Money was spread like the sands of Arabia and glitter gushed like an oil well when His Royal Highness Prince Bandar Bin Sultan, the Saudi Arabian ambassador, entertained last night.

In a day when oil prices have hit the lowest point in almost a decade, the Saudi Arabians may have hit a new high in extravaganzas, with Washington's most elaborate fashion event -- probably the city's most expensive single evening ever celebrating the culture of a country. In the last few years, with the oil-fueled inflation and the departure of the Shah's ambassadors, the Middle East embassies' entertainment has been more subdued.

Last night 375 guests in the Departmental Auditorium were transported into a Rudolph Valentino movie, or some other setting of radical sheik.

With swords, scimitars and daggers waving and revolver holsters on the hip, dancers swooped across the stage, whooping and howling and beating tasseled drums.

Then came women in the traditional dress of the southern highlands, the western cities and the central and eastern plains: gold decoration so heavy you wondered how they could sway their hips under all of it. With embroidered waist-length veils, hung with tassels; a treasury worth of silver jewelry dangling and dancing on demure chests; cloaks shrouding the wearer like a tent; great sheets of chiffon floating like colored clouds of sand; costumes so elaborate they must have taken a whole tribe of weavers; feet bare, ankles hung with bracelets -- the women came down the runway like so many desert mirages.

All this, while 27 projectors flashed Saudi scenes onto a nine-screen backdrop, 60 feet wide.

Buffy Cafritz, a great scholar of Washington parties, said, "This reminds me of the '70s, when embassies really gave bashes."

"Where else can you go to a dinner with a prince at every table?" said writer-about-town Jane Ikard.

Marshall Coyne, owner of the Madison Hotel, where many diplomats stay, said he thought the evening was like " 'The Arabian Nights' -- in the flesh. Be sure you say 'in the flesh.' "

The ambassador explained the evening by saying, "We say that the fire warms the body, but friendship warms the heart."

Abdulaziz Nazer, the ambassador's executive assistant, said, "We hope to have many more parties like this one. We want the American people to know what Saudi Arabia is really like."

The crowd was a mix of business, politics, museum officials and entertainers. Singer Roberta Flack said she became a friend of the Saudis when the ambassador invited her to the embassy to sing for his wife Flack's hit recording "The First Time Ever I Saw Your Face."

The evening, however, was more than entertainment. "This is not a social event but a great business event," said one former ambassador, noting the presence of top executives from Boeing and PepsiCo scattered among the oil biggies. Asked why the party was scheduled last night, one congressional guest noted, "The Saudi arms package came to the Hill today."

At the reception, many Washington people were surprised to see the large number of Saudi women, wearing magnificent costumes, but no veils. Rumor had it they wouldn't appear at the reception, but would be sequestered in the dining room, or perhaps on the balcony, out of sight of the crowd. Two embassy women, neither wanting to be quoted, said, "We often go to large parties."

Another rumor said the princes attached to the embassy had forbidden their princesses to come, lest they be photographed. But Nazer said that was not true. "The princesses are here," he said.

But not the princess, the wife of the ambassador, who had planned the evening and especially the costume showing. The ambassador said she was indisposed, but glad she had been able to come to the dress rehearsal in the afternoon.

Security was very tight, with D.C. police, State Department security and the Saudis' own. The bomb-sniffing dogs were the first guests to come. And some of the so-called waiters had walkie-talkies.

One startled man entered the restroom to find the floor littered with swords. He figured out afterward they belonged to the dancers.

At the dinner, Bouraik, Tamur, Sanbousa, Makboos, Hamis, Margug, Lugmat Al-Qadi and Laban proved to be delicious pastry filled with goat cheese or spiced beef, red snapper, rice, lamb and rose-water syrup on fried dough puffs. It was all washed down Saudi-style with lime and apricot juice, yogurt drink and cardamom coffee.

One guest at the party said, "I never drank so much apricot juice in my life." Kiwi and papaya juice on the rocks surprised guests unmindful of Saudi adherence to Moslem strictures against alcohol.

At the ambassador's table, Secretary of State George Shultz sat on his left, separated from his sometime Cabinet opponent, Defense Secretary Caspar Weinberger, by both the prince and Helena Shultz.

Shultz, who gives a Jeffersonian dinner every year at the State's Diplomatic Reception Rooms, with far different food, admired the all-Saudi menu and urged the prince to tell how it came about. "For one week, Ridgewell's cooks came to the embassy for tasting and testing with my cooks. To me it tastes very authentic. I hope my guests are satisfied."

Weinberger showed off his knowledge by identifying the stage set as having been copied from the seat of the Saudi dynasty. The ambassador confirmed his call.

The dining tables were centered by a decoration of rock sugar, lighted from below and embellished with orchids. The napkins and tablecloths were embroidered with metallic thread to match the golden tableware.

According to one informed estimate, the evening, including performances by the Jizan and Diriyah folk troupes brought here for the occasion, cost more than $500,000 and required a cast and crew of 200, including 70 models. Just building the set of a typical Saudi town, hung with priceless weavings from the collection of John Topham, took three days.

The idea for the evening started on a much smaller scale. Princess Haifa, who is both the ambassador's wife and the youngest daughter of the late King Faisal, conceived it after seeing a costume collection of Heather Colyer Ross, an Australian who has collected traditional costumes since moving to Riyadh in 1969. More than six months ago the princess started planning a way to showcase the culture of Saudi Arabia through its costumes, but since then, the extent of the evening has gone up as fast as oil prices once did. The princess herself wears many western designs, including ones by Oscar de la Renta, Valentino and Yves Saint Laurent. Some eastern designs inspired by Saudi Arabian clothing and art were shown on dummies in the reception hall.

She has been meticulous about the authenticity of the garments shown. A woman from each region portrayed made sure each garment was shown properly, each head wrap authentically tied. Habiba, who was Princess Haifa's nanny and is now senior nanny for the family at the embassy here, has given guidance to the show's producers.

"Princess Haifa would not allow us to spoil the truth for the sake of a good story," said Kezia Keeble, president of Keeble, Cavaco and Duka, the New York public relations firm that produced the event. The backdrop slides for each costume were from the precise region where the dress is worn. The flag bearer with the dancers belongs to the only family permitted to bear the flag for the king. And while music accompanied most of the slides, pictures of Mecca had only the sound of wind in the desert.

Keeble hired the 70 models locally to wear the 77 costumes, most of which were so complex there was no time for a model to change.

Six experts came from New York to do the models' hair and makeup. They used kohl, the black substance used for eye liner that was once thought to have medicinal value and is today thought by some to soften the glare of the desert sun.

The costumes, many of which are still worn in Saudi Arabia (though often in less elaborate versions), reveal much of the way of life in that country. While the formation of the Saudi kingdom blurred regional and tribal differences, and the introduction of sewing machines has reduced the role of hand craftsmanship, the emphasis on total coverage and the layering of garments for warmth and protection from the sun still remains. Clothes almost always follow Islamic law as well as the laws of practicality. Fine black gauze filters dust and gives modest coverage. And any costume, no matter how flattering, must be unrevealing when the wearer reclines, which is both a custom and a necessity in a country with few trees for making chairs.

Those not invited to the festivities will have a chance to see the extraordinary costumes at close range: Starting next month, 30 of the costumes will be on exhibition at the Textile Museum.