* Riyadh signals anger over U.S. policy in Middle East
* Source says shift could affect arms, oil trade
* Prince Bandar set to end cooperation over Syria war
* In Washington, Saudi prince assails Obama’s Mideast moves
By Amena Bakr and Warren Strobel
DOHA/WASHINGTON, Oct 22 (Reuters) - Upset at President Barack Obama’s policies on Iran and Syria, members of Saudi Arabia’s ruling family are threatening a rift with the United States that could take the alliance between Washington and the kingdom to its lowest point in years.
Saudi Arabia’s intelligence chief is vowing that the kingdom will make a “major shift” in relations with the United States to protest perceived American inaction over Syria’s civil war as well as recent U.S. overtures to Iran, a source close to Saudi policy said on Tuesday.
Prince Bandar bin Sultan told European diplomats that the United States had failed to act effectively against Syrian President Bashar al-Assad or in the Israeli-Palestinian conflict, was growing closer to Tehran, and had failed to back Saudi support for Bahrain when it crushed an anti-government revolt in 2011, the source said.
“The shift away from the U.S. is a major one,” the source said. “Saudi doesn’t want to find itself any longer in a situation where it is dependent.”
It was not immediately clear whether the reported statements by Prince Bandar, who was the Saudi ambassador to Washington for 22 years, had the full backing of King Abdullah.
The growing breach between the United States and Saudi Arabia was also on display in Washington, where another senior Saudi prince criticized Obama’s Middle East policies, accusing him of “dithering” on Syria and Israeli-Palestinian peace.
In unusually blunt public remarks, Prince Turki al-Faisal called Obama’s policies in Syria “lamentable” and ridiculed a U.S.-Russian deal to eliminate Assad’s chemical weapons. He suggested it was a ruse to let Obama avoid military action in Syria.
“The current charade of international control over Bashar’s chemical arsenal would be funny if it were not so blatantly perfidious. And designed not only to give Mr. Obama an opportunity to back down (from military strikes), but also to help Assad to butcher his people,” said Prince Turki, a member of the Saudi royal family and former director of Saudi intelligence.
The United States and Saudi Arabia have been allies since the kingdom was declared in 1932, giving Riyadh a powerful military protector and Washington secure oil supplies.
The Saudi criticism came days after the 40th anniversary of the October 1973 Arab oil embargo imposed to punish the West for supporting Israel in the Yom Kippur war.
That was one of the low points in U.S.-Saudi ties, which were also badly shaken by the Sept. 11, 2001, attacks on the United States. Most of the 9/11 hijackers were Saudi nationals.
Saudi Arabia gave a clear sign of its displeasure over Obama’s foreign policy last week when it rejected a coveted two-year term on the U.N. Security Council in a display of anger over the failure of the international community to end the war in Syria and act on other Middle East issues.
Prince Turki indicated that Saudi Arabia will not reverse that decision, which he said was a result of the Security Council’s failure to stop Assad and implement its own decision on the Israeli-Palestinian conflict.
“There is nothing whimsical about the decision to forgo membership of the Security Council. It is based on the ineffectual experience of that body,” he said in a speech to the Washington-based National Council on U.S.-Arab Relations.
In London, U.S. Secretary of State John Kerry said he discussed Riyadh’s concerns when he met Foreign Minister Saud al-Faisal in Paris on Monday.
Kerry said he told the Saudi minister no deal with Iran was better than a bad deal. “I have great confidence that the United States and Saudi Arabia will continue to be the close and important friends and allies that we have been,” Kerry told reporters.
State Department spokeswoman Marie Harf said Riyadh had not conveyed to the State Department its intention to reduce its cooperation with the United States. She said the issue was also not raised in the meeting between Kerry and the Saudi minister.
“Not to my knowledge has that message been sent to the State Department by the Saudis,” Harf told a daily briefing. “We talked about some of the challenging issues that we want to confront together.” she said.
