TEL AVIV ø Egypt's state-owned defense industry has been linked to the Palestinian insurgency against Israel.

Israeli military sources said Egyptian arms dealers have supplied a range of weapons and ammunition to Palestinian insurgents in the West Bank and Gaza Strip via tunnels. The sources said the material has been sold for as much as 10 times the market price for such items as bullets, guns, mortars and grenades.

The most advanced weapon sold by Egyptian arms dealers has been an enhanced rocket-propelled grenade manufactured by Egypt's state-owned industry, the sources said. They said the enhanced RPG, which was not identified, was more accurate and penetrating than the RPGs manufactured or obtained by Palestinian insurgents until 2004.

Israeli officials have acknowledged that weapons from Egypt's arms industry have been sent to the Gaza Strip. But they did not accuse the regime of President Hosni Mubarak of direct complicity.

"The material [for Palestinian weapons] and the weapons themselves come from Egypt," Deputy Defense Minister Zeev Boim said. "So far, there is no effective cooperation [between Egypt and Israel] to stop this.

In May, an Israeli M113 armored personnel carrier was destroyed by an RPG. The sources believe this was an enhanced RPG manufactured in Egypt.

"We heard that missiles that were not in the [Palestinian] arsenal have arrived in the Gaza Strip," Knesset member Ehud Yatom said.

[On Thursday, Turkish authorities reported that a shipment of surface-to-surface rockets was seized as it was headed for Egypt. Authorities did not report the source of the rockets or their end-user.]

Over the last day, Israel's military found a weapons-smuggling tunnel on the outskirts of the southern Gaza Strip town of Rafah. The military said it found 15 weapon-smuggling tunnels in 2004.

Earlier, a senior Israeli military intelligence officer told the Knesset Foreign Affairs and Defense Committee that Operation Rainbow fell short of its goals. The officer said only 44 of at least 200 insurgents were killed, with none of them being senior operatives.

The National Organization for Military Production, part of the Military Production Ministry, has overseen Egypt's defense industry. Helwan Machine Tools produces mortars and rocket launchers while the Helwan Engineering Industries manufactures ammunition, shells, bombs, and rockets. Israeli officials would not say whether the markings from either company have been found on the weapons smuggled to Palestinian insurgents.

Egyptian sources confirmed that weapons made in their country were smuggled to the Gaza Strip. They said the sale and transport were the work of criminal gangs based in Cairo.

These gangs, the sources said, have established dozens of arms facilities to service the underworld in Egypt. In all, the sources said, Egyptian authorities shut down 98 weapons laboratories and production facilities since 2002. In 2004, eight workshops were raided.

Israeli officials said Egypt has refused to block the flow of weapons to the Gaza Strip. They said the reasons for the Egyptian smuggling have been economic as well as the need to fuel the Palestinian insurgency.

"Egypt wants to see Israel and the Palestinians bleed," Knesset Foreign Affairs and Defense Committee chairman Yuval Steinitz said. "I must tell you that all of the assessments of the security forces have been that if the direction of the weapons smuggling was from Israel to Cairo in an effort to arm the Muslim Brotherhood, the effectiveness of the Egyptians [to stop the weapons flow] would have been maybe not 100 percent, but 90 percent. Egypt is not doing anything against smuggling. It is basically helping the smuggling."