* Brotherhood challenges principle of dynastic rule
* Jihadis fighting Assad, and Shi'ite groups, also listed
* Saudis who go to war abroad could be jailed (Adds details, quote, Egyptian reaction)
RIYADH, March 7 (Reuters) - Saudi Arabia has formally designated the Muslim Brotherhood as a terrorist organisation, in a move that could increase pressure on Qatar whose backing for the group has sparked a row with fellow Gulf monarchies.
The U.S.-allied kingdom has also designated as terrorist the Nusra Front and the Islamic State in Iraq and the Levant, whose fighters are battling Syrian President Bashar al-Assad, the Interior Ministry said in a statement published by state media.
Friday's move appeared to enforce a royal decree last month in which Riyadh, which backs some rebel groups in Syria with money and arms, said it would jail for between three and 20 years any citizen found guilty of fighting in conflicts abroad.
It underscored concern about young Saudis hardened by battle against Assad coming home to target the ruling Al Saud royal family - as has happened after the wars in Afghanistan and Iraq.
Saudi Arabia's Islamic religious authorities have spoken out against Saudi fighters going to Syria, but the Interior Ministry estimates that around 1,200 Saudis have gone nonetheless.
Last month's decree said a committee would be set up to determine the groups to be outlawed. The ministry's statement on Friday said the groups mentioned were those the committee had agreed on and that had been approved by the authorities.
Riyadh fears the Brotherhood, whose Sunni Islamist doctrines challenge the Saudi principle of dynastic rule, has tried to build support inside the kingdom since the Arab Spring revolutions.
In an unprecedented move, Saudi Arabia, the United Arab Emirates (UAE) and Bahrain recalled their ambassadors from Qatar on Wednesday, saying Doha had failed to abide by an accord not to interfere in each others' internal affairs.
Saudi Arabia and the UAE are fuming over Qatar's support for the Muslim Brotherhood, and resent the way Doha has sheltered influential cleric Yusuf Qaradawi, a critic of the Saudi authorities, and given him regular airtime on its pan-Arab satellite channel Al Jazeera.
The Interior Ministry said on Friday the royal decree would apply to both Saudis and foreign residents who joined, endorsed or gave moral or material aid to groups it classifies as terrorist or extremist, whether inside or outside the country.
The statement also said "those who insult other countries and their leaders" or "attended conferences or gatherings inside and outside (the country) that aim to target the security and stability and spread sedition in the society", would be punished by law.
In Egypt, the Brotherhood, which won every election following the toppling of veteran leader Hosni Mubarak in 2011, has been driven underground since the army deposed President Mohamed Mursi, a member of the group that also endured repression in the Mubarak era.
The army-backed government in Cairo designated the Brotherhood as a terrorist group in December after accusing it of carrying out a suicide bomb attack on a police station that killed 16 people. The Brotherhood condemned that attack and denies using violence.
On Friday, Egyptian Foreign Ministry spokesman Badr Abdelatty said Cairo approved of Riyadh's move to declare the Brotherhood a terrorist organization.
"We hail it, we welcome it," he said. "It is in the right direction."
The Saudi Interior Ministry also listed as terrorist Yemen's Shi'ite Houthi movement and Hezbollah, a radical Shi'ite group in Saudi Arabia's eastern province which authorities say is linked to Iran and Lebanese Hezbollah. (Reporting by Rania El Gamal in Dubai; additional reporting by Maggie Fick and Omar Fahmy in Cairo; editing by Andrew Roche)
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