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U.S. Turns Up Heat On Saudis

The Bush administration is stepping up pressure on Saudi Arabia to block the flow of money to terrorists and working groups throughout the U.S. government are considering ways to tighten controls worldwide.

As CBS News Correspondent Bill Plante reports, the Justice Department and the Treasury have repeatedly asked the Saudi government to freeze the assets of several wealthy businessmen who they believe are still financing al Qaeda and other terror groups, but sources say that their requests are routinely ignored.

Many administration officials are frustrated because they feel the Saudis have been reluctant to confront the problem. Today the White House sent the Saudis a polite but very public message:

"The president believes that Saudi Arabia has been a good partner in the war against terrorism, but even a good partner like Saudi Arabia can do more," said White House spokesman Ari Fleischer.

The U.S. drive, which extends beyond Saudi Arabia to several other countries, is being taken with care. The administration wants support from the Arab monarchy in the event of war with Saudi Arabia's neighbor Iraq, and two senior U.S. officials said the Saudis agreed — "with a wink and a nod" — to help, provided use of its territory was limited.

"We are working continually to find ways to help nations to do more and are exploring concrete ways to do it," Fleischer said.

The working groups are focusing on drying up financial support for terror, but they have not settled on specific recommendations, and none has been approved, another senior official said.

"But it's appropriate to have a broad group look at a number of options, so it's helpful to have ideas kicked around," Fleischer said.

According to Plante, administration officials continue to look for new ways to force better cooperation. Their ideas have included a U.S. ultimatum to the Saudis to take action or step aside and allow the U.S. act unilaterally, but so far their suggestions have been ignored because of the delicacy of the U.S. - Saudi relationship, which is built on oil. And things are even touchier now because of the possibility of war in Iraq. If Saddam Hussein were to torch his own oil fields as he did those of Kuwait in 1991, only the Saudis could keep world oil prices from going through the roof.

"They're the only producer around who can ramp up production within a few days to - by 2 to 3 million barrels a day - and that can avert any kind of a crisis in oil pricing. That's important to our economy," says Ned Walker, President of the Middle East Institute and former U.S. Ambassador to the United Arab Emirates.

At the same time, the administration is pressing Saudi Arabia to monitor Islamic charities to make sure that contributions do not go to terrorists, another senior official said.

The flow of money from Saudi Arabia and other countries to extremists in Yemen and elsewhere was confirmed, meanwhile, by Abd al-Kareem al-Iryani, special adviser to Yemeni President Ali Abdullah Saleh.

"No Arab government supports extremists," al-Iryani said in a luncheon at the Brookings Institution. "But there is money in the world coming to these people."

The Yemeni official said Saudi Arabia and other Arab countries have limited banking systems and cannot keep track of the contributions. He stressed the financing problem was far bigger than just Saudi Arabia.

Sen. Richard Lugar, who becomes chairman of the Senate Foreign Relations Committee in January, said in an interview Tuesday that the United States should insist Saudi Arabia do more to stop the financing of terror, "with the implied threat the United States will take charge of the situation, and we will attempt to impose some controls."

With possible war with Iraq approaching, the United States should have high expectations of its allies, Lugar, R-Ind., said. "This is a time that firmness ought to be on the part of the United States."

Meanwhile, Treasury Secretary Paul O'Neill and senior officials in his department are reaching out to allies in the Middle East and in Europe to block funds for terror groups.

As terrorist financiers are forced out of the traditional banking system, they are turning to riskier ways to move money, including smuggling cash and cigarettes; trafficking in diamonds, gold and drugs; and siphoning money from charitable donations, Treasury officials say.

Secretary of Defense Donald H. Rumsfeld said more than $100 million had been frozen worldwide. "We are getting good cooperation," he said at a news conference.

Asked if Saudi Arabia was a reliable U.S. ally, Rumsfeld said, "We have had and do currently have, and, in my view, will have prospectively, a good military-to-military relationship with Saudi Arabia."

U.S. interagency teams have made several trips to Saudi Arabia, and the Saudis have sent officials to Washington to help identify groups that may be a source of funds for terror operations, a senior U.S. official said Tuesday.

Undersecretary of State Alan Larson, Assistant Secretary of State William Burns and Francis Taylor, who headed the State Department's office to counter terror, are among American officials who have gone to Riyadh in the past few months.

Rep. Michael Rogers, R-Mich., who was on his way home from a trip to the Middle East, said Saudi Arabia had shown "some really great signs" of cooperating against terror.

But, Rogers said in a telephone interview from London, "They've shown some signs that they may, in fact, be encouraging pretty extreme behavior in fundamentalist Islam."

"We still need to continue to put pressure on them to open up, to democratize, to be better neighbors in the Middle East," Rogers said.

The drive to intercept funds for terror groups was begun months before recent news reports that a charitable contribution by Princess Haifa al-Faisal, wife of the Saudi ambassador to the United States, may have indirectly helped two of the men who participated in the Sept. 11, 2001, attacks in New York and Washington.

The Saudi government reacted angrily to suggestions that the princess funneled money to the men.

The charges concerning Princess Haifa al-Faisal were "baseless fabrications," Interior Minister Prince Nayef said in remarks carried Monday by the official Saudi Press Agency.

The princess sent monthly checks to a Saudi woman living in the United States. Saudi officials said she was the wife of Osama Basnan, who along with Omar al-Bayoumi is believed to have lent financial support to two of the Sept. 11 hijackers, Khalif al-Mihdhar and Nawaf al-Hazmi, while they lived in the United States. The FBI is investigating.

Saudi officials confirmed that some of the princess' donations ended up
with al-Bayoumi's family. But they defended the charitable giving, saying it is the habit of Saudis in the United States to support each other

On Tuesday, Basnan denied he passed on Saudi government money to the hijackers. He told a Saudi newspaper money he received from the princess was used toward the cost of his wife's medical treatment.

Basnan and his wife, Palestinian Majeda Dweikat, were arrested in August in San Diego on visa fraud charges. They pleaded innocent to using and making false immigration documents.

Basnan was deported to Saudi Arabia on Nov. 17. Saudi officials say they believe his wife, who suffers from thyroid problems, was deported to Jordan two weeks earlier.

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