Satellite image of the Sinai.

A senior Israeli official on Thursday described the peace treaty between Egypt and the Jewish state as “the most significant foundation stone for security in the entire Middle East,” and minimized the role a 20% reduction in U.S. military aid to Egypt would have on that relationship. Common interests in combating lawlessness in the Sinai have led to the most “co-ordination, co-operation and communication” between the two countries’ security forces “in the past two decades,” the source said.

The 1979 peace treaty, negotiated together with the U.S. at Camp David, “is in everyone’s interests, beyond just Egypt and Israel, there is a global interest for that treaty to be maintained,” said the senior Israeli official, in an interview with The Algemeiner.

The agreement led to Israel returning sovereignty over the Sinai to Egypt, and both countries were rewarded with foreign aid deals from the U.S. where the military component — most of Israel’s package and part of Egypt’s — comes in the form of cash rebates to buy different classes of hardware from U.S. defense companies.

While the decision by the U.S. administration on Wednesday to hold back a disbursement of $260 million, out of some $1.5 billion destined to Egypt, may allow the U.S. to dictate by veto how its largesse can be spent, the co-ordinated defense operations in the Sinai are too important to both Cairo and Jerusalem to suffer from the aid cut, the official said.

“From our point of view, the Sinai, on the one hand threatens to be, rather than already is, a lawless land, an ungoverned territory. On the other hand, it is critical there’s stability there, and the Egyptian Army has done great things in the past two months, more than they had done in the past two decades,” the official said.

“It is in our interest for the Egyptian army to be able to ensure stability and law and order at a minimum in the Sinai — I understand Sinai is not their number #1 issue, but it is our #1, and where we work closest together,” the official said.

In the Sinai, once the Egyptian Army took power away from the elected Muslim Brotherhood leadership in July, Egypt and Israel have seen a tremendous surge in violence in this vast badlands, where Brotherhood hardliners, militant groups and Hamas fighters, who enter the Sinai from Gaza, work together to terrorize military forces and border control outposts. High-level communication and meetings between the directors of the security forces of both countries were reported by the press and soldiers co-ordinated efforts in July and August to close hundreds of the tunnels that connect Sinai to Gaza, cutting off smuggling revenues used to pay for black market arms caches, including anti-aircraft missiles and motorized paragliders.

Internally, Israel split up responsibilities, with the IDF collecting intelligence from Sinai balloons, cameras stationed along the Sinai border fence and satellite photographs, while a Shin Bet team focuses on preventing planned attacks from being carried out. Shin Bet estimates there are 15 militant groups operating in the Sinai, with four being extremely violent. The militants have used bombs to destroy a pipeline at El-Arish that transports gas to Jordan. But armed attacks, which peaked in early September when Egyptian helicopters raided militant hideouts, have been on the rise.

After Egyptian security forces cracked down on Brotherhood protestors, killing 53 and injuring 271, in Cairo this past Sunday, the Sinai was immediately aflame with retaliation attacks, several nearly simultaneously, at Egyptian military installations; one brazen bomb attack on a highway injured an Egyptian general. At one of the sites, an unexploded bomb was found attached to a Palestinian mobile phone, indicating that Hamas operatives from Gaza were likely involved.

“The present Egyptian leadership sees Hamas as a real danger, a bad player, because Hamas thought they hit the jackpot when the Muslim Brotherhood came into power in Cairo two years ago,” the Israeli official said.  But, after being excluded from power, and now outlawed as political party, “if the Brotherhood comes to the conclusion there’s no choice but to fully resort to violence, then little brother Hamas will be the people to teach them how to do it; Hamas knows destruction better than anyone else in the whole world,” the source added.

“For our interests, we’re doing our best not to be involved in Egypt’s internal problems. Egypt has got problems with Ethiopia, which wants to dam up the Nile River. They don’t need to have problems with Israel; they have got problems with themselves right now! What Israel wants for Egypt is three things; one, stability; two, a return to a political process; and three, prosperity.”

In terms of the actual monetary loss that may be suffered by Cairo because of the delay or permanent reduction in U.S. aid, the senior Israeli official said the funds were minimal if other countries move forward with financial aid packages for Egypt that are also on the table.

According to the Israeli official, a group of Gulf states, led by Saudi Arabia and Kuwait, have offered between $12 billion and $15 billion in unrestricted aid to Egypt’s military rulers.

“We are probably less concerned than in the past about the impact of the loss of cash for two reasons: one, because there is an acute awareness of how important the stability of the peace treaty is to everybody’s interests, and, two, because they have money coming in from the Gulf, it’s not like they are going to be short on money now,” the official added.

As well as to support stability in the broader region, the two heavyweight donors are seen acting to counter Qatar, which has been financially supporting the Muslim Brotherhood.

“The Saudis don’t want Islamists in power in Egypt, or anywhere,” the official said, describing a theological arms race being played out in mosque building across Europe, where Saudi Wahabi Islam vies for more new pulpits to counter the Qatari support of venues for Muslim Brotherhood preachers, and in Syria, where the two countries are supporting rival rebel groups seeking to overthrow Bashar Al-Assad’s regime.

“There is a battle going on for Sunni Islam, and we only talk about the relationship with Shia, but within the Sunni, the West is completely oblivious, because a Muslim, is a Muslim, is a Muslim, which would be like for us, saying [Jewish denominations] Litvacks, Hasids of Breslov and Conservative are all Jews, but are all very different. Our enemies don’t get into it — we’re all Jews to them,” the official said.

“Ultimately, the Saudi [financial aid] position, may facilitate the Americans to close the tap for now, but it is not in anybody’s interest for the Israel-Egypt peace treaty to unravel,” he said, adding “the only people in Egypt who can create stability today is the Army.”