In its randomness and bloody mindedness, yesterday's attack on a residential compound in Riyadh, which killed at least 5 people and injured more than 100 others, had al-Qa'ida written all over it. Not only were most of those killed or injured Muslims, but, with many adults out of doors breaking their dawn-to-dusk Ramadan fast, a disproportionate number of the victims are likely to be children. Like the triple suicide-bombing in Riyadh in May that claimed 35 lives, yesterday's atrocity is likely to harden Saudi popular opinion against the Islamist terrorists. After the first Gulf War, the presence of US troops in Saudi Arabia, home of the two sacred cities of Mecca and Medina, was the decisive event in the move by Osama bin Laden, himself a Saudi, to establish al-Qa'ida. This has been reiterated by him in every piece of al-Qa'ida propaganda produced since September 11, 2001. But since they are no longer required in Saudi Arabia after the downfall of Saddam Hussein in neighbouring Iraq, the 5000 US troops remaining on Saudi soil are in the process of being withdrawn. Not that one expects consistency from a bunch of racist, misogynistic butchers, this nevertheless underlines the danger of taking at face value anything that the terrorists tell us about their motivations, or of fantasising about establishing any kind of dialogue or negotiation with them.

Saudi Arabia occupies a unique niche in the war on terrorism. It is simultaneously part of the solution and a big part of the problem: that is why it is both an exporter and a target of terrorism. The home of Wahhabism, the deeply conservative interpretation of Islam of which bin Laden is an adherent, Saudi Arabia fielded almost all the September 11 hijackers. A 900-page report on the attacks released by the US Congress in July effectively accused the Saudi ruling family of channelling funds to al-Qa'ida. The families of September 11 victims have a $100 trillion lawsuit outstanding against Saudi Arabian interests. And along with Syria and Iran, Saudi Arabia is a source of the current destabilisation of Iraq, with many of the terrorists crossing into Iraq from the Saudi desert. Nor has Wahhabism left Australia untouched: Saudi "charities" are among the main sources of funding for the fundamentalist colleges in Indonesia that support Jemaah Islamiah and that produced the Bali bombers.

At the same time, Saudi Arabia is considered a US ally in the war on terror and – as the presence of those troops testifies – in the campaign to oust Saddam Hussein. As the world's largest producer of oil, it is in intricate relationships with the US, with the ruling al-Saud family providing generous donations to both major US political parties. And to their credit, since the suicide bombings on May 12 the Saudi authorities have been much more assiduous in stepping up security and breaking up the terrorist cells. Despite that, however, there have been portents of a new attack for weeks.

Even more important than the crackdown on terrorists, there have been recent signs of reform and liberalisation in a country that has been an absolute monarchy since its formation in 1932. Under pressure from the US Government, Saudi Arabia has begun a dialogue on human rights, committed itself to a limited degree of electoral freedom, and even allowed demonstrations by pro-democracy groups. This may be, in fact, what provoked the renewed attack by the terrorists: in Saudi Arabia, as in post-Hussein Iraq, they will quite rightly see any movement in the direction of democracy, and rights for women, as a dire threat to their interests.

As citizens in Arab countries experience the economic and social benefits that democracy and human rights, in co-operation with Islam, can bring, the influence of religious radicals will wane and the terrorists' recruiting-swamps will dry up. This is the basis of the Middle East vision outlined by George W. Bush in his keynote speech last week, where he described his mission in the Middle East as analogous to Ronald Reagan's revolutionary impact on European communism in the 1980s. The sophisticates scoffed at President Reagan's vision of a democratic eastern Europe, and of course they are scoffing at Mr Bush now. But yesterday's attack on Riyadh should convince even more Saudis that the Islamists are their enemies, and that the Bush vision is their lifeline.