LONDON—It went up in July, a 100-foot-tall testament to the fearless and fearsome warrior who became a god. And now it’s wrapped in a gigantic white sheet.

The statue of Guan Yu – a third-century Chinese General revered for his bravery and loyalty – met its undignified fate last month in the Indonesian province of East Java. Because of Guan Yu’s significance to Buddhism and Confucianism, which worship him as a god, hardline Islamic groups called it a blasphemous behemoth, took to the streets, and threatened to remove it. In response to the controversy, leaders at the Chinese Confucian temple where the statue stands decided to cover it.

This may sound like a strange turn of events for Indonesia, a diverse archipelago of at least 17,000 thousand islands which has developed the national motto “unity in diversity.” Perhaps because of that diversity, the world’s most populous Muslim nation at 260 million strong is known for its practice of a moderate, multicultural form of Islam – one that has long respected the rights of ethnic minorities, including the Chinese that make up less than five percent of the population.

In the past few years, however, it has started to change. The Guan Yu showdown is just the latest in a series of clashes which have destroyed or defaced a number of statues. This growing profile of Islamic fundamentalism is unprecedented. It has led to legislative proposals to ban alcohol, the imposition of Sharia law in some regions on non-Christians, the recent imprisonment of a rising political star – and at least 2,000 Indonesians who have trained in Syria to fight for the Islamic State of Iraq and Syria (ISIS).

But the good news, a well-known Indonesian political expert tells me, is that “These issues are all at the local level – limited to more-conservative regions – and not the national level. It’s all about local dynamics.” Indeed, a recent survey of the general Indonesian population conducted by SMRC Polling found that just two percent of Indonesians have sympathy for ISIS while 95% reject it. Whether or not local Muslim extremism will go national is uncertain. But what is undeniable is that this rising instability in the world’s third-largest democracy can be traced back directly to Saudi Arabia.

The two nations have long found themselves on opposite sides of religious divide. Nothing quite embodies this split like Nahdlatul Ulama (NU), a religious organization founded nearly a century ago as an alternative to the hardline form of Islam found in Saudi Arabia. With over 30 million members, it has become the largest Muslim organization in Indonesia and played a critical role in the country’s history (one of its chairmen became President in 1999). Throughout its existence, NU has used that position to counter extremist groups.

But NU’s influence in Indonesian public life, while still significant, has steadily eroded in recent years. The cause lies with a growing number of Saudi Arabian acolytes that practice an ultra-extreme form of Sunni Islam known as Wahhabism, the basis for the most virulent forms of Islamic extremism around the world. For the uninitiated, Wahhabism advocates a medieval interpretation of the Koran, rejects modernity in all forms, and promotes, in the words of Saudi Muslim scholar Ahmed Ali, that any non-Wahhabis (including Christians, Jews, Confucians, and Shiite Muslims) “be hated, be persecuted, even killed.”

As I wrote in 2015, Saudi Arabia has reportedly spent $200 billion over the past three decades funding Wahhabi religious schools throughout the Muslim world. As former U.S. Secretary of State Hillary Clinton put it in a cable released by Wikileaks in 2009, “Donors in Saudi Arabia constitute the most significant source of funding to Sunni terrorist groups worldwide ... a critical financial support base for al-Qaeda, and other terrorist groups.” Riyadh-directed religious funding has sowed the seeds of political extremism from Paris to Pakistan -- and is now working to establish that same foothold in Indonesia.

As the Boston Globe reported earlier this year, Saudi Arabia has supported more than 100 boarding schools and 150 mosques across Indonesia. But the center of attention remains the Institute for the Study of Islam and Arabic (LIPIA), an Arabic-speaking, gender-segregated, and tuition-free university in Jakarta – where, as the Globe put it, “students learn an ultra-conservative form of Islam that favors hand amputation for thieves, stoning for adulterers, and death for gays and blasphemers.” The most promising students receive funding to continue their studies in Riyadh, and have gone on to become influential teachers, ministers, and right-wing political leaders.

Over the past fifteen years, these efforts have started to yield dividends. Last year, a study led by Dr. Didin Syafruddin of Jakarta’s Syarif Hidayatullah State Islamic University across five of Indonesia’s 34 provinces found that nearly 80 percent of Islamic education teachers support implementing Sharia law – “causing alarm,” as Voice of America reported, “among some moderate Muslim groups.” Meanwhile, local governments have passed nearly 500 local ordinances – from curfews to headscarf requirements to alcohol bans – based on the concepts of Sharia. Again, these developments are local and regional. They haven’t gone national – yet.

But these changing preferences have given rise to new civil society groups that promote a fundamentalist interpretation of Islam. Islamic vigilantes like Hizb ut-Tahrir and the Islamic Defenders Front (FPI) have grown rapidly in the past few years. As Karen Brooks, a fellow at the Council on Foreign Relations, recently put it, this has led to a “troubling erosion of tolerance toward minorities in Indonesia.” A recent electoral campaign for one of the country’s most important political offices shows why this is such a troubling development for Indonesian democracy.

Basuki Tjahaja Purnama, the Chinese and Christian governor of Jakarta known as Ahok, entered his re-election campaign with the support of the President, a solid lead in the polls and a staggering 76% approval rating. But he faced significant opposition from Islamic groups, particularly the FPI, which argued against his candidacy in explicitly religious terms. Muslim organizations organized rallies decrying him as a blasphemer. They argued on the streets and in the mosques that Muslim voters could only support Muslim candidates. And, perhaps most chillingly, they filed blasphemy charges against him in court.

This strategy worked. Ahok lost the election in April. In May, he was convicted on blasphemy charges and sent to a detention center. He will spend the next two years in prison.

As Islamic groups mobilized against Ahok, the government – led by President Joko Widodo, a close Ahok ally – started to mobilize against them. In early July, the Indonesian Parliament empowered the President to unilaterally ban organizations whose beliefs run counter to those expressed in the Indonesian constitution. The announcement drew significant criticism from both human rights groups and Islamic organizations. But it was to no avail: a week after the announcement, Hizb ut-Tahrir, which supports a global Islamic caliphate in direct contradiction of Indonesia’s pluralist state ideology, was banned.

The implications of Ahok’s defeat and its aftermath are troubling. Rising religious intolerance can lead to poisonous identity politics. Islamist groups are already using the tactics that took down Ahok on other minority governors throughout the country. The effects could be chilling both for minority officeholders and minority involvement in political life.

An early March visit to Indonesia by Saudi King Salman bin Abdulaziz Al Saud – the first such visit in 47 years – didn’t help. He announced an additional $6 billion of Saudi investment in the island nation, including funding for renovations to the LIPIA campus in Jakarta and the creation of three more LIPIA campuses in the cities of Makassar, Surabaya, and Medan. As usual, he also promised to help fight extremism.

The Indonesian government needs to be careful not to let Riyadh pull the wool – or a white sheet – over its eyes. If it does, Guan Yu’s statue won’t be the only thing that harkens back to the Middle Ages.

Stanley A. Weiss is a business leader and founder of Business Executives for National Security. His memoir, “Being Dead is Bad for Business,” is available online and a collection of his selected writings, titled “Where Have You Gone, Harry Truman?” was just published by Disruption Books, available here.