Twixt silken sheets – in a bedroom whose walls are also covered in silk – and in the very palace of King Abdullah of Saudi Arabia, President George Bush awakes this morning to confront a Middle East which bears no relation to the policies of his administration nor the warning which he has been relaying constantly to the kings and emirs and oligarchs of the Gulf: that Iran rather than Israel is their enemy.

The President sat chummily beside the all-too-friendly monarch yesterday, enthroned in what looked suspiciously like the kind of casual blue cardigan he might wear on his own Texan ranch; he had even received a jangling gold " Order of Merit" – it looked a bit like the Lord Chancellor's chain, though it was not disclosed which particular merit earned Mr Bush this kingly reward. Could it be the hypocritical merit of supplying yet more billions worth of weapons to the Kingdom, to be used against the Saudi regime's imaginary enemies.

It was illusory, of course, like all the words that the Arabs have heard from the Americans these past seven days, ever since the fading President began his tourist jaunt around the Middle East.

You wouldn't think it though, watching this preposterous man, prancing around arm-in-arm with the King, in what was presumably meant to be a dance, wielding a massive glinting curved Saudi sword, a latter-day Saladin, who would have appalled the Kurdish leader who once destroyed the Crusaders in what is now referred to by Mr Bush as "the disputed West Bank".

Is this how lame-duck American presidents are supposed to behave? Certainly, the denizens of the Middle East, watching this outrageous performance will all be asking this question. Ever since the 1979 Iranian revolution, a Muslim Cold War has been raging within the Middle East – but is this how Mr Bush thinks one should fight for the soul of Islam?

Already by dusk last night, the US President's world was exploding in Beirut when a massive car bomb blew up next to a 4x4 vehicle carrying American embassy employees, killing four Lebanese and apparently badly wounding a US embassy driver. And while Mr Bush was relaxing in the Saudi royal ranch at Al Janadriyah, Israeli forces killed 19 Palestinians in the Gaza Strip, most of them members of Hamas, one of them the son of Mahmoud Zahar, a leader of the movement. He later claimed that Israel would not have staged the attack – on the day an Israeli was also killed by a Palestinian rocket – if it had not been encouraged to do so by George Bush.

The difference between reality and the dream-world of the US government could hardly have been more savagely illustrated. After promising the Palestinians a "sovereign and contiguous state" before the end of the year, and pledging "security" to Israel – though not, Arabs noted, security for "Palestine" – Mr Bush had arrived in the Gulf to terrify the kings and oligarchs of the oil-soaked kingdoms of the danger of Iranian aggression. As usual, he came armed with the usual American offers of vast weapons sales to protect these largely undemocratic and police state regimes from potentially the most powerful nation in the " axis of evil".

It was a potent – even weird – example of the US President's perambulation of the Arab Middle East, a return to the "policy by fear" which Washington has regularly visited upon Gulf leaders. He agreed to furnish the Saudis with at least £41m of arms, a figure set to rise to more than £10bn in weaponry to the Gulf potentates under a deal announced last year – all of which is supposed to shield them from the supposed territorial ambitions of Iran's crackpot President, Mahmoud Ahmadinejad. As usual, Washington promised the Israelis that their "qualitative edge" in advanced weapons would be maintained, just in case the Saudis – who have never gone to war with anyone except Saddam Hussein after his 1990 invasion of Kuwait – decided to launch a suicidal attack on America's only real ally in the Middle East.

This, of course, was not how the whole shooting match was presented to the Arabs. Mr Bush could be seen ostentatiously kissing the cheeks of King Abdullah and holding hands with the autocratic monarch whose Wahhabi Muslim state had only recently showed its "mercy" to a Saudi woman who was charged with adultery after being raped seven times in the desert outside Riyadh. The Saudis, needless to say, are well aware that Mr Bush's reign is ending amid chaos in Pakistan, a disastrous guerrilla war against Western forces in Afghanistan, fierce fighting in Gaza, near civil war in Lebanon and the hell-disaster of Iraq.

