Washington ? Cash handouts are a way of life, and a way of survival, for Saudi Arabia’s otherwise rapacious royals. Paying protection money is how they make problems disappear. Or at least travel to someone else’s doorstep.

Osama bin Laden is only the most horrible example of this time-honored Saudi practice going awry. His family and his nation were happy to see bin Laden spending smallish chunks of the family fortune in Sudan, Pakistan and Afghanistan on his gruesome hobbies. It kept him from lining up the royal family – or his own extended, estranged family – in his gun sights.

But in the interdependent modern world that the Saudis try to inhabit on a part-time basis, shifting your troubles to others can splash back quickly. The Saudi royal system must now adapt at its very core – a core built on providing protection money and privilege to obscurantist fanatics – or endure terminal decline.

Saudi Arabia’s money habits jumped back into the headlines with the discovery that the wife of Bandar bin Sultan, the Saudi ambassador to Washington, forked over large financial payments to a Saudi family in San Diego simply because the family asked for help. The family then provided handouts of its own to two other Saudis who helped stage the Sept. 11, 2001, day of terror.

The suspicious will see Islamic conspiracy, the trusting will see good-hearted Bedouin charity. Investigators will have to sort out the truth or, more likely, a reasonable facsimile thereof after it is massaged beyond recognition by the diplomats. Not even the State Department can disguise the central reality, however: al-Qaida and other terrorists float in a sea of Saudi petrodollars that have been unleashed on the rest of the world with no control and precious little concern about what happens outside the kingdom.

Saudi spokesmen are using an offensive defense, as they did last year when they initially denied that 15 of the 19 Sept. 11 hijackers could have been from the kingdom. (They were.) The courtiers are again outraged, dismayed and shocked that anyone could think that the roots of America’s worst terrorist outrage lie in Saudi practices and lucre. (They do.)

Individual Saudis tend to have generous, sharing natures. Their easy, lavish hospitality -once you have been admitted to their circle or to their country, which is never an easy task – is legendary. On a dozen visits, I was made to feel at home at Crown Prince Abdullah’s table and in the homes of modest citizens. Giving to charity is in fact an admirable religious duty and personal habit for many Saudis.

But “charity” developed into a sinister code word as the royal family’s vast oil revenues and its appearance of weakness and fear attracted the Middle East’s sharks. The Saudis quickly became adept at keeping Palestinian gunmen, Syrian terror operatives, Iraqi hit squads and other bad actors off their backs in an elaborate extortion racket called “Arab solidarity.” They never met a problem they didn’t try to buy off.

A more sophisticated and benign version of this is the royal family’s extravagant purchase of weapons, airliners and goods from the United States and other Western countries, which then provide the Saudis with military protection and support. Bin Laden has made this symbiosis the primary target of his terror campaign.

America’s war on terrorism and the disappearance of abundant petrodollar surpluses bring the Saudi rulers to a traumatic moment of choice. To survive in the 21st century, they must actively help put the extortionists and terrorists out of business rather than fund and shield them.

The biggest change must come at home: The House of Saud must end the Faustian bargain it originally made with the country’s extremist Wahhabist sect, which was given significant sway over the kingdom’s social, economic and political life in return for supporting the monarchy. Wahhabi clerics have used Islamic charity as a cover to promote terrorism and hatred in the Middle East and Central Asia. The Saudi monarchy must disown and delegitimize the extremists or remain mired in a disappearing world.

American officials are predictably loath to rock a sinking ship. Secretary of State Colin Powell sprang to the defense of Bandar and his wife: It was “unlikely” they “would do anything knowingly to support anybody connected to terrorist activity.” (Wait: That’s a defense? Powell has worked with Bandar for nearly two decades, more closely than he has with most members of this administration. Only “unlikely”? Hmmm.)

Americans need to be honest with themselves and with the Saudis about what has been going on and how it needs to change. That is the only way to provide genuine protection for Saudi Arabia.