An Arabian Nights tale of how a beautiful Saudi princess and her student boyfriend were publicly executed last year in Jeddah's main bazaar was confirmed here yesterday.

But the Saudi Embassy, in offering a rare peek behind the veil that shrouds the activities of the royal family which rules the wealthy kingdom, angrily denied British press reports that the couple had been killed because the princess sought to marry a commoner.

"They were both executed after sentence by an Islamic court for adultery," the Saudi Embassy said in a formal statement. "For an adulterous act, the law is death.

"The victims of the feudal Islamic code were Princess Misha Abdul Aziz and Musleh Shaer. She was said to be 19 and he in his early 20s.

Musleh was beheaded by a bodyguard of Princess Misha's grandfather, according to one account. She was either stoned to death, the penalty provided by the Koran for adulterous women, or shot before her lover's eyes. There are conflicting reports on this and many other points.

Confirmation of the executions came about only because the Saudi government was infuriated with stories on the BBC and elsewhere that the two were killed because she was royalty and he was a commoner.

"The marriage of a princess with a man unrelated to the royal family is not considered a crime, let alone one that should be punished by execution," the Saudi Embassy declared.

David Owen, the British foreign minister, promptly expressed his "regret" that an earlier Foreign Office statement "had caused offense." The offending statement had simply voiced "regret" over "a tragedy."

Several members of Parliament complained that Britain was "groveling" before the world's largest oil producing nation, but the Saudis indicate they were appeased.

All accounts here agree that Misha's grandfather, Mohammed Bin Abdul Aziz, was outraged over her conduct. His nickname in Riyadh is Mohammed of the Two Evills, a reference to his choleric temper and his fondness for drink. He is the brother of King Khalid, so his will is not likely to be thwarted.

A marriage with a royal cousin had been arranged for Misha several years ago, but it was said to be loveless and he walked out on her.

Misha was sent to Beirut to study and there met Musleh, also a student and cousin to the Saudi ambassador. Pictures of Misha reaching here show a slim, pretty, dark-haired young woman, dressed in western bouse and skirt, dancing by herselft.

The clandestine affair between the married princess and the student lasted about eight months.

They found refuge in the Creek, a seaside resort north of Jeddah, frequented by more modern minded Arabs. There the two planned to escape from the country.

Misha faked a drowning, cut her hair and donned male dress. she and Musleh went to the Jeddah airport separately to fly off together. Security guards discovered her disguise and the two were returned to the palace.

What happened inside the palace is conjecture, but clearly grandfather Mohammed could have stopped the killing, if he had wanted. Royal Saudis and other rich Arabs frequently hire woman other than their wives in London and other European capitals, taking a flexible view of the Islamic code.

The two were executed on a Saturday in the main square at Jeddah, but which Saturday is unclear. Some reports place their death at some time last Autumn, others in July.

It is Saudi custom to sedate sentenced victims and it was a good things here. One report said that Mohammed's bodygurad was not a professional executioner and struck repeatedly at Musleh's neck beforehe fell dead.