Have you seen that ad for property in the Gulf states? The one with the huge palm-tree development stretching out into the Gulf? It looks impressive and, if the marketing is to be believed, all classes of celebrities have already signed up. In the same region, there is a development modelled on an aerial view of a globe, where you can buy a country. Hard luck, though, Ireland has already been bought.

These and other �opportunities’� in the Gulf States are being flogged every day.

For example, in March, many Irish papers carried a blizzard of positive publicity about a development called �Dream City’, which was described as �an offshore residential resort in the Emirate of Umm Al-Quwain, just 40km from Dubai along a new stretch of road . . .well-placed to benefit from the tourist boom in this exotic region. Villas at Dream City start at �425,000 for around 371 sqm (4,000 sq ft) of accommodation. Townhouses start at �200,000, while one and two-bedroom apartments start at �150,000.�

They were snapped up, apparently.

But why is this happening? Why are the Gulf States now a magnet for tourism and development? Who is paying for all this? And what else is being financed?

A few weeks ago, this column considered the problem of Third World debt in the context of the recycling of petro-dollars after the first oil shock. The property boom in the Gulf, and Irish speculation there, also start at our petrol pumps.

Every time you fill up with expensive petrol, some of the cash goes straight to the oil producers. Most economic analysis coming out of the banks and stockbrokers looks at how higher oil prices affect us and stops there.

The standard analysis starts with you paying more and goes on to assess the impact this will have on your household’s budget, working through to the national economy.

Sometimes you will even find a grandiose statement such as �economists calculate that every $10 rise in the price of oil reduces world economic growth by 0.5 per cent’� – or some such blather.

But the really interesting geopolitical question is what happens to the money after it has left us and our economy.

Clearly, it doesn’t evaporate into thin air.

It goes somewhere, and somebody receives it.

Yet we have heard amazingly little about what happens at the other end of the barrel of oil, to the people who sell the stuff. We all know that the biggest oil-producing countries are the Arab states in and around the Persian Gulf. What are they doing with the money? Unlike the 1970s, this time, a large proportion of the money flowing into Saudi Arabia and the Persian Gulf is staying there.

The result has been a phenomenal boom in the few tradable assets available in this region, primarily the small but rapidly-growing stock exchanges and the property markets of these countries.

The boom has been so sharp that prices have quickly reached levels considered to reflect gross over-valuation, so that local investors are moving steadily further afield, though still within the Arab world.

On the other hand, although Middle Eastern money is active in western stock and property markets, it is certainly not the prominent player that it was in the 1970s and early 1980s.

The man responsible for that is Osama bin Laden. While it is very doubtful that one of his goals in the September 11, 2001, attacks on the US was to spur the rise of an equity culture in the homeland of the Prophet Mohammed or to create tourist playgrounds on offshore islands in the Persian Gulf, that is exactly what happened.

The post-September 11 atmosphere in the US is one of overt suspicion and barely concealed hostility towards Arabs, especially Saudis. Not surprisingly, many of them have taken the hint and taken themselves and their money back home, with the result of huge price rises and rampant speculation in property. The traditionally delinquent Arab governments have also changed their behaviour remarkably. They have been hyper-responsible in the way they have spent this windfall.

The Saudis have used the extra revenues to eliminate the hefty debts they accumulated in the years of low oil prices; they have also doubled and tripled their spending on infrastructure projects to try and spur the growth of non-oil industries and sectors in the kingdom.

The results have been, by any standards, highly impressive: growth has been rapid and diversified and the pace of structural reform, always frustratingly slow in the Arab world, has picked up noticeably, with several key measures legislated and implemented.

So, unlike the 1970s, when they blew their cash on yachts and vanity properties like the Savoy, this time they are content to invest sensibly and allow the free-spending Irish to outbid them for London’s finest trophy assets.

Osama and his mates are probably not too happy about any of this newfound responsibility, because one of Osama’s aces was to portray the ruling Arab elites as corrupted, bloated and self-serving, in contrast to the suffering of the ordinary man in the souk. And while he still has a point, the elites are doing their best to try to rectify the situation on two fronts.

The first is economic and the second is the much less well understood religious one.

Let’s deal with the economic front first. Despite our image of Arab opulence, they are, in fact, very poor, and this is threatening the stability of the regimes.

For example, the economy of Saudi Arabia, the world’s biggest oil exporter and for many in the west a symbol of Arab affluence, is only marginally bigger than Portugal’s.

Until 2001, the economy had stagnated for over a decade, yet the population rose by over 3 per cent per year, and now 60 per cent of the country’s 12 million native citizens are under 25. Seven million foreigners work in Saudi, most of them employed in the private sector.

The public sector tries to mop up the native school-leavers. Yet even the Saudi central bank admits �there are only enough new jobs for one in three Saudis coming into the workforce’�. Unemployment is close to 20 per cent.

For the Arab region as a whole – home to more than 280 million people – the picture is even worse. In the 1990s, the region grew at only half the rate of other developing countries. Its share of global trade shrank from 3 per cent in 1990 to 1 per cent in 2000.

It is clear that the Saudi elite has woken up to this threat and is spending judiciously to try to kick-start the economy, complementing the property and infrastructure boom. So far, so traditional. Throwing money at the problem is nothing more than a 21st century version of �killing Home Rule with kindness’�.

But their other way of placating Osama’s threat is much more worrying.

Despite indirectly causing a property boom in the cradle of Islam, Osama’s friends can console themselves with the thought that they, too, are direct and major beneficiaries of the oil boom. This was not understood well in the 1970s, but today we know a great deal about the deep links between the Saudi royal family and government and the kingdom’s religious establishment.

The royal family has financed and aided the religious establishment in spreading the Saudi brand of Islam, Wahhabism. In recent years, it has become clear just how virulently anti-western this creed is. It is anti-Christian, anti-Jewish and even anti-Shi’ite Muslim – indeed, anti-everybody who doesn’t accept its version of the truth.

Some of the graduates of these extremist academies are now blowing up ordinary Iraqis every day. Others serve as imams in places like London and Amsterdam, where they preach hatred and violence to young Muslims from both local and immigrant communities.

We now know that Saudi-financed madrassas in Pakistan were the breeding ground for the Taliban, for the September 11 bombers – and for at least one of the London bombers.

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