Your highness, is that Gucci or Dior under your veil?

On Sunday Harvey Nichols launched its first flagship store of the millennium. If I told you all the women in the room wore head-to-toe black, you wouldn't be at all surprised. Honey, it's a fashion party after all. You would, however, be shocked to learn that women were on the whole conspicuously absent from the gala dinner for 1200 royals, millionaires and dignitaries. Welcome to Harvey Nichols Riyadh, 80,000sq ft of designer frocks in the heart of the new Sir Norman Foster-designed Al Faisaliah Centre.

Unlike the glitzy Saudi resort of Dubai, Riyadh is not a Gulf golf tourist-trap. This Middle Eastern city is a bastion of Islam where all Saudi women must wear the veil in public. A woman cannot be seen in public with any man bar her husband, and cannot drive a car. Fashion magazines are forbidden, as are adverts depicting the human body. Even shop mannequins with heads or hands are banned. Patsy and Edina would provoke a fatwah before they even left the airport.

So why should Knightsbridge's raciest designer department store choose to take the veil? "If I told you that Riyadh has 9,000 princesses, then you might begin to understand why Harvey Nichols belongs in Riyadh," says the company's buying director Sue Whiteley. "A woman must wear the abaia in public, but she will be wearing Western clothes beneath the veil. The princesses will entertain at all-female parties in their palaces. This is their party circuit. The level of sophistication and fashion knowledge is incredible. You'd imagine they'd be dripping in Chanel but the most popular label in Riyadh is Donna Karan."

It is no secret that Saudi princesses keep Paris couture alive. The most infamous Saudi fashionplate is Mouna Al-Ayoub, the Lebanese former wife of Saudi businessman Nasser Al-Rachid, who will routinely order 30 pieces of Paris couture per season. Riyadh, it seems has another 9,000 Mounas with comparable time and money at their disposal.

Harvey Nichols Riyadh slips effortlessly between Leeds little sister (50,000sq ft) and Knightsbridge big mama (150,000sq ft). In midtown Riyadh, the Al Faisaliah Centre stacks up Saudi's first skyscraper (276m high), a subterranean banqueting hall, 40,000sq m retail mall, a five-star hotel and a luxury apartment complex. Saks 5th Avenue is due to join within the year.

"Riyadh is an emerging market with no quality retail," says Harvey Nichols Group commercial director Patrick Hanley. "It also has a population of three and a half million whereas Dubai, maybe a more obvious choice, has under a million. As the home of the Saudi royal family, Riyadh also has a formal, extravagant court circular. No one will see these women in Western clothes apart from their husbands and other women at home. That doesn't mean they are not informed about Western taste levels. They are a very sophisticated, educated and well-travelled people."

When Sue Whiteley went on a research mission to Riyadh she found major stand-alone stores for Donna Karan, Christian Dior, Gucci and Dolce & Gabbana. "These are all closed shops," she says, "which means women must be veiled and accompanied by husbands. They are staffed by men, and the women don't try anything on. They were quite depressing spaces. They weren't addressing the taste levels or fashion knowledge of these women."

Harvey Nichols Riyadh is a combination of open and closed. Of the 80,000sq ft, 10,000 is set aside for personal shopping. This sanctuary is women only. The princesses can leave their drivers in the chauffeur's lounge and retreat to the privacy of the closed section to try on their clothes, experiment with make-up at one of 20 cosmetics stations. "There is very little for women to do in Riyadh," says Whiteley. "We want Harvey Nichols to be a destination for the ladies to come and spend the day, as women do in Knightsbridge."

Harvey Nichols say they want to bring the personality of Knightsbridge to Riyadh. But the two cultures are as different as Patsy Stone and the Singing Nun. Harvey Nichols is aiming to be the Jemima Khan of fashion retail, marrying Western Style with Islamic culture.

"I was amazed to see the young Saudi princes telling me they would like to see labels like Patrick Cox, Alexander McQueen, Jean-Paul Gaultier, Maharishi and Mandarina Duck. When men come of age they wear the long white thobe and headdress but they wear Western clothes when in Europe or the States. When wearing the thobe, Saudi men will accessorise with a fantastic Mont Blanc pen, Alfred Dunhill cufflinks or a superb Patek Philippe watch. The briefcase is an important status symbol, too. So the emphasis is on accessories rather than suiting."

For the princesses, Sue Whiteley has made sure her floor features major eveningwear designers like Randolph Duke (designer of Hilary Swank's knockout Oscar frock), Badgley Mischka, Vera Wang, Valentino and Amanda Wakeley. The demand and occasions to wear floor-length eveningwear in Riyadh is even greater than in Hollywood.

So the next time you see one of those haunting, black-clad Saudi ladies floating around Harvey Nichols Knightsbridge, don't let your Western prejudices move you to pity her. Beneath, these gals are probably wearing a smarter Donna Karan pant suit than you could dream of, their make-up will make yours look like it's been applied with a trowel and their jewellery will probably be worth more cash than you will see in a lifetime. Theirs is a life of private parties, haute couture and first-class travel. And they never have to do a day's work in their lives. Oh, and the sun always shines in Saudi.