Traveling to the Middle East can be a disconcerting experience. One day you feel as if you're journeying into the future, the next day into the past.

The futuristic part of our recent trip-- undertaken with a bipartisan delegation of American policy wonks, and organized by the Center for Strategic and International Studies--was our visit to Dubai. A mere decade ago this city perched on the edge of the Persian Gulf amounted to a single office tower and lots of sand. Today it looks like a Hong Kong, Shanghai, or Singapore in the making, with elements of Miami and Las Vegas tossed in. A drive into town along a traffic-clogged highway takes a visitor past glass-and-steel skyscrapers too numerous to count. Some are complete, others still under construction. Giant cranes are everywhere: Dubai is estimated to have up to 25 percent of the world total.

The ambitions of this parvenu city seem limitless. Old showpiece projects are constantly being superseded by new ones. An eight-year-old hotel built in the shape of a sail and a two-year-old indoor ski slope are old news. The buzz now is about the silvery Burj Dubai ("burj" means tower in Arabic), which will be the tallest building in the world. With 156 stories completed, it has already far surpassed the previous record-holder, the 101-story Taipei tower in Taiwan. The ultimate height is a secret, but it will exceed 160 stories, or twice the height of the Empire State Building. Numerous other, slightly shorter buildings are going up around the Burj, along with what is being called the world's biggest mall, exceeding in size the nearby Mall of the Emirates which at one time claimed that title. The Burj is estimated to cost $1 billion, the whole multiacre project $20 billion.

This vertical city will have offices, apartments, and an Armani hotel. Who will volunteer to inhabit its uppermost floors? That hasn't been announced, but the developer--a company called Emaar, which is 32 percent owned by the government of Dubai--claims to have sold the first 52 apartments within an hour of their going on the market, with apartments supposedly fetching $10 million.

Although the United Arab Emirates sit on 10 percent of the world's proven crude oil reserves, such grandiose projects are not being built with the proceeds from black gold--at least not directly. Dubai has relatively little in the way of natural resources; most of the Emirates' oil is to be found in neighboring Abu Dhabi. (The UAE is a federation of seven emirates created after the British pullout in 1971-72.) But thanks to an aggressive strategy of broadening the economy's base, only 30 percent of the UAE's GDP now comes from the energy sector--down from 75 percent during the last oil boom in the 1970s. The rest comes from investment within the UAE, and from the hundreds of billions of dollars invested in the outside world by the country's "sovereign wealth" funds. (The Abu Dhabi Investment Authority just announced a $7.5 billion investment in Citigroup, making it the largest shareholder in America's largest bank.) Black gold still enters the picture: It is the original source of a lot of the capital invested in and by Dubai. But it is growing less important in the overall scheme of things than in neighboring states.

One of Dubai's largest companies attracted unwanted publicity last year when Dubai Ports World, a state-owned company formerly known as the Dubai Ports Authority, sought to assume management of six major U.S. ports after acquiring their previous operator, the British-based Peninsular and Oriental Steam Navigation Company. DPW's proposed investment was nixed after a political outcry in the United States, even though the UAE is one of America's closest partners in the Arab world and in many respects a model of what we would like the region to look like in the future. Dubai is a major port of call for the U.S. Navy, the UAE has Special Forces deployed to Afghanistan, and the country supports U.S. military operations in a variety of important ways.

The one area where more help is needed is sanctions against Iran. The Iranian Business Council estimates that some 300,000 Iranians live in the UAE and hold $300 billion in assets there. Many of these Iranians operate banks, businesses, and front companies that provide the mullahs a critical financial and economic outlet to the rest of the world. While the UAE has been doing a much better job of cooperating with the United States to stop terrorist money laundering since the 9/11 attacks (which were carried out by, inter alia, two Emiratis), it would be helpful if the UAE did more to implement multilateral and unilateral U.S. financial sanctions against Iran. Without the UAE, such steps will be meaningless.

While there is undoubtedly jihadist sentiment in the UAE, as in all other Muslim (and, for that matter, non-Muslim) countries, what is notable is how far this small state has managed to move beyond many of the pathologies that mar its neighbors. Dubai, in particular, is open for business in a way that can be said of no other Arab city save Beirut--and it doesn't have Lebanon's political instability to contend with. The Maktoum family, which has ruled this emirate since 1833, has driven breakneck economic growth over the past decade that has led to a large influx of foreign capital, workers, and visitors.

