The brutal murder of an American engineer, Paul Johnson, by a Saudi al-Qaeda cell has further tarnished the image of Saudi Arabia, America's long-standing ally in the Arab world. Is the strategic relationship between the two countries failing? Who is to blame, and what can be done to save it?

Problems in Saudi-American relations emerged right after the September 11 attacks. Their designer, Osama bin-Laden, is a Saudi, as were 15 of the 19 airline hijackers. The U.S. government has long considered Saudi Arabia a "moderate" Islamic kingdom. But critics point out that the Wahhabi brand of Islam dominant in the country is anti-Western and anti-Semitic. They say the Saudi rigid political system and failing economy alienate and radicalize disaffected youth. Some claim the Saudi government is actively supporting Islamist movements abroad and tolerates local organizations that fund extremist and terrorist groups.

Thomas Lippman, author of "Inside the Mirage: America's Fragile Partnership with Saudi Arabia," concedes the Saudi leadership has tried to appease Islamist radicals and "basically paid reprehensible people to do their dirty work elsewhere and leave the kingdom alone." They also allowed, perhaps even encouraged, instruction in schools and homilies that spread intolerance.

But about a year ago, says Mr. Lippman, Saudi Arabia was hit by an escalating wave of terror and was forced to take decisive measures against extremist elements. The government also strengthened cooperation with the U.S. intelligence and law enforcement. The United States provides the Saudis with a lot of information and the Saudis are reciprocating by dismantling terrorist financing system.

In the aftermath of the September 11 attacks, President Bush announced a plan to bring democracy to the greater Middle East. He said only freedom and accountable governments can stem the rise of anti-Western extremism in the Islamic world. Some critics say the United States should demand more liberal reforms from its Arab allies like Saudi Arabia. But a former U.S. ambassador to the kingdom, Chas Freeman, believes that would be premature and counterproductive:

"There are people within Saudi Arabia who aspire to the development of something resembling a western style democracy. But there are vastly larger numbers of people who have a different view, and I don't think we can, as foreigners, impose our way of life, our ideals, our political philosophy on foreign countries. The best we can do is help those who wish to be helped to make progress on their own or with our help."

Ambassador Freeman says the U.S. ? Saudi relations remain solid at the official level. But the people in both countries are beginning to question it. He is troubled by a collapse of Saudi-American exchange programs in the aftermath of the September 11 attacks. Visa applications from Saudis to come to the United States are less than half of what they were, because the Saudis are apprehensive about whether they can get a visa, or how will they be treated on entry to the United States. "Previous generations of Saudi Arabia," says Chas Freeman, "knew the United States first hand and admired it. The next generation will not do that unless we are able to restore this kind of relationship."

But Thomas Lippman points out that visa restrictions and other security policies that upset the Saudis were imposed for legitimate reasons. He reminds that most enemies of America do come from Arab and other Muslim countries. Besides, he says exchange programs do little to win over those already in the grip of an extremist ideology. Such people have a "different agenda, and it is not about getting visas to the United States."

Thomas Lippman believes the U.S. administration knows Saudi Arabia is not likely to adopt a representative government in the foreseeable future. But in his view the Saudi economic and social institutions are beginning to allow greater popular participation. However, this is due to internal economic and demographic change rather than external pressure. "They have a very fast growing and young population that has to be put to productive use. They have a new generation of educated women who want a greater place in social and economic decision making in Saudi Arabia. And there are changes going on."

Mr. Lippman says the September 11 attacks have forced some Saudis to start looking within and considering reform. But even Saudi reformists tend to accept the monarchy as the glue that holds their society together.

Both Thomas Lippman and Chas Freeman believe the United States and Saudi Arabia must not allow the extremists to destroy their partnership. The two countries are still united by economic, political and security interests. But considering the present anger in the Arab world against various U.S. policies, analysts doubt Washington can do much to promote Saudi reforms or solve its internal problems.