RIYADH -- The businessman was chatting amiably from behind his large desk about any number of things on the mind of a Saudi these days: Traffic jams on the expressways. The transfer of a friend to Paris. Jordan's peace treaty with Israel.


But what, he was asked, of the reports that dozens of his colleagues had been arrested by the secret police? Was it true that thousands of Saudis had taken to the streets recently to protest the arrest of a popular Moslem cleric?


"But we have agreed not to discuss politics," he said lightly as he reached for a yellow legal pad and scribbled something.


He passed it back with another pleasantry. He offered another cup of tea. The tablet said, "It is possible my office is being bugged."


Then he typed on his word processor, turned on the printer and pushed over another note: "The situation is extremely dangerous and could lead to an explosion ... even violence."


A few minutes later, walking out into the hall, the man stopped near the elevator and talked quietly. "There are now more than 400 political prisoners, most of them being held for nothing at all," he said. "They are given their food and water through a hole in the door. Really, it is like Siberia."


There is a certain air of intrigue these days in this city, a gleaming desert capital that is a modern land of Oz fashioned of mirrored skyscrapers and sleek, lighted expressways -- and a medieval bastion of old Arabia, linked irretrievably to the undisciplined sands that creep up against its edges.


Saudi Arabia, one of the most secretive nations in the world, bared its interior for the first time four years ago when it threw open its frontiers and hosted hundreds of thousands of international troops to prepare for the battle against Iraq.


In the years after that war, it retreated into privacy once more. And it is only recently apparent the extent to which the desert kingdom's flirtation with the outside world -- and a new era when huge stores of petroleum can no longer guarantee unlimited luxury and stability -- has left an irreversible mark.


A Gulf War debt of more than $55 billion, coming at a time when oil prices dipped below $13 a barrel for the first time in five years, has plunged the kingdom into an economic crunch that has almost consumed its once-huge fiscal reserves and forced major budget cuts.


Coupled with this, allegations of corruption within the royal family have produced a popular backlash that has fed Islamic fundamentalist unrest and widespread grumbling within Saudi Arabia's increasingly cash-strapped middle class.


The most serious outbreak of anger came September in the farming region of Buraida. There, hundreds of citizens -- opposition sources say 10,000 -- angrily gathered outside the mosque when Sheik Salman Auda, a popular firebrand and cleric critical of the government, was arrested.


More than 130 people were taken into custody; two dozen remain in detention. Islamic activists tell stories of secret police knocking at their door and taking them to prison, often for months at a time, usually without charge or explanation.


Islamic militants, now forced largely underground, believe the kingdom should become even more conservative, closing banks that pay interest (in conflict with Islamic law), stemming the tide of military cooperation with the West and holding a firmer line against Israel.


Their demands have won sympathy among the liberal intelligentsia, who share their concerns about lack of democracy, mismanagement and corruption.


For years, the royal family -- which now numbers more than 5,000 princes -- has collected commissions on government contracts, enough to buy opulent villas, luxury yachts, private jets and fast cars around the world.


Saudis accepted this because of the vast welfare net offered to the kingdom's citizens. It includes free health care and education to university level, with each student receiving a monthly stipend of $270.


But all this has begun to change.


While the government has pledged not to cut into its basic programs, the new budget announced this week raises charges for gasoline, electricity and cooking oil, and officials said the imposition of user fees on some municipal services is also likely.


The government is examining how best to make further cuts, "but we don't want, by any means, to harm the limited-income people," said Hussein Sejini, deputy planning minister.


Officials here hope to focus on developing the private sector, expanding the Saudi presence in the work force by replacing some 4.5 million imported foreign workers, privatizing some enterprises and capping government administration costs, Sejini said.