Prince Bandar is seen as a foreign policy hawk, especially on Iran. The Sunni Muslim kingdom’s rivalry with Shi’ite Iran, an ally of Syria, has amplified sectarian tensions across the Middle East.
A son of the late defence minister and crown prince, Prince Sultan, and a protege of the late King Fahd, he fell from favour with King Abdullah after clashing on foreign policy in 2005.
But he was called in from the cold last year with a mandate to bring down Assad, diplomats in the Gulf say. Over the past year, he has led Saudi efforts to bring arms and other aid to Syrian rebels.
“Prince Bandar told diplomats that he plans to limit interaction with the U.S.,” said the source close to Saudi policy.
“This happens after the U.S. failed to take any effective action on Syria and Palestine. Relations with the U.S. have been deteriorating for a while, as Saudi feels that the U.S. is growing closer with Iran and the U.S. also failed to support Saudi during the Bahrain uprising,” the source said.
The source declined to provide more details of Bandar’s talks with the diplomats, which took place in the past few days.
But he suggested that the planned change in ties between the energy superpower and the United States would have wide-ranging consequences, including on arms purchases and oil sales.
Saudi Arabia, the world’s biggest oil exporter, ploughs much of its earnings back into U.S. assets. Most of the Saudi central bank’s net foreign assets of $690 billion are thought to be denominated in dollars, much of them in U.S. Treasury bonds.
“All options are on the table now, and for sure there will be some impact,” the Saudi source said.
He said there would be no further coordination with the United States over the war in Syria, where the Saudis have armed and financed rebel groups fighting Assad.
The kingdom has informed the United States of its actions in Syria, and diplomats say it has respected U.S. requests not to supply the groups with advanced weaponry that the West fears could fall into the hands of al Qaeda-aligned groups.
Saudi anger boiled over after Washington refrained from military strikes in response to a poison gas attack in Damascus in August when Assad agreed to give up his chemical weapons arsenal.
Representative Chris Van Hollen, a member of the U.S. House of Representatives’ Democratic leadership, told Reuters’ Washington Summit on Tuesday that the Saudi moves were intended to pressure Obama to take action in Syria.
“We know their game. They’re trying to send a signal that we should all get involved militarily in Syria, and I think that would be a big mistake to get in the middle of the Syrian civil war,” Van Hollen said.
“And the Saudis should start by stopping their funding of the al Qaeda-related groups in Syria. In addition to the fact that it’s a country that doesn’t allow women to drive,” said Van Hollen, who is close to Obama on domestic issues in Congress but is less influential on foreign policy.
Saudi Arabia is concerned about signs of a tentative reconciliation between Washington and Tehran, something Riyadh fears may lead to a “grand bargain” on the Iranian nuclear program that would leave Riyadh at a disadvantage.
Prince Turki expressed doubt that Obama would succeed in what he called an “open arms approach” to Iran, which he accused of meddling in Syria, Lebanon, Yemen, Iraq and Bahrain.
“We Saudis observe President Obama’s efforts in this regard. The road ahead is arduous,” he said. “Whether (Iranian President Hassan) Rouhani will succeed in steering Iran toward sensible policies is already contested in Iran. The forces of darkness in Qom and Tehran are well entrenched.”
The U.N. Security Council has been paralysed over the 31-month-old Syria conflict, with permanent members Russia and China repeatedly blocking measures to condemn Assad.
Saudi Arabia backs Assad’s mostly Sunni rebel foes. The Syrian leader, whose Alawite sect is derived from Shi’ite Islam, has support from Iran and the armed Lebanese Shi’ite movement Hezbollah. The Syrian leader denounces the insurgents as al Qaeda-linked groups backed by Sunni-ruled states.
In Bahrain, home of the U.S Fifth Fleet, a simmering pro-democracy revolt by its Shi’ite majority has prompted calls by some in Washington for U.S. ships to be based elsewhere.
Many U.S. economic interests in Saudi Arabia involve government contracts in defence, other security sectors, health care, education, information technology and construction.