A wealthy Saudi Arabian businessman who has served as a key Middle East peace negotiator and adviser to Saudi King Fahd has purchased the former Phillips estate in Northwest Washington for $13 million, the highest residential sales price ever recorded in the District.

Rafik Hariri, a Lebanese-born Saudi citizen and principal investor in Raha III Inc., last week paid cash for the lavish, 26-room mansion and its surrounding 16.2 acres. The seller was John Driggs, a Capitol Heights construction executive who had been preparing the site for an upscale housing development.

Driggs purchased the 58-year-old estate only a year ago for $8.75 million, which at the time easily surpassed the District's previous record residential sales price.

The white-columned, Georgian-style mansion sits on a sprawling, tree-filled site at 2101 Foxhall Rd. NW. It is the former home of Laughlin Phillips, whose parents began the renowned art collection housed in a museum bearing their name near Dupont Circle.

Rafic A. Bizri, president of Raha III, which is officially listed as the new owner of the estate, said, "The options are still wide open as to what we will do with the property."

Maintaining the estate as a single residence or breaking up the property for a housing complex -- an option worrying many neighbors -- are among the possibilities being considered.

Raha III, a Delaware-chartered investment corporation based in New York, is one of several companies owned by Hariri, who lives in Riyadh, Saudi Arabia. During the past several years, Hariri has played an integral part of Middle East peace negotiations, serving as special emissary and go-between for the leaders of Saudi Arabia, Lebanon and Syria. He has also been instrumental in gaining the release of Saudi hostages held in Lebanon.

Hariri's Saudi-based construction company, OGER International, had sales exceeding $2 billion in 1983, the last year for which statistics are available. The construction company has rebuilt sections of war-torn Beirut. Raha I Inc., another U.S. company owned by Hariri, purchased a 75-story Houston skyscraper for between $250 million and $300 million in 1985. Hariri's business associates describe him as a philanthropist, and he has been quoted as saying, "If I have $350 million and I give away $300 million, then I still have $50 million left, and that's enough."

Before Raha III's offer, Driggs, the estate's seller, planned to sell the mansion and four surrounding acres. He had obtained D.C. government zoning approval to develop the remaining acreage into an enclave of 24 homes, with prices starting at $2 million each. Roadwork had begun on 12 acres at the site. Construction on the development's first house was scheduled for August.

"But they {Raha III} just kept wanting more land," Driggs said, who noted that because of his desire to develop the property the high-priced deal was mixed "with a little bit of reservation." But he quickly noted that "the big-time price" removed any financial uncertainties he had about developing the site. As part of the deal, Driggs has agreed to regrade the prospective roads his firm had started work on and replant the ground.

The hushed transaction involving the Phillips estate sent real estate agents and developers throughout Washington scrambling to uncover the identity of the new owners of the 17,000-square-foot mansion and surrounding property. Documents at the D.C. Recorder of Deeds processed this week listed the buyer of the estate simply as Raha III. In Dover, Del., where the firm is incorporated, officials at the state Division of Corporations had no listing for any of Raha III's officials. In New York, where the company is based, and in several other major eastern cities, including Washington, no firm by the name Raha III could be located.

The ownership mystery was further heightened by the intense secrecy maintained by the players involved in the purchase of the mansion. Neither Raha III's Washington attorney, John Barron, who sought to keep his identity quiet, nor officials of the settlement company that handled last week's transaction, would reveal the identity of the estate's buyers.

In addition, two real estate agents involved in the sale were required to sign confidentiality clauses prohibiting them from releasing information about the settlement -- a highly unusual agreement for real estate agents who often benefit from publicity following a major real estate deal. Moreover, Driggs said he never met the Raha III officials and did not know the identity of the purchaser.

Hariri's name surfaced, however, after his association with Raha I was revealed in documents at the U.S. Department of Commerce trade and investment analysis branch. Raha III officials then reluctantly decided to discuss the Phillips purchase and acknowledged Hariri's ownership of the company.

Confusion followed the sale after Barron said the new owners planned to use the estate as a single residence, not as a potential housing development, as is now one of the possibilities. Driggs, as well as the two real estate agents involved in the deal, said they were also told the buyer would maintain the property for a single home.

At first, Barron's remarks were enthusiastically greeted by nearby neighbors who had fought development of the site. "I'm delighted," said Simon Cain, president of the Palisades Citizens Association.

But late this week, after Raha III officials amended their lawyer's premature remarks concerning the use of the estate, Cain said he hoped the property will remain as is "because it appears there'd be a monumental assault on the entire area if it's developed."

Laughlin Phillips, whose parents Duncan and Marjorie Phillips built the mansion in 1929, exclaimed, "It's great," when it appeared the estate was going to be preserved. But after Raha III officials said they were leaving their options open, Phillips, reached at his summer home on Martha's Vineyard in Massachusetts, said, "It would be intrusive for me to comment."

Considered one of Washington's great art supporters, the Phillips family moved to the Foxhall Road mansion 58 years ago when their massive art collection outgrew their former home at 1600 21st St. NW -- now the museum containing the Phillips Collection.

Over the decades, the Phillips' 12-bedroom mansion, known as Dunmarlin, became a gathering place for diplomats, politicians and artists. Duncan Phillips, who died in 1966, used part of his inheritance from the Jones & Laughlin Steel fortune to purchase the family's massive art collection of Matisses, Cezannes, Van Goghs and Renoirs, among other works.

Several years ago, Marjorie Phillips and her son Laughlin considered developing a portion of the property, but that never materialized. Laughlin Phillips said that after his mother died in 1985, "It just became financially impossible to keep it."