Islamic State (Isis), now being described in some quarters as “the most capable military power in the Middle East outside Israel”, is at the top of the global agenda. Naturally, there is discussion of its origins and backers.

It is notable that, in particular, the Saudi government has scrambled to deny any links to the group. In the past two weeks, the usually low-profile Saudi ambassador in the UK sent a strongly worded letter to the Guardian. The embassy issued a press release to the same effect, and last week the grand mufti of Saudi Arabia himself made a statement condemning Isis. This follows a $100m contribution to a UN anti-terror programme.

Saudi Arabia is increasingly feeling the heat of the Sunni hardline blowback. While the Saudi government technically doesn’t sponsor Isis, it has promoted a fundamentalist Salafi interpretation of Islam that has encroached into the mainstream Sunni space. This has created the conditions, inside and outside the country, for extremism to breed.

The clergy is a powerful force in Saudi Arabia. Its influence derives from the fact that the royal family has entered into a formal pact with the sheikhs, under which the understanding is that the House of Saud can hold on to political power, while the religious establishment gets to dictate the national character of Saudi Arabia, one that has remained doggedly extreme. This vision has also been exported abroad by both state and non-state actors, the former as a clumsy substitute for a coherent foreign policy, by which the Saudi government contributes funds for mosques and charitable organisations in Muslim countries as a way of purchasing influence; the latter via personal wealth and the zeal of private citizens.

Osama bin Laden was a perfect combination of the two, a personally motivated non-state actor, radicalised in the schools and mosques of Jeddah, who managed to also rope in the Saudi establishment by selling a religious mission to them – pushing back the Soviet invasion – in the guise of a political project.

But it seems even Saudis are beginning to see the foolhardiness of this arrangement. In a searing essay in the Saudi newspaper Al Riyadh last week, Hissa bint Ahmed bin Al al-Sheikh, a member of one of the most influential religious families in Saudi Arabia and a relative of the grand mufti, rails against the “farce of fatwas” in the kingdom, and records a litany of extremist measures introduced since the 1980s that have stifled public life and glorified a culture of “hatred and death” that she recognises in Isis. This is a culture disseminated via state media, the national curriculum and public order laws – legislation that many Saudi intellectuals warned against.

The Saudi establishment has sacrificed its people, and the wider Muslim world that lies within its influence, in return for immunity from religious revolt of the type that threatened Mecca in the 1970s. While the immediate focus vis-a-vis Isis needs to be on practical counter-extremism measures, the west can no longer afford to turn a blind eye to Saudi’s internal contradictions. These have spawned a decadent and west-friendly royal family that preside over a society where clerics run amok, where imams rant against infidels, religious minorities are oppressed, education is heavily slanted towards religion and where people are beheaded for sorcery. As far as containing the radical Islamic threat, the status quo is increasingly no longer working – neither for the Saudis, nor the western governments who support them.

Saudi salafism is not the wellspring of hardline Islamic groups worldwide, but it is part of something that might be – a tendency for Arab and Muslim governments to pay lip service to Islam to bolster their religious credentials through politically expedient means. These leaders simultaneously instrumentalise religion while oppressing any form of religious opposition. The combination of serious cash and the religious weight that comes from being the birthplace of Islam renders Saudi Arabia the most dangerous member of this club.

The long-term solution to the constant reincarnation of radical Islamic political movements doesn’t lie in grand public gestures like anti-terrorism funding, strong statements of condemnation, or “rehabilitation clinics” for radicals, but in dismantling state-sponsored religious indoctrination. As the Isis threats march on, the old calculations no longer work in Arab governments’ favour.

• This article was amended on 29 August 2014. An earlier version of the photo caption referred to Iran’s former president, Akbar Hashemi Rafsanjani as Iran’s foreign minister.

