Israel Responds to FBI Probe, Denies Spying on U.S.

Israel denied on Saturday spying on its main ally, the United States, responding to suspicions a Pentagon analyst passed secret papers to the Jewish state about one of its most bitter enemies, Iran.

U.S. government sources said on Friday the FBI was investigating an analyst connected to Defense Secretary Donald Rumsfeld's (search) office on suspicion he gave classified documents to Israel via the American Israel Public Affairs Committee (search) (AIPAC), the powerful pro-Israel lobby in Washington.

The sources declined to identify the suspect and said no one had been arrested and no charges brought.

In a brief statement, the U.S. Department of Defense (DoD) said it had been cooperating on the matter with the Justice Department for some time and understood the investigation was limited in scope.

Israeli officials insisted Israel had not spied on the United States since being caught red-handed two decades ago in an espionage scandal involving U.S. Navy analyst Jonathan Pollard (search), arrested in 1985 outside the Israeli embassy.

"We deny carrying out any intelligence activity. It is a strange story," said a senior Israeli government official, who declined to be identified. "Israel, for many years, has not carried out intelligence activity in the United States."

An Israeli Embassy spokesman in the U.S. capital called the allegations "completely false and outrageous." AIPAC described the suspicions as "baseless and false."

A former AIPAC staff member said that as a "matter of policy" the organisation hired former Pentagon insiders with security clearance to keep Israelis informed on projected U.S. plans.

"It's a standard feature of the lobbying scene," the staffer told Reuters. "How do you draw the line between a lobbyist briefing and spying? It is not as clear-cut as it should be."

Yuval Steinitz, chairman of the Israeli parliament's Foreign Affairs and Defence Committee, said Israel made a "firm decision" 20 years ago, after Pollard's arrest, not to spy on Washington again.

"I have a lot of confidence in the United States investigation authorities and therefore I am completely confident that at the end of the day it will be confirmed that there is no Israeli involvement in such a case," he said.

Prime Minister Ariel Sharon has frequently highlighted his warm relations with U.S. President George W. Bush and has visited the White House nine times since taking office. A senior Sharon aide meets often with U.S. National Security Adviser Condoleezza Rice.

But the case of Pollard, an American Jew granted Israeli citizenship in 1995, eight years after he began serving a life sentence in a U.S. prison for spying for Israel, is still an irritant in relations between the two countries.

According to CBS, which first reported the FBI investigation, one of the documents passed to Israel was a draft presidential directive on U.S. policy towards Iran -- placed by Bush in an "axis of evil" along with pre-war Iraq and North Korea.

U.S. and Israeli officials accuse Iran of developing nuclear weapons, a charge it denies. Since its 1979 Islamic revolution Iran has refused to recognise Israel's right to exist.