NEW YORK, May 7 (JTA) — A report that a top U.S. official may have passed highly sensitive information to Israel is sparking fears that it could damage relations between Washington and Jerusalem. Israel has denied the allegations, with Prime Minister Benjamin Netanyahu”s spokesman in Jerusalem calling them “totally baseless.”” Eliahu Ben-Elissar, Israel”s ambassador to the United States, who has been implicated in the report, called it “first-rate nonsense”” probably emanating from “a sick imagination.”” But if the report is true, some observers say it may augur a crisis on the scale of the Jonathan Pollard affair. The Jewish Navy analyst was sentenced in 1986 to life in prison for selling military intelligence to Israel. That affair strained bilateral relations and raised Jewish hackles over questions of dual loyalty. They also say that it could be a heavy blow to a Netanyahu government still reeling from a domestic political scandal known as the Bar-On affair. It is “hard to believe”” that the ambassador could be involved “without that leading back to Netanyahu,”” said one analyst who declined to be identified. But the most serious consequence, he said, would be “the level of profound distrust”” it would create between Netanyahu and President Clinton. Another Middle East analyst agreed. “This would again serve to make the relationship even more tense and strained just at a point where it looked like the peace talks were being revived.”” If it is true, he said, it was “short-sighted and colossally wrong- headed.”” At the same time, many cautioned that there is no evidence yet to support the charges. Israeli officials and some American Jews suggested that the information was leaked with the intention of harming U.S.-Israeli ties at a sensitive time in the Israeli-Palestinian peace process. U.S. Middle East envoy Dennis Ross was due to arrive in the region Wednesday night to try to revive the stalled talks, which broke down in March after Israel began building a Jewish neighborhood in southeastern Jerusalem. The Washington Post reported Wednesday that the FBI opened an investigation in January after the National Security Agency intercepted a telephone conversation between a senior Israeli intelligence official in Washington and a superior in Israel. According to the Post, the two Israelis talked about whether to ask someone with the code-name “Mega”” to obtain an unpublished letter that then-U.S. Secretary of State Warren Christopher had sent to Palestinian Authority leader Yasser Arafat. The Christopher missive was one of two “side letters”” of assurances sent separately to Israel and the Palestinians as part of the Hebron accord signed in January. The agreement stipulated an immediate Israeli transfer of most of the West Bank city to the Palestinians and a commitment to further West Bank withdrawals. Israel immediately made public its letter, but the Palestinians never did. In what may prove to be a political bombshell, the Post said the intelligence officer told his superior that Ben-Elissar, the Israeli ambassador, had requested the letter from “Mega.”” The Post news story said that while the suggestion was rejected that “Mega”” be asked for the letter, the intercepted conversation led officials to believe that “Mega may be someone in the U.S. government who has provided information to the Israelis in the past.”” State Department officials have confirmed the Post report, but they made clear that the identity of Mega is still unknown. Sources in Jerusalem say the Washington Post report may have been based on a misunderstanding by U.S. intelligence officials of what they were hearing. They say “Mega”” was not the term actually used, and that the word that was used merely referred to a U.S. agency in a loose Hebrew code. For his part, Ben-Elissar emphatically denied to the Post that he had requested a copy of the letter to Arafat or that a U.S. government official was passing sensitive information to Israel. “Israel does not collect intelligence in the U.S. and this is a terrible report whose purpose is to accuse Israel of spying against the U.S.,”” Ben-Elissar said. “We do not spy in the U.S.”” Accompanying the news story was a lengthy profile of Ben-Elissar, headlined, “Holocaust Years as Spy Made Israeli Ambassador Hard- Liner.”” In Jerusalem, Israeli Foreign Minister David Levy said he was “amazed”” by the report, noting that Israeli diplomats are barred from any involvement in the transfer of intelligence information. In interviews in the United States, one observer after another said that it seemed “so stupid”” to jeopardize Israel”s most important strategic relationship that they found the report almost impossible to believe. “It”s hard to believe that anybody in Israel, after what happened with Pollard, would repeat the same stupidity, the same idiotic mistake,”” said one. Mark Rosenblum, founder and political director of Americans for Peace Now, said it was “too early to speculate”” on the ramifications of the investigation. But, he said, “if any of this is true, I would expect the only way to control damage to the strategic relationship between Israel and the United States is for Israel to cooperate fully and completely in getting to the bottom of this and making sure everyone culpable is brought to justice.”” Abraham Foxman, national director of the Anti-Defamation League, downplayed the impact of the report on U.S.-Israel relations. If it is true, he said, “there should be consequences and penalties”” for wrongdoing, but that it would be only a “blip”” in the relationship. Instead, Foxman said he believed the report was a leak initiated by someone with “an agenda to undermine the relationship between the two countries.”” There are hundreds of investigations going on at any given time into alleged instances of improprieties between allies and non-allies, but “we don”t get to see any of these until and unless it is determined there is a violation of ethics or law,”” he said. At the same time, he noted, the mere allegations will do damage. “They play into the idea that Jews are not loyal Americans,”” he said. For their part, officials at the American Israel Public Affairs Committee, the pro-Israel lobby, would say only, “There are reasons to be skeptical about the report.”” The Washington Post report follows the disclosure in February of an FBI investigation into the activities of David Tenenbaum, an Army engineer in Detroit who, according to an FBI affidavit, admitted to sharing classified documents with Israel for the last 10 years. That investigation fell on the one-year anniversary of the repeal of a Defense Department security agency memo warning government contractors that “strong ethnic ties”” to American Jews allow Israel to “aggressively”” steal military and industrial secrets. Little attention has been paid to the Tenenbaum case since February, said Malcolm Hoenlein, executive vice chairman of the Conference of Presidents of Major American Jewish Organizations. The latest incident “will blow over like the Tenenbaum case,”” he said. “There is no evidence so far of any Pollard-like affair.”” However, like Foxman, Hoenlein said he was concerned that the allegations themselves would cause damage.