RIYADH, Jan 19 (Reuters) - The lifting of sanctions on Iran as a result of its nuclear deal with world powers will be a harmful development if it uses the extra money to fund "nefarious activities," Saudi Arabia's Foreign Minister Adel al-Jubeir told Reuters on Tuesday.

Asked in an exclusive interview if Saudi Arabia had discussed seeking a nuclear bomb in the event Iran managed to obtain one despite its atomic deal, he said Saudi Arabia would do "whatever we need to do in order to protect our people."

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"I don't think it would be logical to expect us to discuss any such issue in public and I don't think it would be reasonable to expect me to answer this question one way or another," he said.

Jubeir's comments were the first to directly address the lifting of sanctions on Iran, Riyadh's bitterest regional rival, although Saudi Arabia has previously welcomed Iran's nuclear deal so long as it included a tough inspections regime.

But in private, officials have voiced concern that the deal would allow Iran greater scope to back militias and other allies across the region thanks to the extra funds it can access after sanctions are lifted and because of the reduced diplomatic pressure.

"It depends on where these funds go. If they go to support the nefarious activities of the Iranian regime, this will be a negative and it will generate a pushback. If they go towards improving the living standards of the Iranian people then it will be something that would be welcome," Jubeir said.

Saudi officials have also in recent years voiced fears that their most powerful ally, the United States, is disengaging with the Middle East, something some of them have said may have contributed to Syria's descent into civil war.

Jubeir said he did not believe Washington was retreating from the region, but emphasized that the world looked to it as the sole superpower to provide stability.

"If an American decline were to happen or an American withdrawal were to happen, the concern that everybody has is that it would leave a void, and whenever you have a void, or a vacuum, evil forces flow," Jubeir said.

SECTARIAN TENSIONS

Riyadh accuses Tehran of fomenting instability across the region and the two back opposing sides in wars in Syria and Yemen and political tussles in Iraq, Lebanon and Bahrain.

Last year Saudi Arabia began a military campaign in Yemen to stop an Iranian ally from gaining power. The two rival powers accuse each other of supporting terrorism, destabilizing the region and inflaming sectarian hatred.

Jubeir said Iran's support for Shi'ite Muslim militias across the region was the main source of sectarian ill will, but acknowledged that this had produced what he described as "a counter reaction in the Sunni world."

Asked about inflammatory rhetoric from Saudi Sunni clerics, Jubeir said he could not comment on remarks he had not seen, but said the government encouraged dialog and inclusion and discouraged extreme or disparaging language.

The state-appointed Imam of Mecca's Grand Mosque this week wrote a Tweet alleging an "alliance of the Safavids with the Jews and Christians against Muslims," using a sectarian-tinged term often used to describe Iranians or Shi'ites.

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