AL QUDS, Aug 29: Israel flatly denied on Sunday deeply embarrassing allegations that one of its agents had spied on the United States by passing on top-secret Pentagon intelligence.

"We have no involvement in these allegations," a spokesman for Prime Minister Ariel Sharon's office said. "It is an internal issue in the United States which is running out of steam anyway.

"Israel has not used an agent to spy on the United States, the country which is its best ally." US authorities have confirmed that they are investigating an aide to a senior Pentagon official who allegedly passed secrets to Israel with the help of employees of a powerful pro-Israel lobby.

The Federal Bureau of Investigation believes the man passed classified White House policy documents on Iran to Israel and received no money, but acted out of ideological support for the Jewish state, said a top US official who spoke on condition of anonymity.

The probe targets an individual in the office of Under secretary of Defence for Policy Douglas Feith, the third most senior official at the Pentagon. The Washington Post on Saturday identified the man as one Larry Franklin, described as a desk officer in the Pentagon's Near East and South Asia Bureau.

Ehud Yatom, an MP for Sharon's Likud party and a member of the parliamentary sub-committee which scrutinises the activities of the security services, rejected any involvement by Franklin.

"I have never heard any talk about him and Israel has no need for recourse to such agents," he told public radio on Sunday. Officials in Washington said the investigation was part of a broader, two-year FBI probe of the handling of highly classified material by civilians working at the Pentagon.

Israel pledged not to spy on the United States after the case of Jonathan Pollard, an intelligence analyst for the US navy, who passed on thousands of secret documents in the 18 months before his arrest in Nov 1985.

Pollard was sentenced to life imprisonment in 1987, but Israel only admitted that he was one of its spies 11 years later. Sharon is desperate to avoid falling out with the US administration which has given its enthusiastic backing to his plans to pull settlers and troops out of the Gaza Strip while at the same time reinforcing its hold over settlements in the West Bank. -AFP