary, Muhammad Ibn Abd al-Wahhab. Ibn Saud pledged to purge the land of impurities in return for the latter's endorsement, and together they conquered Riyadh and the central Arabian region of Najd. The Saud family's control of the Najd was later broken by the Ottoman Empire and the rival Rashid family, but was reestablished after Abdelaziz al-Saud recaptured Riyadh in 1902. Over the next three decades, Abdelaziz expanded his domain to encompass most of the Arabian Peninsula, including the holy cities of Mecca and Medina, through a combination of conquest, diplomacy, and strategic polygamous marriages. In 1932, he officially declared the establishment of the Kingdom of Saudi Arabia. Since the death of Abdelaziz in 1953, Saudi kings have been chosen from among his 44 sons on the basis of seniority and consensus within the royal family. King Fahd has held the throne since 1982, though he ceded political authority to Crown Prince Abdullah in 1996 after suffering a stroke.

Throughout the 60-year history of Saudi Arabia, the royal family has ruled without any institutional checks on its authority. Oil revenue facilitated an informal social contract; in return for material prosperity and the provision of free health care, education, and other social services, the population accepted the denial of basic political and civil liberties. The infusion of petrodollars into the country also helped perpetuate enforcement of the fundamentalist Wahhabi interpretation of Sharia (Islamic law). The government could afford to maintain an educational system centered around religious indoctrination because the country's material prosperity did not require cultivating an indigenous skilled labor force. Women could be denied the right to drive because most families could afford to import chauffeurs.

Over the last two decades, however, declining oil prices, rampant corruption within the royal family, and gross economic mismanagement have caused a steep decline in the living standards of most Saudis. Per capita income, more than $28,000 in the early 1980s, has today dropped to below $12,000. Unemployment is now estimated at up to 35 percent and is expected to rise in coming years. Growing opposition to the monarchy by religious and liberal dissidents was brutally crushed in the 1990s.

Crown Prince Abdullah has reportedly lobbied within the royal family for relatively sweeping economic and social reforms in recent years (such as permitting employed women over the age of 40 to drive), but few senior princes have been willing to sanction major changes. While other oil-rich states making the transition to market-oriented economies have typically introduced limited political reforms in order to avoid sparking unrest, powerful members of the royal family remain firmly opposed to establishing even powerless representative institutions. Reforms of the legal system and banking sectors--the two most important steps needed to attract international investment and gain membership in the World Trade Organization--have been stalled because greater transparency would undermine royal patronage networks. Most other economic reforms have been insufficient in meeting investors' concerns. Changes in the educational system needed to prepare Saudi students for the job market have been blocked by princes aligned with the religious establishment.

The biggest obstacle to attracting international investment in the years ahead is likely to be uncertainty about political transition in Saudi Arabia. Both Abdullah and Sultan, who is second in line for the throne, are in their seventies, while even the youngest remaining sons of Abdelaziz are in their sixties. As a result, Saudi Arabia is set to experience a rapid series of royal successions in the coming years unless a mechanism for passing power to the next generation of princes can be agreed upon. Speculation that Abdullah will break with tradition after Fahd's death and designate one of his own sons as heir has fueled fears that Sultan may try to seize the throne by force.

Unable to attack decisively the underlying causes of the country's economic malaise, Abdullah has sought to remedy its most politically dangerous symptom--unemployment. In 2002, the government enacted a set of "Saudization" laws that require companies with 20 or more employees to ensure that Saudi citizens constitute at least 30 percent of their workforce (a quota that will gradually increase in future years). In addition to reducing unemployment, the measures should alleviate the government's perennial budget deficits by reducing the estimated $16 billion sent abroad each year by foreign workers in the kingdom. In conjunction with the Saudization initiatives, some reforms were made in the area of workers' rights.

In March 2002, eleven Saudi girls died when a fire broke out at their school and the mutawwa'in--baton-wielding religious police--blocked the escape of those who had discarded their veils amid the commotion. The tragedy sparked widespread media criticism of the cleric-controlled General Presidency for Girls Education (GPGE), prompting the government to end the religious establishment's direct control over the education of girls.

Under pressure from the United States to crack down on al-Qaeda activities in the kingdom, the government detained scores of suspects during the year. As of November, around 100 people remained in custody for what the Interior Ministry called "holy-war activities." Although a new criminal procedure code went into effect in May, there was little evidence that it has been observed in practice.

Attacks against Westerners residing in the kingdom continued in 2002. In June, a British bank employee was killed by a bomb placed under his car and an American couple found a similar device beneath their car. In September, a German national was killed by a car bomb. As with most previous cases of attacks on Westerners in recent years, the government blamed the killings on turf wars between Western expatriates engaged in the illegal alcohol trade.