* Attack on Saudi royal viewed as new tactic
* Failed suicide bombing lacks past sophistication
* Instability in Yemen conducive to al Qaeda
By Alistair Lyon, Special Correspondent
BEIRUT, Aug 29 An attempt to assassinate Saudi Arabia's security chief, who is a prominent member of the royal family, appears to mark a new tactic by an al Qaeda network that is exploiting worsening instability in neighbouring Yemen.
A suicide bomber posing as a repentant militant failed to kill Prince Mohammed bin Nayef at his Jeddah office on Thursday in the first known attack on a Saudi royal since al Qaeda began a bloody campaign in the world's top oil exporter in 2003.
"If it had been successful, it would have been an incredibly significant propaganda victory for al Qaeda in the Arabian Peninsula (AQAP)," said Christopher Boucek, an associate of the Carnegie Middle East Programme. "But it's not on the level of sophistication seen in previous multiple, coordinated attacks."
The Saudi and Yemeni branches of al Qaeda merged early this year to form AQAP. They regrouped in Yemen following a vigorous counter-terrorism campaign led by Prince Mohammed, deputy interior minister, that badly damaged militants in Saudi Arabia.
AQAP is led by a Yemeni, Nasser al-Wahayshi, but it named as commanders two Saudis freed from the U.S. detention centre at Guantanamo Bay who had later graduated from Saudi Arabia's rehabilitation scheme for militants -- run by Prince Mohammed.
Although one later surrendered to the authorities, that was a setback to a scheme that has won much publicity, even though the Saudis say its successes still outweigh occasional failures.
Boucek said the rehab programme was only an adjunct to tough tactics credited with derailing al Qaeda's campaign by 2006.
"All of those soft counter-terrorism measures were only possible because of the hard security victories that were achieved earlier on," he said. "This (attack) is only going to reinvigorate those continuing hard security efforts."
The attack on Prince Mohammed, a son of the interior minister, Prince Nayef bin Abdul-Aziz, who is seen as next in line to be named crown prince, was claimed by AQAP and may have been a gambit to show muscle behind its ambitious rhetoric.
"The group is now aiming to meet the goal of regional reach that it has set for itself," said Gregory Johnsen, a Princeton University analyst, arguing that a months-long lull in AQAP violence indicated consolidation and planning, not inaction.
Earlier this month Saudi authorities announced the arrest of 44 militants and the seizure of explosives, detonators and guns.
In April the Saudis said they had intercepted 11 militants with arms caches near the Yemeni border.
AL QAEDA SANCTUARY
Saudi officials fret that militants are finding refuge in lawless swathes of Yemen, whose security forces are stretched by a tribal revolt in the north and separatist unrest in the south.
"We can't say for sure yet that there is a direct connection between Yemen and the attack on Prince Mohammed, but Yemen's security problems are going to affect the region," Boucek said.
Saudi concern about Yemen is shared by Washington, which doubts Sanaa's capacity to handle returning Guantanamo inmates.
"We worry about Yemen becoming a safe haven for al Qaeda," State Department counter-terrorism adviser Shari Villarosa told a Carnegie audience in July. "Yemen does cooperate with the United States in terms of strengthening its law enforcement capabilities, but there is still much room to improve."
She said the United States sought to ensure that Yemen does not "become another Afghanistan" and argued that instability in Yemen was also fuelling chaos in nearby Somalia. "Right after Afghanistan-Pakistan, we talk about Somalia and Yemen as our two greatest concerns in terms of counter-terrorism."
Yemen joined the U.S. "war on terror" after Sept. 11, 2001, but squirmed when the Pentagon leaked word of a drone missile strike that killed al Qaeda's local leader on its soil in 2002.
Foreign Minister Abubakir al-Qirbi told Reuters this month that Yemen had limited resources to combat terrorism and urged the United States to share more intelligence information.
President Ali Abdullah Saleh has in the past sometimes co-opted Islamist militants, notably those who returned from Afghanistan in the 1990s, but now confronts a new generation of much more radical young fighters who are harder to deal with.
Poverty and corruption in Yemen, the birthplace of Osama bin Laden's father, offer opportunities for al Qaeda recruiters in a population of 23 million, two-thirds of whom are aged under 24.
"Al Qaeda's ideological messages have very little resonance here, but you can radicalise people around a sense of injustice," said a Western diplomat in Sanaa. Militants have attacked tourists, foreign embassies and government targets in recent years, hurting tourism and efforts to lure investment to a country dependent on dwindling oil.
Yemeni government officials frequently accuse Western embassies and media of exaggerating the security threat, but analysts such as Carnegie's Johnsen suggest they are in denial.
"One surprising thing is almost a refusal to acknowledge that al Qaeda is a local problem, not something imported from Iraq or Afghanistan, something the Americans created," he said.
"In Yemen the government has never felt threatened in the way the Saudi government felt threatened in 2003 and 2004."