Of the UAE's total population of 4.4 million, only 800,000 are natives and citizens. Fully 50 percent of the population is composed of South Asians, many of them manual laborers who work for as little as $2.50 an hour and live in Dickensian "work camps" run by their employers. Other expatriates are higher-paid managers and professionals lured from all over Europe, Asia, North America, and the Middle East to run an ever-growing number of companies. The attractions are good pay, lots of jobs, and no income tax.

Emirati men still dress in flowing white robes, and many women still cover their hair if not their faces. But it's also common to see European women (including a growing number of Russian prostitutes) parading around in high-cut skirts and low-cut blouses. And even many of the black-clad women wear jeans and high heels that peek out from under their black gowns. In some other predominantly Muslim cities such behavior could provoke a lashing; in Dubai no one bats an eyelash. Liquor is readily available in bars and restaurants across the city. The party doesn't even have to stop during Ramadan.

This social and economic freedom doesn't extend to the political sphere. The UAE is still very much an absolute monarchy run with a firm hand by its ruling families. That said, the de facto level of tolerance is high, and the country is as close to a meritocracy as you can find in this kind of a system. The people wielding the country's day-to-day economic and political power are in many instances the best-and-the-brightest nonroyals drawn from Harvard, Oxford, and Georgetown. In some ways, Dubai is reminiscent of Hong Kong in the days of British rule, when it was remarkably free without being democratic.

Abu Dhabi is more conservative than Dubai, its neighbor a two-hour drive away. You see more burkhas in Abu Dhabi and fewer miniskirts. Overall, it is much less bustling, but that is changing. The two cities have a historic rivalry, and Abu Dhabi's rulers, the Nahyan, are determined to keep up with the Maktoum of Dubai, who have traditionally been seen as their younger brothers. (A Nahyan is by custom president of the entire country; a Maktoum the vice president and prime minister.)

Dubai built a world-class air carrier, Emirates Airlines; Abu Dhabi responded by starting its own luxury carrier, Etihad. Dubai built a Formula One racetrack; Abu Dhabi built one of its own, and for good measure added a Ferrari theme park. (Abu Dhabi owns 5 percent of the Italian automaker.) Dubai built a spate of luxury hotels; Abu Dhabi responded with what is reportedly the world's most expensive hotel--the $3 billion Emirates Palace, constructed in an Arabian Nights motif with endless marble corridors and gold-leaf domes. Dubai became a tourist center with attractions such as its beaches and indoor ski slope; Abu Dhabi responded by setting in motion a cultural district on its Saadiyat Island (the "Island of Happiness") that will include branches of the Guggenheim and Louvre museums. The buildings are being constructed by Frank Gehry and other famous architects, and they will be the drawing cards for a mixed-use area that will house 150,000 people. The island development is scheduled to be completed by 2018 at a cost of $27 billion.

It's hard not to be both impressed and amused by such relentless ambition. Everything in the UAE is touted as bigger and better than anything else in the world--and frequently it lives up to the hype. It's as if John D. Rockefeller, Leona Helmsley, and P.T. Barnum had been reincarnated in Arab dress and given limitless political as well as economic power to make their wildest dreams a reality. Property developers in the UAE don't have to worry about pesky zoning boards or "NIMBY" syndrome. Anything can be built to the nth degree as long as it has the support of the rulers.

Does all this construction make economic sense? Local officials insist that it does; the sky's the limit. So far they appear to be right, but at some point the market will be saturated. Even when the inevitable downturn arrives (and it could easily be triggered by a slump in the price of oil), the future of the UAE still seems bright because Dubai and Abu Dhabi offer such a welcome investment, tourism, and residential haven in a region better known for war and extremism. The freedom, opportunity, and stability are unrivaled in this part of the world.

If you want to see why so many rich Iranians, Iraqis, Saudis, Kuwaitis, and other Middle Easterners have poured their resources into the UAE, all you have to do is hop on a two-hour flight to Riyadh. Traveling to Saudi Arabia is like going back through time to a drearier era of economic stagnation and repression. You know you're not in Dubai anymore when the first thing you see at Riyadh's airport is not the duty-free Herm├Ęs shop but a line of at least 30 men kneeling in prayer next to the gate. We don't recall hearing the muezzin, the call to prayer, once in Dubai. In Riyadh we heard it five times a day, and each time it sounded, large numbers of Saudis streamed into mosques that are notable for their ubiquity and size.

