(Adds details about nationalities, U.S. comment)

By Andrew Hammond

RIYADH, June 25 (Reuters) - Saudi Arabia has detained 520 suspected al Qaeda-linked militants since January, accusing some of them of planning car bomb attacks against an oil installation in the kingdom, the Interior Ministry said on Wednesday.

A ministry statement read out on Saudi television said the detainees were part of a wider plot managed from abroad and involving militant groups seized last year.

Among the detainees were some Asian and African nationals.

Some planned to use car bombs to attack an oil installation and a security target in coordination with al Qaeda second-in-command Ayman al-Zawahri, who had planned to send fighters from Iraq, Afghanistan and North Africa to help them, the ministry statement said.

"Security forces managed to arrest one cell in the Eastern Province led by African residents ... their concern was to get close to people working in the oil sector in order to find work in oil installations," it said.

There were 40 Mauritanians among those held in the province, as well as Afghans, Iraqis and Yemenis, a security source said.

The kingdom, which has faced a campaign of violence by al Qaeda-linked militants since 2003, arrested hundreds of suspects in 2007 but because of a tough security crackdown has not been hit by any major attacks for over two years.

The ministry said a total of 701 people were arrested in recent months but 181 were released for lack of evidence.

The last major attack by militants was a failed attempt to storm the world's largest oil processing plant at Abqaiq in the Eastern Province in February 2006.

Saudi Arabia is the world's biggest oil exporter.

In Washington, State Department spokesman Tom Casey said the arrests were "another indication that al Qaida and the terrorist groups out there remain, and remain a challenge, not only for the United States and for Saudi Arabia but for the broader region and, really, for the world".

SECURITY POLICY

Dubai-based Saudi analyst Fares bin Houzam said the arrests showed that Saudi security policy was failing to challenge al Qaeda's appeal.

The group, led by Saudi-born Osama bin Laden, accuses the royal family of being corrupt, un-Islamic tyrants allied to the United States. The government condemns the group as "deviants" abusing religion to justify a campaign of violence that has killed civilians and destroyed property.

"The government is operating only on the security level. The efforts at the level of ideology have come to nothing," said bin Houzam, a former militant sympathiser. "I don't see any efforts on the ground, it's all just in the media."

Liberal and Islamist government critics say the country needs political reform to temper the autocratic rule of the Al Saud dynasty, and allow ordinary people a say in government.

King Abdullah has led efforts to end religious extremism in the education system and open up dialogue between different groups in society, but opposition figures say it is not enough. Some opposition critics have been arrested over the past year.

"For 25 years Saudis were told by their teachers, religious scholars and media that they should help Muslims in conflict abroad," said Thomas Hegghammer, a research associate at Princeton University. "It will take a very long time to change that perception."

The ministry statement said the Eastern Province cell leader was found with a taped message from Zawahri.

State television showed a cache of ammunition which it said the suspects had tried to hide in the desert.

The detainees included another cell that was collecting funds in the Red Sea port city of Yanbu, the scene of an attack on foreigners working in the energy sector in 2004.

"They were acquiring money by any means including theft and fraud in order to fund terrorist activities inside and outside the country," the statement said. "They tried to exploit religious sentiment in the country through Internet propaganda." (Reporting by Andrew Hammond; Editing by Diana Abdallah)

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