Prince Abdullah, the effective regent of Saudi Arabia, placed a soft, plump hand on his young compatriot's shoulder, smiled and spoke of friendship and loyalty. His words were smooth and conciliatory, but there was no doubting the harsh threat that lay beneath them.

"The family of Mohammed bin Laden have always been faithful subjects of our kingdom and have helped us greatly in our times of need," he told the gathering. "We are sure that nothing will be allowed to mar our good relations in the future."

It was the autumn of 1990 and Abdullah was addressing Afghan veterans in a beautifully furnished lounge in his palace in Riyadh. Although the men nodded respectfully at the prince's words, the man to whom they were directed could barely conceal his anger. "He was seething," one of the Afghan commanders said. "You could see it in his eyes."

A few months earlier, on Aug. 2, Saddam Hussein had invaded Kuwait. Osama bin Laden, then living in his home town of Jedda, had immediately sent a message to the Saudi royal family offering to form an army of 30,000 Afghan veterans to defeat the Iraqi dictator. The men who had defeated the Russians could easily take on Saddam, he said, and he was clearly the man to lead them.

Bin Laden was in for a rude -- and profoundly upsetting -- shock. The last thing the House of al-Saud wanted was an army of zealous Islamists fighting its war. Bin Laden was received by senior royals, but his offer was firmly rejected.

Worse was to come. Instead of the Islamic army he envisaged protecting the cradle of Islam, the defense of Saudi Arabia -- and thus of the holy sites of Mecca and Medina -- was entrusted to the Americans. Bin Laden, seething with humiliation and rage, could do nothing but watch as 300,000 U.S. troops arrived in his country and set about building bases, drinking Coke and alcohol and sunbathing. Bin Laden saw their presence as an infidel invasion. It even appeared to defy directly the dying words of the Prophet Muhammad: "Let there be no two religions in Arabia." The 33-year-old started lobbying religious scholars and Muslim activists throughout the Gulf. Playing on his celebrity status, he lectured and preached throughout Saudi Arabia, circulating thousands of audio tapes through mosques.

He started recruiting his army and sent an estimated 4,000 men to Afghanistan for training. The regime grew uneasy, raided his home and put him under house arrest. Bin Laden's family, worried that his activities might jeopardize their close relations with the ruling clan, tried to bring him back into the fold but were forced eventually to effectively disown him. The pressure mounted.

In late 1990, an escape route appeared. Bin Laden received an offer of refuge from Hassan al-Turabi, the charismatic Islamist scholar in effect running Sudan. Turabi believed that the total defeat of Iraq and the discrediting of "secular" Arab regimes would lead to an opportunity to set up a "pure" Islamic government across the Muslim world. It was a seductive message. And the Saudi regime was thankful for an opportunity to get rid of him. They pushed bin Laden further in the hope that he would leave. Bin Laden cracked. He fled Saudi Arabia for Khartoum, the Sudanese capital. He was never to return to his homeland.

Bin Laden set up a home in a rich suburb of Khartoum with his four wives, his children and a core of close retainers. Then he flew in several hundred Arab veterans from Afghanistan to provide the basis of a broader organization. Life in Sudan was odd. There were football matches and bathing trips to the Blue Nile, and long junior common room-type arguments over whether Shia and Sunni Muslims should unite to fight the common enemy, and points of Islamic doctrine. Bin Laden even opened a personal bank account in his own name. And most of the time of "the sheikh" was spent making money, rather than spreading global jihad.

"The biggest myth concerns his wealth," Ghazi Algosaibi, Saudi Arabia's veteran ambassador to London, said recently. "I have read reports that he has $300 to $400 million stashed away. This is simply not true. When he left Saudi Arabia he did not take anything like that amount of money, and the Saudi authorities have taken great care to make sure he does not receive any money from the kingdom."

In the group's offices in Khartoum, bin Laden, as befitted the boss, had the largest office. The group was run like any other organization. There was a board of directors, a series of subcommittees and too many meetings. Employees nursed grievances over wages, healthcare and alleged favoritism. Perks included travel (using the passports of Arab volunteers killed in Afghanistan), free tea and groceries.

The organization ran a trading company called Laden International, a foreign exchange dealership, a civil engineering company and a firm running farms growing peanuts and corn. In payment for building a 700-mile road from the capital to Port Sudan, the government gave bin Laden the monopoly on sesame seed export. Sudan is one of the world's three largest sesame producers, so it was extremely lucrative.

Other ventures were less successful. A plan to import bicycles from Azerbaijan was a total flop. Other hare-brained schemes were hatched, half-implemented and then went nowhere. But there was still enough cash to keep al-Qaida's core business ticking along. The chief executive never lost sight of his main purpose. More than $100,000 in cash went to Islamists in Jordan, funds were sent to Baku to set up an operation smuggling Islamic fighters into Chechnya, and another $100,000 went to an Eritrean Islamist group.

At one point bin Laden bought a plane for $250,000 and hired a pilot. The plane soon crashed. He also set up several military training camps, and hundreds of Algerians, Palestinians, Egyptians and Saudis received instruction in bomb-making and terrorist tactics. Many of them had fought in Afghanistan and now, like bin Laden, were at a loose end. There was talk of assassinating President Mubarak of Egypt, though nobody was sure how to go about it, and there was some haphazard surveillance of possible targets for a bombing in East Africa, including the Nairobi embassy of the U.S.

There also appears to have been an unsuccessful attempt to buy components for nuclear weapons in Eastern Europe and a bid to smuggle hundreds of Kalashnikovs on camels across the desert to Egypt. A shipload of guns was sent to Yemen and operatives dispatched to help tribesmen fight U.S. troops in Somalia.

The CIA claim that bin Laden was behind the attacks on their troops in Mogadishu in 1993. However, there is little evidence that al-Qaida were heavily involved. "During bin Laden's stay in Sudan anti-American incidents happened in many places but none were conducted by his group in the usual sense of an order passed down a chain of command," one intelligence source said. "They were done by people who had trained in Afghanistan and had enough anti-American drive. Bin Laden may have sanctioned them but that was all."

It was a pattern that was to be often seen in the years to come. A car bomb in Riyadh in 1995 was blamed on him, with the Saudis producing video "confessions" from four Afghans for the attack. The Khobar Towers bombing a year later was also blamed on bin Laden, though Iranian agents are now the prime suspects. In 1994, when the Saudis publicly withdrew his citizenship, bin Laden's response was to exploit the power of the media. It is believed he set up a London office called the Advice and Reform Committee (ARC). Its job was allegedly propaganda, issued vitriolic criticism against the Saudi regime. It was run by Khalid al-Fawwaz, now fighting extradition to the United States from the U.K.

By January 1996, Khartoum was increasingly uneasy about its guest. Turabi contacted the Sudanese ambassador to Afghanistan, Atiya Badawi, who was based in Peshawar. Badawi, who had learnt the Pashtun language while fighting the Russians, had excellent contacts with his former comrades among the Mujahideen and, with Afghanistan split into hundreds of warring bandit fiefdoms, it was easy to persuade three of the most senior commanders in the Jalalabad area that a wealthy Saudi under their protection might give them an edge over their rivals. The three men -- all of whom are now dead -- flew to Sudan to ask bin Laden to return to the land of the jihad.

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