Mideast Report

JERUSALEM (JPS) -- The Cabinet Tuesday approved the Treasury-proposed $660 million cut to the 1998 state budget, by a vote of 11-6 with one abstention.

During the 18-hour debate, there were times when a majority threatened to vote against the Treasury, which had received the full backing of Prime Minister Benjamin Netanyahu.

Transport Minister Yitzhak Levy abstained. Those who voted against the cuts -- Eli Suissa (Interior), Eli Yishai (Labor and Social Affairs), Tzachi Hanegbi (Justice), Zevulun Hammer (Education), Yehoshua Matza (Health), and David Levy (Foreign Affairs) -- spent much of the day attacking the cuts both in the Knesset and in media interviews.

Yishai, Hammer, David Levy and Matza were particularly outspoken, accusing Finance Minister Ya'acov Ne'eman of betraying the disadvantaged.

"This is a budget which is cut off from the social reality," said Levy. "It ignores what we call the social disaster and that's unemployment."

Hammer said he has no doubt that the budget the Knesset eventually passes will be substantially different from the one the Cabinet approved, saying that to assure a majority, it will have to forget about cutting the education, welfare, and health budgets.

Netanyahu rejected the claims that the cuts will affect the poor. He said the brunt of the impact will be felt by the wealthiest 30 percent of the population.

Mubarak, Netanyahu in conflict over Druze

JERUSALEM (JTA) -- Egyptian President Hosni Mubarak has criticized Prime Minister Benjamin Netanyahu's campaign to win the release of an Israeli Druze jailed in Egypt for espionage.

In a seven-page letter to Netanyahu, Mubarak said last week that Netanyahu's high-profile efforts made it virtually impossible for Mubarak to do anything on Azam Azam's behalf.

Azam, a mechanic at an Israeli textile firm in Cairo, was convicted late last month in a Cairo security court of spying for Israel and sentenced to 15 years in jail with hard labor.

Because Egyptian law allows for no appeals of the security court's verdict, only a presidential pardon from Mubarak could secure Azam's release.

In his letter to Netanyahu, Mubarak complained that in light of the high-profile attention Netanyahu gave the case, any move by the Egyptian leader to help Azam would appear as a capitulation to Israel, according to the Israeli daily Ha'aretz. Mubarak also accused Netanyahu of taking up Azam's case in order to win support from Israel's Druze population.

Israeli court frees suspected Druze spy

JERUSALEM (JTA) -- An Israeli court this week released from custody a Druze student detained a month ago on suspicion of spying for Syria.

The Akko Magistrates Court released Ilham Abu Salakh on more than $14,000 bail after she agreed to leave her passport at a local police station and report there daily for the next 45 days.

Abu Salakh, 31, was detained Aug. 10, several days before she was due to return to Damascus, where she was due to start her fourth year of studies in psychology at Damascus University.

A resident of the Druze town of Majdal Shams on the Golan Heights, she is president of the university's Golan Student Association.

She was detained on suspicion of making contact with a foreign agent and spying for Syria. Abu Salakh has denied the allegations against her.

The prosecutor is expected to decide in the coming days whether to press charges.

Japanese to study Dead Sea railway

TEL AVIV (JPS) -- Nissho Iwai, Japan's sixth largest corporation and the 13th biggest worldwide, will begin conducting feasibility studies for a railroad that would run from the Israeli side of the Dead Sea to the Red Sea via Jordan, Koichi Naito, general manager of the company's Tel Aviv office, said on Tuesday.

The line is part of the company's plan to support bilateral projects between Jordan and Israel, Naito said.

Unlike many Japanese companies, which have shied away from doing business in Israel since difficulties in the peace process erupted, Nissho Iwai remains committed to promoting peace through economic cooperation, said Naito.

"My philosophy is to support the peace process through economic development and the creation of jobs," he said.

Established last year, the company's Tel Aviv office employs six people.

Worldwide Nissho Iwai, which had a turnover of $89 billion in 1996, has some 37,000 employees.

Last year, Nissho Iwai exported $50 million in Israeli goods to Japan.

Nissho Iwai also intends to participate in the Israeli project to provide Jordan with desalinated water, to work on the gas pipeline between Israel and Egypt, and to push the Jordanian government to create a free-trade zone with Israel.

Such a development would allow companies to simultaneously benefit from Jordan's cheap labor supply and Israel's free-trade agreements with Europe and the United States.

British feared queen was on Stern hit list

LONDON (JPS) -- A recently declassified document, published for the first time Monday, indicates that Britain feared that then-Princess Elizabeth was the target of a 1948 assassination plot by the pre-state underground Stern Group.

Concern over her safety is contained in a telegram sent by the Foreign Office to the British Embassy in Paris, where Elizabeth was due to visit. The contents of the telegram, published in the Times Monday, is based on the discovery in the British Public Records Office by Israeli author David Rubovitz, who is described as an expert on the war between the Jewish underground movements and the British in Mandatory Palestine.

The telegram, described as being of "particular secrecy," was dated May 7, 1948.