"While apprehensive about the buildup of the Egyptian ground and air forces, some Israeli officials, especially Knesset member Yuval Steinitz and former commander-in-chief of the Israeli Navy, Maj. Gen. Yedidia Ya'ari, consider the overhaul of the Egyptian Navy to be the most significant aspect of the military's modernization program," the report said.

The Egyptian Navy has been operating two Knox-class frigates and four Oliver Hazard Perry frigates exported by the United States. The report said the warships were capable of over-the-horizon combat and anti-submarine warfare.

But the report said Egypt's order of 53 satellite-guided Harpoon Block II missiles could pose the greatest threat to Israel. Author Jeffrey Azarva said the Harpoon could "exploit Israel's lack of strategic depth by evading its current air defense systems. That has truly caused consternation in Jerusalem."

"This purchase could signal a strategic shift in Egypt's naval doctrine — one that would allow it to project its open-sea capabilities even further in the eastern Mediterranean Sea and place a stranglehold on Israel's most important maritime lifelines," the report, entitled "The Significance of Egypt's Military Buildup," said.

The U.S. State Department has played down the offensive capabilities of the Harpoon. But the report said that with the Harpoon, warships that operate from Egyptian Navy bases at Ras Al Tin on the Mediterranean and at Safajeh and Hurghada on the Red Sea could block Israel's sea links.

Egypt has also been assembling a huge main battle tank fleet based on the U.S.-origin M1A1. The report said the M1A1, assembled in Egypt, has been armed by advanced munitions used by the U.S. Army in Iraq.

"By bolstering its armored corps, air force, and naval fleet with an array of U.S. military platforms, the Egyptian armed forces have emerged as one the region's most formidable forces," the report said.

Egypt's M1A1 fleet was expected to number 880 MBTs in 2008, the report said. Egypt was also said to have deployed 835 upgraded U.S.-origin M-60A3 tanks, which participated in the 1991 Gulf war.

The report said Egypt's fleet of F-16 multi-role fighters has forced Israel to alter its air combat techniques. Over the last two years, the Egyptian Air Force has absorbed 36 AH-64D Apache attack helicopters, each capable of carrying 16 laser-guided, anti-tank, Hellfire missiles.

Still, the report said, Egypt has failed to exploit the potential of its U.S.-origin weapons. Azarva said Egypt's military continues to be marred by a rigid command structure that prevents optimal deployment of precision-guided weaponry, information technology and integrated command and control systems.

"While detractors of the gloom-and-doom scenario in the Israeli defense establishment will not dispute the Egyptian military's modernization, their sanguine assessments assume that it will be mired in its antiquated Soviet-style military doctrine for the foreseeable future," the report said.