One report from Moscow, quoting an unidentified Russian security official, said the Israeli, Col. Vadim Leiderman, had engaged in "industrial espionage -- or rather his overly active work on behalf of certain Israeli companies on the Russian market."

But Russia's Federal Security Service, known as the FSB, said in an official statement that Leiderman, who was born in the former Soviet Union, was caught "red-handed … receiving secret information from a Russian citizen."

Leiderman was arrested May 12 by the FSB in a Moscow restaurant as he met with a Russian military officer. He was interrogated and then given 48 hours to leave Russia.

Israeli authorities have denied Leiderman was engaged in espionage, claiming that as military attache it was his diplomatic function to keep abreast of Russian arms sales to the Middle East.

The Russians maintain they tried to keep the whole affair under diplomatic wraps, and that the Israelis made a big deal out of it. So maybe there's more to this than meets the eye.

What isn't in dispute is that Israel is increasingly concerned about the sale of advanced Russians weapons systems, such as the MiG-31 fighter, supersonic P-800 Yakhont anti-ship cruise missile and advanced S-300PMU air-defense missile to Iran and Syria.

Moscow declared in June 2010 it had blocked delivery of five S-300 batteries to Iran after the U.N. Security Council imposed new sanctions on the Islamic Republic for refusing to abandon its contentious nuclear program.

Moscow signed a $700 million contract for the S-300s with Tehran in December 2007.

The Israelis were relieved Tehran wouldn't get its hands on one of the world's most effective air-defense systems to protect its nuclear facilities from threatened strikes by Israel, and possibly the United States, but they took Moscow's action with a pinch of salt.

In September 2009, Israeli Prime Minister Binyamin Netanyahu was sufficiently alarmed that he flew secretly to Moscow in September 2009, using a jetliner borrowed from an Israeli business tycoon rather than an air force jet, in a vain bid to persuade the Russians to cancel the missile deal.

On Feb. 26, Russian Defense Minister Anatoly Serdyukov declared Moscow would honor a 2007 contract to supply Syria, which remains technically at war with Israel, with 72 Yakhont missiles, despite stringent Israeli and U.S. objections.

Serdyukov had only disclosed the deal, believed to be worth $300 million, in September 2010.

The Israelis' main fear is that the weapons could find their way to Hezbollah, Iran's Lebanese proxy which is also armed by Syria.

During the 2006 war, Hezbollah almost sank an Israeli corvette off Lebanon with a Chinese-designed C-802 anti-ship missile provided by Iran via Syria.

Moscow wants to boost arms exports to the Middle East, where it had many clients such as Syria, Iraq, Libya and Algeria during the Cold War, because it needs to upgrade its once flourishing defense industry.

The industry has fallen into disarray since the collapse of the Soviet Union two decades ago.

But Russia primary objective in the Middle East is restoring the political influence that Moscow had during the Cold War.

To a large extent, those ambitions remain unrealized, and the current wave of popular pro-reform uprisings across the Arab world, possibly heralding a new focus on economic growth rather than military might, may hobble Russian arms sales.

Russian officials admitted in February that the fall of Arab regimes could cost Moscow $10 billion in arms contracts.

Even so, Russia doesn't want Israeli or Western intelligence agents rummaging around foreign arms contracts.

Leiderman's expulsion marked the sharpest rift between Israel and Russia in the last 20 years, during which they sought to put the Cold War behind them.

Israel and Russia signed a military cooperation agreement, their first, in Moscow Sept. 6, 2010. Israel would sell Russia unmanned aerial vehicles worth $100 million, with the possibility of a joint venture to manufacture them in Russia in a deal that could be worth $300 million.

That deal, which would give Russia technology it doesn't have, now looks problematical.

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