The bomb in Beirut, just before five in the evening, must still have come as a rude shock to the luxuriating President who has such close ties with the Saudi regime – despite the fact that the majority of hijackers in the crimes against humanity of 11 September 2001 came from the kingdom – that he allowed its junior princes to fly home from the United States immediately after the attacks. Two trips to Mr Bush's Texas ranch by King Abdullah was apparently enough to earn the US President a night in the Saudi king's palace-farm, surrounded by groomed lawns and grassy hills.

Heard across many miles of the Lebanese capital, the bomb devastated buildings in a narrow street in the east of the city through which the vehicle was passing, just as the US ambassador – on a different route into the city – was travelling to a central Beirut hotel reception before leaving for Washington. A State Department spokesman, however, insisted that no US citizens had been hurt. The American SUV had taken an obscure laneway close to the Karantina bridge to travel north of Beirut along the bank of the city's only river when it was struck, leading local Lebanese military officials to ask themselves if the bomber had inside knowledge of the route they were taking.

There was talk that this was a "dummy" convoy staged to distract potential bombers from the journey which Ambassador Jeffrey Feltman was taking to a reception at a downtown hotel. A carpet manufacturer's factory was smashed by the blast which tore down roofs and smashed windows more than half a mile from the scene.

For Arab leaders, Mr Bush's message to the Gulf leaders was wearily familiar. In the 1980s, when the Reagan administration was supporting Saddam Hussein's invasion of Iran, Washington spent its time warning Gulf leaders of the danger of Iranian aggression. Once Saddam invaded Kuwait, America's emphasis changed: It was now Iraq which posed the greatest danger to their kingdoms. But once the emirate was liberated, the oil-wealthy monarchs were told that – yet again – it was Iran that was their enemy.

Arabs are no more taken in by this topsy-turvy "good-versus-evil" narrative than they are by Washington's promises to help create a Palestinian state by the end of the year, scarcely a day before Israel publicly admitted to plans for yet more houses for settlers on Arab land amid Jewish colonies illegally built on Palestinian territory.

Yet to understand the nature of this extraordinary relationship with the Gulf monarchs, it is necessary to recall that ever since the President's father promised a weapons-free "oasis of peace" in the Gulf, Washington – along with Britain, France and Russia – has been pouring arms into the region.

Over the past decade, the Gulf Arabs have squandered billions of their oil dollars on American weapons. The statistics tell their own story. In 1998 and 1999 alone, Gulf Arab military spending came to £40bn. Between 1997 and 2005, the sheikhs of the United Arab Emirates – Mr Bush's hosts before he continued to Riyadh – signed arms contracts worth £9bn with Western nations. Between 1991 and 1993 – when Iraq was the "enemy" – the US Military Training Mission was administering more than £14bn in Saudi arms procurements and £12bn in new US weapons acquisitions. By this time, the Saudis already possessed 72 American F-15 fighter-bombers and 114 British Tornados.

How little has changed in the past 17 years. On 17 May 1991, for example, George Bush Snr said there were now "real reasons to be optimistic" about a peace in the Middle East. "We are going to continue to work in the [peace] process," he said then. "We are not going to abandon it."

James Baker, who was the American Secretary of State, warned on 23 May 1991 that the continued building of Jewish settlements on Palestinian land " hindered" a future Middle East peace, just as the present Secretary of State said last week. At the time, the Israelis were reassured by Dick Cheney that the US would safeguard their "security".

The West may have a short memory. The Arabs, who happen to live in the piece of real estate which we call the Middle East and who are not stupid, have not. They understand all too well what George W Bush now stands for. After advocating "democracy" in the region – a policy which gained electoral victories for Shia in Iraq, for Hamas in Gaza and a substantial gain in political power for the Muslim Brotherhood in Egypt – it seems to have dawned on Washington that something might be slightly wrong with Bush's priorities. Instead of advocating a "New Middle East", Mr Bush, lying amid his silken sheets in the Saudi king's palace, is now pursuing a return to the "Old Middle East", a place of secret policemen, torture chambers – to which prisoners can be usefully " renditioned " – and dictatorial "moderate" presidents and monarchs. And which of the Gulf despots is going to object to that?