Israel hits back hard, with a clear knowledge of the motivations behind the leak, in what CBS News is calling the “Israeli spy” case: Jerusalem views ‘spy’ story as local US political fare.

Sources in Jerusalem vehemently denied any Israeli espionage in the US, terming as an “internal US political story” the reports that a mid-level Pentagon official is under investigation for allegedly passing classified material to AIPAC, which in turn allegedly passed it on to Israel.

“This is an American political story, an elections story, a pre-convention story to try to slander and criticize [US President George W.] Bush. It has nothing to do with us,” one source in Jerusalem said.

A statement from the Prime Minister’s Office released Saturday night said the government was not aware of the incident, adding that “Israel is not employing any intelligence assets in the United States.”

Knesset Foreign Affairs and Defense Committee chairman Yuval Steinitz said Israel had taken a decision to halt all espionage activities against the US following the 1985 arrest of American naval analyst Jonathan Pollard for passing on secrets to Israel.

“Following the Pollard crisis 20 years ago, there was a decision not to spy against the US government or its subsidiaries, and I am confident that this is still the case,” Steinitz said.
Despite Israel’s deep concern about Iran’s nuclear program, it would not be tempted to break that ban, Steinitz said.

“Israel is very concerned… that the ayatollahs will acquire nuclear weapons,” he said. “But if you think this might change our previous decision [not] to spy on the US, the answer is no.”

The Jerusalem sources said that the story, which broke on the eve of the Republican National Convention in New York, comes amid an attempt over the last few months to attack the neo-conservatives close to Bush, such as Paul Wolfowitz, Douglas Feith, and Elliot Abrams, and to create the impression that the neo-cons, many of whom are Jewish, led Bush into war in Iraq because it was good for Israel, and now are trying to do the same with Iran.

“This is part of the effort to find fault with Bush, and cast him as someone who is surrounded and controlled by Jewish Zionists,” one official said.

The story, according to these sources, fits in neatly with the anti-Semitic agenda of some in the US who are accusing Israel of being behind Bush’s war in Iraq.

And if you’re interested in the spin that the Daily Kos/Josh Marshall/Atrios crowd is winding up to inflate this story as much as possible, here it is, at War and Piece. (Hat tip: Allah.)