Saudi Arabia carried out its threat to break diplomatic relations with Egypt yesterday to protest President Anwar Sadat's peace treaty with Israel. The Saudis, however, made no immediate move to cut off the estimated $1.5 billion annual subsidy that has helped keep Sadat in power.
The Saudi action left Sadat politically isolated in the Arab world. It came shortly after Kuwait broke its economic and diplomatic links with Egypt to comply with resolutions condemning Egypt that were adopted at a meeting of foreign and economic ministers in Baghdad last month.
The Saudi action, announced by the official Saudi News Agency after a Cabinet meeting in Riyadh, represented a disappointment for the Carter administration, which had appealed to the Saudis not to oppose the treaty.
Since the Baghdad meeting, administration officials in private and public statements had held out hope that the Saudis would adopt a liberal interpretation of the Baghdad resolutions and continue ties to Sadat.
Information Minister Mohammed Abdo Yamani said in Riyadh that the decision had been taken in retaliation for Egypt's plan "to exchange diplomatic representation with the Zionist enemy," Israel, "without taking into cnsideration the minimum demands" of Arab countries.
The Cabinet statement did not refer to the Baghdad resolutions and said nothing about Saudi financial commitments to Egypt, a Saudi source in Washington noted, saying that these omissions indicated that the Saudis were not slamming the door on Sadat.
Egypt responded by announcing to the Egyptian public that it head decided to cut diplomatic relations with Saudi Arabia and Kuwait. The two countries provided much of the oil money that enabled Sadat to turn away from the Soviet Union in 1972, launch the October war in 1973 and then move toward peace negotiations with Israel.
The Egyptian announcement specified that it expects Saudi Arabia and Kuwait to maintain interests sections in third-country embassies in Cairo, but it was not immediately clear they would do so.
Sadat severed relations with Algeria, Syria, Iraq, South Yemen and Libya in December 1977, following Sadat's visit to Jerusalem. Jordan withdrew its ambassador from Cairo last month.
The only Arab countries that have offered full support to the peace treaty have been Sudan and Oman. Sudanese President Jaafar Nimeri responded to attacks on Sudan's continuing friendship with Egypt by breaking diplomatic ties with Iraq, news agencies reported from Khartoum.
A suspension of Saudi financial aid, said by Egyptian officials to total about $1.5 billion a year in financial and military subsidies, would put new pressure on the United States, its Europea allies and Japan to increase their aid commitments to make up the shortfall.
Sadat has already said publicly he hopes for a $15 billion "Carter plan" to aid Egypt after the signing of the peace treaty.
Saudi Arabia's deputy prime minister, Prince Abdullah, chaired the Cabinet meeting. Crown Prince Fahd, who normally presides over the Cabinet, is in Spain for medical treatment. CAPTION: Picture 1, Carter visits Albert Einstein statue at the National Academy of Sciences. By Frank Johnston-The Washington Post; Picture 2, Prime Minister Begin and his wife, Aliza, mourn at burial of Israeli raid victims. AP