The State Department said earlier this year in its report on global religious practices that there was no freedom of religion in the kingdom, but Secretary of State Colin Powell decided not to add the country to the U.S. religious freedom blacklist.

In its annual report, the congressionally mandated watchdog, set up to provide policy advice to the U.S. government, described the decision as a mistake and called on the White House to address the spread of Wahhabism in the kingdom, Agence France-Presse (AFP) said.

"The U.S. government should designate Saudi Arabia a 'country of particular concern' under the International Religious Freedom Act of 1998," the report said.

It also urged top officials to determine whether "the Saudis are directly or indirectly funding efforts to propagate globally, including in the United States, a religious ideology that explicitly promotes hate, intolerance, and other human rights violations, and in some cases violence toward members of other religious groups."

President Bush, speaking at the Indiana State Fairgrounds Tuesday, denounced the attacks, and said it was the work of "killers whose only faith is hate."

The report was issued as Powell visited Saudi Arabia shortly before the blasts, as the State Department has always been seen as favoring private diplomacy over public confrontation with Saudi officials.

Some officials in the State Department say it would be better to work behind the scenes with the Saudis and give them a chance to improve their record before designating them a country of concern.

"The behind-the-scenes approach is practical, reasonable ways for moving forward," one State Department official said.

Such steps could include a project to revise Saudi textbooks or encourage the Saudi government to furnish unadorned buildings for non-Muslim religions, he added.

Meanwhile, the Christian Science Monitor said that the well-coordinated bomb attacks in Saudi Arabia - the worst against Americans since 9/11 - are also believed to be a new attempt by terrorists to exploit tensions between the United States and a key ally in the Middle East.

"That was no accident - striking Americans in the heart of Saudi Arabia," says Jean-Francois Seznec, an expert on Saudi Arabia at Columbia University in New York, told the Monitor.

"Al-Qaeda is sending a message to the Americans and to the Saudis. Even though the military may leave, Americans are still too strong in the kingdom. [Al-Qaeda] wants all links severed," he added.

Just investigating who was behind the attack could exacerbate tensions between Washington and Riyadh. Because American civilians were killed in this attack, there will be pressure on the U.S. to manage the probe and punish the culprits. And that may be hard for the Saudis to deal with at home, the Monitor said

That caused the U.S. to recalibrate its troop placements inside Saudi Arabia. Moreover, the investigation that followed - carried out by the FBI in tandem with the Saudis - resulted in a higher degree of tension between the U.S and Saudi Arabia.

One of the companies targeted in this latest attack, for example, is Vinnell Corp., which trains the Saudi National Guard that is controlled by Saudi Arabia's Crown Prince Abdullah.

The watchdog also expressed concern over the rights of believers in Russia, Vietnam, China, North Korea, Laos, Sudan and Belarus.

The commission called on top American officials to ensure that freedom of worship was respected in Afghanistan as the reconstruction process grinds on.

Regarding Russia, the commission urged the Bush government to explain to Moscow that its efforts to combat terrorism should not be used as an excuse to restrict the rights, including that of religious freedom, to ethnic minorities.

It also referred to a report cited by Russian newspaper Gazeta, allegedly co-authored by Minister for National Affairs Vladimir Zorin which purportedly warned of threats to Russian security from groups such as the Roman Catholic church, Protestant groups and Islamic groups.

"Though welcoming the assurances from Russian government officials that the so-called 'Zorin report' does not reflect government policy, the U.S. government should continue to press the Russian government to ensure that the views expressed in the leaked report are not adopted as Russian government policy," the commission said.

In Vietnam, the report called on the U.S. government to make clear to Hanoi that an improved performance on religious toleration was essential if its relations with Washington were to broaden.

A list of actions Vietnam should be told to take was appended, including the halt to surveillance and bans on religious meetings for ethnic minorities, including those in the restive Central Highlands region.

It also called on the State Department to designate Vietnam a country of "particular concern" under U.S. law.

The Belarus government should also face stiff U.S. pressure over human rights, the report said, calling on U.S. officials to make clear they favored genuine movements towards democracy and protection of religious rights.

The U.S. commission warned that it was "seriously concerned about U.S. policies in Afghanistan and their impact on Afghanistan's future."

"There are indications that Afghanistan is being reconstructed -- without serious U.S. opposition -- as a state in which an extreme interpretation of Sharia would be enforced by the government which the United States supports and with which our nation is closely identified."

It also called on Washington to call for the expansion of the International Security Assistance force beyond Kabul and its environs and to ensure that the country's fledgling new security forces screen would be applicants to exclude past human rights violators.