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CAIRO, May 16 (UPI) -- Israel's unease as post-Mubarak Egypt distances itself from its 1979 Middle East peace partner is deepening by the day. A pro-Palestinian rally Sunday outside the Israeli Embassy in Cairo, with riot police firing live rounds and tear gas at protesters demanding the mission's closure, underlined concern in Israel that the Jewish state is being inexorably pushed back three decades when it was ringed by hostile Arab states.
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Egypt's hand in brokering the recent reconciliation between the rival Palestinian factions in the West Bank and the Gaza Strip, something Israeli Prime Minister Binyamin Netanyahu's right-wing government didn't want to see, has convinced Israeli leaders that Cairo is doing everything but repudiate the historic March 1979 peace treaty.
That breakthrough pact, brokered by U.S. President Jimmy Carter, changed the political complexion of the Middle East, just as two months earlier, the shah of Iran, a close ally of the United States and Israel, was toppled by Ayatollah Khomeini's Islamic revolution.
The reconciliation should move the Palestinian closer to the declaration of an independent state in September despite Israel's efforts to prevent that.
Egypt's announcement in late April that it will permanently reopen a key border crossing with Gaza in Sinai, effectively ending Israel's much-criticized economic blockade of the territory, underlined how the upheaval that has roiled the Arab world since January is changing the parameters of the Middle East conflict.
Israel's security service, Shin Bet, reported Thursday that arms smugglers moving weapons into Gaza were now "operating almost without hindrance."
Outgoing Shin Bet chief Yuval Diskin warned: "In Egypt, it's very hard to assess what will happen in the elections expected in the summer … It's not a good to rest on our laurels."
Until Egyptian President Hosni Mubarak was driven from office Feb. 11 in a pro-democracy uprising, Egypt backed Israel in seeking to contain Iran and Hamas, the Palestinian fundamentalists who seized control of Gaza in June 2007.
But all that has changed since Mubarak's ouster. The military-backed interim government is steadily stripping away the previous regime's ties with Israel, which made Cairo a crucial U.S. ally in the tempestuous Middle East. That too seems to be changing.
There are even reports that Hamas politburo chief Khaled Meshaal will move his headquarters from the -- relative -- safety of Damascus to Gaza under Egyptian tutelage.
The new regime in Cairo isn't only taking control of the troublesome Palestinian issue, it's also considering restoring relations with Iran that were severed in 1979 to a bid to restore Cairo's traditional leadership of the Arab world.
"The odds of a lasting relationship between the internationally recognized leaders of the Palestinians, Fatah and the internationally recognized terrorist group, Hamas, aren't great," said analyst M.K. Bhadrakumar, a former Indian ambassador to several Muslim states.
"It's not clear whether the union will actually be consummated. But even a short fling has the potential to upturn Arab-Israeli affairs, shift U.S. interests in the Middle East and play a role in the 2012 U.S. presidential election …
"What is becoming apparent is that Egypt is reclaiming the regional influence it abjectly surrendered when it became a poodle of the United States and a collaborator of Israel following the 1979 peace treaty," Bhadrakumar observed.
Cairo's point man on all this is Egypt's new intelligence head, Maj. Gen. Murad Muwafi, who, unlike Gen. Omar Suleiman under Mubarak, has kept the Israelis at arm's length.
Muwafi rose to prominence after Suleiman, his former boss and head of the General Intelligence Directorate since 1993, was named vice president in late January to shore up Mubarak's crumbling position.
Few in Egypt expected Muwafi, 61, a former Military Intelligence chief, to throw himself into untangling the Palestinian Gordian Knot so energetically.
Suleiman had had that responsibility but "Israel and Washington had no genuine desire to see a unified Palestinian government and Egypt's thinking followed suit," according to one analysis.
Egypt's clinching move in its efforts to reconcile the Palestinians was likely a discreet March 18 visit by Muwafi to Damascus, where Hamas senior leaders have been holed up for years.
The visit may also have been aimed as well to restore long-strained relations between Egypt and Syria. The last time they were buddies they launched the October 1973 war that nearly did for Israel.
