By Andy Serwer

(FORTUNE Magazine) – Prince Alwaleed bin Talal bin Abdul Aziz al Saud is the richest businessman in the Muslim world, worth upwards of $20 billion. He is also one of the biggest--and most successful--foreign investors in the U.S. The Saudi royal (he's a nephew of the late King Fahd) has long-term holdings worth billions in companies such as Apple, Citigroup, and Time Warner (parent of FORTUNE's publisher). In early September the prince announced that he had increased his holdings in media giant News Corp. to 5.46% of the voting shares and reaffirmed his support for chairman Rupert Murdoch, following hints from Liberty Media CEO John Malone that he might attempt a takeover of News Corp. Before reports broke that Time Warner and Microsoft were in talks about an Internet alliance, Alwaleed spoke to FORTUNE's Andy Serwer by phone from Riyadh about why he's cozy with Murdoch, what he thinks of Carl Icahn's bid for influence at Time Warner, and whether the world is running out of oil.

Why did you up your stake in News Corp.?

Our move is pro-Murdoch. We approve of his strategy and approach. Some say this move is anti-Malone; it's not necessarily anti-Malone. It's pro-Murdoch. And we will be discussing having News Corp. invest in Rotana, our TV and media company here in the Middle East. Mr. Murdoch's DirecTV will be carrying Rotana, to broadcast its programming to Arab Americans in North America. I recently met Murdoch in New York City and told him, "You are in America, Australia, Europe, Asia--why not the Middle East?"

What's your take on Carl Icahn and Time Warner?

First of all, I own about $1 billion of Time Warner, or around 1%, and Mr. Icahn has a very small position. I know [Time Warner CEO Richard] Parsons and his strategy, and he came into a very messy situation. Any ideas Icahn has to increase the stock price--for sure we are not against it. But you can't just take a piece of Time Warner and get rid of it. It is a totality; each piece affects the operations of the entire company. The stock has been at $18 for two years, and we don't like that! I talked to Parsons after the meeting with Icahn, and I'm glad they met. I strongly believe that AOL is a jewel that has not been polished completely. My advice to Parsons is not to divest it. It could be our fuel--our Yahoo, our Google. The future is the Internet, and I am worried about divesting AOL, because it could be our locomotive.

Are you impatient with Citigroup? The stock is down, and you own almost 5%, or more than $10 billion.

The way I see it is that you are handing over the reins from a charismatic leader [former CEO Sandy Weill] to a technocrat. [Current CEO] Chuck Prince is taking some time. He got a very big lesson when he missed earnings last quarter, and Citi shares were punished. I don't like that either! But the stock is coming back, and analysts are upgrading it.

Let's talk big picture. Is the world running out of oil?

For sure the world is not running out of oil. We have at least one trillion barrels in the ground, and Saudi Arabia has 250 billion and growing. The price is psychological now; the markets are very, very worried about demand from China and India. But look at how the price is exaggerated. After Katrina, the price of oil fell from $70 to $63 in a week or two. That's 10%. That's not finance or production, that's psychology.

Where have you made good money recently?

Actually, in the markets here. Saudi Arabia, Egypt, Kuwait, Morocco, and Algeria. They are up more than 60% over the past 12 months. Some of it is the price of oil, but in countries like Egypt and Morocco, it is the opening up of economies and liberalization.

We just passed the fourth anniversary of 9/11. Are relations between Americans and Saudis healing?

Sept. 11 was a deep wound. These kinds of wounds take many years to heal, not just three or four. Yes, the terrorists were Saudis, but most Saudis do not agree with them. I hope things like King Abdullah visiting Texas will help bring us together. But it will take time.