The US has demanded an explanation from the Palestinian leader, Mr Yasser Arafat, over the seizure by Israeli authorities of 50 tonnes of weapons allegedly being smuggled to Palestinians from Iran.
Israel accused Mr Arafat's Palestinian Authority of secretly preparing for a major escalation of military hostilities. It said the weaponry, intercepted on board the Karin-A overnight on Thursday in the Red Sea 300 miles from Israel, was mostly Iranian. It said the shipment had been arranged by senior officials in the authority, in breach of all limitations on armaments agreed by it and Israel in various interim peace accords.
Iran has denied any connection with the ship, a foreign ministry spokesman said last night. Aides to Mr Arafat last night denied all knowledge of the shipment and accused Israel of playing propaganda games to disrupt the current peacemaking mission of US peace envoy, Mr Anthony Zinni.
The Israeli army's Chief of Staff, Gen Shaul Mofaz, said evidence of the authority's responsibility was "incontrovertible", that the ship was owned by it and that its captain and some of the 13 crew members arrested were members of Mr Arafat's naval police.
Israel released film of the weapons haul on board the Karin-A while it was being towed into the Red Sea port of Eilat, and said it would be taking foreign diplomats to view the consignment - the largest yet intercepted.
The Israeli Defence Minister, Mr Benjamin Ben-Eliezer, said the weapons shipment indicated that the authority was preparing for war. Mr Arafat, who has accused Israel of escalating military hostilities against his people, said after talks with Mr Zinni in Ramallah that he was committed to achieving "lasting peace".
Israeli Foreign Ministry officials said they would seek to have Iran designated as a state which sponsors terrorism.
Israeli officials said it was intended that the Karin-A would sail close to Gaza, from where the weapons, in modern watertight containers, were to have been brought ashore by divers and small vessels.
After opening nine of the 83 crates of weaponry it said it seized, the army said the haul included long-range Katyusha rockets, and sophisticated anti-tank missiles capable of piercing its tanks' defences.