(Recasts with Saudi ban; adds new RIM statement, analyst
comment, Saudi ban; closing stock prices. Changes dateline to
New York)

By Sohail Karam and Sinead Carew

RIYADH/NEW YORK (Reuters) - Saudi Arabia Tuesday
ordered at least one Research In Motion's BlackBerry smartphone
service to be blocked as of Friday, becoming the latest
government to threaten to curb the device on security grounds.

The issue, which pits governments against BlackBerry's
super-secure encrypted services, has flared at a particularly
inopportune time for RIM. On Tuesday, the company wanted all
eyes on the unveiling of its new BlackBerry model at an event
in New York.

The new touch-screen BlackBerry Torch is considered RIM's
response to tough competition on its North American home turf
from the likes of Apple Inc's iPhone, which is driving
the company to seek new markets offshore.

Hours before Saudi Arabia's move, a RIM
executive said governments were unlikely to carry through on
threats because state officials themselves depend heavily on
the iconic devices for communication.

"I believe they'll have trouble pulling the trigger to shut
down BlackBerry," RIM Chief Technology Officer David Yach told
Reuters on the sidelines of the New York launch bash. "Most
governments in the world rely on BlackBerry."

Earlier, newspapers reported that RIM may make concessions
to India and Kuwait after their governments voiced concerns the
security risk posed by the smartphones, fearing they could be
used for plots against the state.

Unlike rivals Nokia and Apple, RIM controls its
own networks, which handle encrypted messages through centers
in Canada and the UK.

But Canada-based RIM said in an emailed statement that
"claims" it has provided unique wireless services or access to
any one country are "unfounded."

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Take a Look on Blackberry's data risk [ID:nN02151382]
Global smartphone market: http://link.reuters.com/fup82n
ANALYSIS on Blackberry's secure data [ID:nLDE67103O]
Reuters Insider: http://link.reuters.com/myw92n
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"There is only one BlackBerry enterprise solution available
to our customers around the world and it remains unchanged in
all of the markets we operate in," the company said.

U.S. President Barack Obama is arguably the world's most
famous BlackBerry user. He had to push hard to keep his beloved
device due to security concerns and his address book was
reduced to a small group of personal friends and senior staff.

Saudi Arabia, India and the United Arab Emirates together
represent only about 5 percent of the 41 million BlackBerry
devices in service worldwide. Even so, they are markets with
growth potential for RIM.

STOCK FALLS, HOPES TOO HIGH?

RIM's Nasdaq-listed shares ended down 2.5 percent at $55.53
while its Toronto-listed shares fell 4 percent to C$56.77.

Analysts blamed the fall on disappointment that the
much-hyped BlackBerry Torch, which features a new operating
system, revamped browser and easier-to-use display, lacked a
"wow" factor.

"It catches RIM up with what everyone else is doing. Most
people who are just looking at the hardware aren't particularly
excited," said Charter Equity Research analyst Ed Snyder.

The success or failure of the new smartphone is far more
important for RIM's immediate fortunes than the Middle East
security issues, Snyder said.

"If the Middle East changed their tune and told everybody
they should do nothing but buy RIM (phones), if the (new) phone
tanks, the stock is not going up," Snyder said.

Earlier, India's Economic Times newspaper reported that RIM
had agreed to allow security authorities in the country to
monitor BlackBerry services after pressure from governments
worried about national security.

Separately, Kuwaiti daily al-Jarida, quoting a source it
did not identify by name, said RIM had given "initial approval"
to block 3,000 porn sites at the request of Kuwait's
communications ministry. It said security was also a concern.

The two reports follow the announcement on Sunday that the
United Arab Emirates would suspend BlackBerry Messenger, email
and Web browser services from Oct. 11 unless it could access
encrypted messages.

The Saudi telecom watchdog said Tuesday that telecom
companies in the kingdom must block an unspecified Blackberry
service as of Friday. Industry sources told Reuters on Sunday
that the intention was to ban Blackberry Messenger.

The ban would last until the kingdom's three mobile phone
operators "fulfill the regulatory requirements it has
requested," according to a statement to media.

NEGOTIATIONS ONGOING

The Economic Times, citing internal government documents,
said RIM has offered to share with Indian security agencies its
technical codes for corporate email services, open up access to
all consumer e-mails within 15 days and also develop tools in
six to eight months to allow monitoring of chats.

An Indian government source told Reuters a deal could be
reached by the end of the month.

Kuwait's al-Jarida said Kuwait's government was working
with RIM and telecom companies on "legal controls that would
guarantee national security on the one hand, and the rights of
citizens ... to use the device's services on the other."

Despite the ongoing wrangling, analysts expect the two
sides to reach a compromise in the UAE.

"I don't expect the UAE will be a day without BlackBerry
access," said Jon Alterman, director of the Middle East program
at the Washington-based Center for Strategic and International
Studies.

($1=$1.03 Canadian)
(Additional reporting by Devidutta Tripathy in New Delhi;
Diana Elias in Kuwait; Erika Solomon and Amena Bakr in Dubai;
Euan Rocha in Toronto; Tabassum Zakaria in Washington. Writing
by Jason Neely and Nicole Mordant; Editing by Frank McGurty)