One of the most striking things about spending a few days in Riyadh is the paucity of contact with the fairer sex. Not a single woman was employed in our business hotel; even the maids were men. There were few women to be seen in public either. When they do make an appearance it is of course in a shapeless black abaiya (gown) topped off with a hijab (head scarf) and burqa (face covering). Aboard an Emirates flight from Dubai, we watched one woman clad in this outfit eating her dinner. It was quite a production, with every morsel of food and every drop of drink having to be lifted precariously beneath her burqa. Mustn't lift the veil even an inch lest, presumably, some lascivious male be turned on by the sight of a dainty jawline.

That was one of the few times we saw a Saudi woman eating, since all restaurants, public buildings, and even private homes are strictly segregated. Women are never supposed to mix with men to whom they are not related. In one of the more barbaric applications of this antediluvian code, a 19-year-old Saudi gang-rape victim was recently sentenced to 200 lashes and six months in jail for being in a car with an unrelated male when the attack occurred. Last week, her lawyer was disbarred for objecting too vociferously to this mind-boggling outcome.

While aware of this gender apartheid before visiting the kingdom, we had failed to appreciate how pervasive it is. Just as in apartheid South Africa and Jim Crow America there were separate entrances for whites and blacks, so in many Saudi buildings there are separate entrances for men and women. The public library has men's and women's sections. So did a Starbucks near our hotel.

Women are discouraged from working, and when they do work, they are put in separate office areas. Only 7 percent of Saudi women are employed--a tremendous waste of human capital. The official rate of unemployment among Saudi men is 13 percent, though the actual figure is probably higher.

This points to another fact that we hadn't appreciated sufficiently before visiting the kingdom: While Saudi Arabia is a very wealthy country (it is projected to earn $165 billion this year from oil exports), little of that wealth trickles down to the Muhammad in the street. Average per capita income is only $13,800, considerably less than in Israel ($26,800), to say nothing of the UAE ($49,700). Of course there are super-wealthy Saudis whose gaucheries make global headlines: Prince Alwaleed bin Talal, chairman of the investment firm Kingdom Holding Company, made news while we were visiting by becoming the first individual to purchase for his personal use Airbus's new A380, the world's largest passenger jet. But there is also a substantial underclass among Saudi Arabia's 25 million people.

Most Saudis get only indirect benefits from their country's oil wealth, to the extent that the government uses its revenues to fund public projects. Saudi Arabia is not, contrary to the public perception, a cradle-to-grave welfare state. Its people get free (and low-quality) health care and education, and that's about it. Many of the social-welfare functions that in the West are run by the state are still reserved in Saudi Arabia for tribes, families, and religious organizations.

Riyadh, capital of the country with the world's largest oil reserves, doesn't feel opulent--nothing like Dubai. There are few skyscrapers, and the roads are full of clunkers. There are some fabulous palaces and public buildings, to be sure, but also lots of modest homes and shops. Camels wander through the desert just a few miles outside of town. And Riyadh is the kingdom's centerpiece; many other areas are downright destitute.

Part of what holds Saudi Arabia back is the puritanical Wahhabist theology taught in its mosques and schools. The kingdom's emphasis on religious purity produces too many graduates who cannot compete in the modern world except in the art of suicide bombing.

Many Saudi leaders know they have a problem, but they have been slow to adjust. It took the May 12, 2003, terrorist attacks in Riyadh for the authorities to crack down hard on the group known as Al Qaeda in the Arabian Peninsula. Since then, Saudi security forces claim to have killed or captured 5,000 suspected members of this movement. Only last week, the Saudi Interior Ministry announced the arrest of 208 suspected terrorists in six cells ahead of the annual hajj. Al Qaeda has not been totally defeated; its handiwork was evident when a security forces colonel was decapitated in April and his headless body left for his son to find in the entrance of their house. But terrorist activities have become fragmented and smaller in scale than they were in 2003 and 2004, when al Qaeda was staging high-profile raids in Riyadh. Cooperation with American intelligence and law enforcement agencies, once anemic, has become more robust, even if the Saudis still refuse to imprison prominent individuals implicated by the U.S. Treasury in the financing of terrorism.

The Saudi government claims it has moved to tone down the rhetoric of sermons, schoolbooks, and official publications distributed at home and abroad. (According to PBS's Frontline, one Saudi ninth-grade textbook instructed students, "The day of judgment will not arrive until Muslims fight Jews, and Muslims will kill Jews until the Jew hides behind a tree or a stone. Then the tree and the stone will say, 'Oh Muslim, oh servant of God, this is a Jew behind me. Come and kill him.'") Outsiders have to take the Saudis' word for the state of their reforms; independent verification is hard to come by since the kingdom does not publicly release its school texts and has denied Western officials access to schools.

In any event, poisonous attitudes built up over many decades cannot be changed overnight--even if the Saudi government were determined to effect a radical break, which it is not. Many members of the royal family still exhibit attitudes that raise eyebrows in the West. Prince Nayef, the hardline interior minister, for instance, once publicly suggested that "Zionists" were behind 9/11. By all accounts, King Abdullah, who took the throne in 2005, is one of the more moderate and enlightened royals. But how much change can an 84-year-old monarch implement in a tribal society that still functions by consensus? While the UAE is a youthful meritocracy bubbling with new ideas, Saudi Arabia is a staid gerontocracy in which change occurs at a glacial pace.

Saudi Arabia's modest experiment in democracy has already been aborted. Two years ago the Saudis allowed elections to some seats on municipal councils. The biggest winners were hardline Islamists, so the government has, probably wisely, put the kibosh on voting for now. Economic reform is still moving ahead: The government is privatizing some state-owned enterprises, liberalizing the financial services sector, and loosening rules for foreign investment. The number of foreign financial institutions with offices in Riyadh has shot up from 10 a few years ago to over 100 today. (American firms are losing out in many instances to Europeans and would be wise to return to what has become a more vibrant non-oil economy.)

But despite talk about possibly letting women drive and other such reforms, there is little progress on the social front. Abdullah seems determined to avoid any frontal clash with the kingdom's clerical establishment. Instead of going at the clerics, he is going around them. Dissatisfied with what is being taught in Saudi schools, he is funding 25,000 scholarships to send Saudis to study in the West. He is also building a new citadel of higher learning, King Abdullah University of Science and Technology, that is supposed to be a Saudi MIT with an endowment of $10 billion. It is being constructed not by the hardline Education Ministry but by the more progressive state oil company, Saudi Aramco.

The university will be part of King Abdullah Economic City, an entirely new metropolis planned for an undeveloped spot on the Red Sea. This is only one of six new "economic cities" supposed to be erected across the kingdom. The Saudis, it seems, have Dubai envy. They still derive 45 percent of their GDP, 75 percent of their budget, and 90 percent of their export earnings from oil, and they would like to diversify more than they did during the last oil boom. It seems doubtful that they will succeed in emulating their neighbors, however, until they relax their stifling social strictures--and that won't happen anytime soon.

If anything, Saudi Arabia is going backwards. Older residents recall that the kingdom was more tolerant and progressive prior to the 1980s. The turning point was the 1979 Iranian Revolution and the takeover of the Grand Mosque in Mecca by Islamic radicals. A 50-something Saudi journalist we met recalled that when he was growing up men and women could actually go to social events together. That's inconceivable today.

Unless the Saudi government can nudge the country toward the future at a faster pace without at the same time triggering a fundamentalist revolution, it will continue to be a serious security concern for the West no matter how much its law enforcement agencies cooperate in counterterrorist operations. Indeed, it is no surprise to learn that Saudi Arabia remains the No. 1 foreign source of funds and suicide bombers for Al Qaeda in Iraq, with Saudis comprising some 40 percent of foreign jihadists. That pattern is likely to remain unchanged as long as jihadist ideology continues to be reinforced by Saudi institutions, ensuring that the kingdom remains mired in the past even as neighbors like the UAE zoom into the future.

Max Boot is a senior fellow at the Council on Foreign Relations, a contributing editor to THE WEEKLY STANDARD, and author of War Made New: Technology, Warfare, and the Course of History. Lee Wolosky, a partner in the law firm of Boies, Schiller & Flexner LLP, served on the National Security Council under Presidents Clinton and George W. Bush.

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