JERUSALEM, Dec. 7 (JTA) Twice in the past three months, the already fragile relationship between Israel and Egypt seemed to head south. On Oct. 7, Egyptian security forces failed to prevent the deadly bombing of a hotel in the Sinai resort town of Taba that killed 32, including 12 Israelis and then they delayed rescue workers for hours. On Nov. 18, when Israeli soldiers missed their intended Palestinian targets near Rafah, a town on the Gaza strip’s southern border, they killed three Egyptian soldiers instead. That tragic incident transpired just as Israel needed Egypt at its side, with Israeli Prime Minister Ariel Sharon’s Gaza withdrawal plan moving forward. But Sharon and Egyptian President Hosni Mubarak kept cool heads after those incidents, and both parties were able to take deep breaths and allow a quick improvement in relations, culminating this week in the release of Israeli Druse Azzam Azzam. Azzam had served eight years of a 15-year sentence in an Egyptian prison for allegedly spying for Israel. His incarceration on charges that he and Israeli officials categorically denied had cast a giant shadow on Israeli-Egyptian relations. Azzam’s release sent a clear signal to Israel that, in the aftermath of the death of Palestinian Authority President Yasser Arafat, regional tides seemed to be shifting for the better. Israeli officials said this week that the two countries have not been so close since the euphoric days of their peace agreement in 1979. Security officials such as Meir Dagan, head of the Mossad; Avi Dichter, head of the General Security Service; and Amos Gilad, head of the security-political department at the Defense Ministry, have been welcomed in Cairo in a manner reminiscent of the days when Ezer Weizman, as defense minister in Menachem Begin’s government, visited Cairo as President Anwar Sadat’s favorite Israeli. Azzam’s release was initiated last December, when Mubarak met Israel’s foreign minister, Silvan Shalom, in Geneva. After years of blanket refusals to discuss early release for Azzam, Mubarak surprised Shalom when he said that letting Azzam go “could be discussed.” The negotiations culminated last Dec. 1 when Omar Suleiman, the Egyptian intelligence chief, and Foreign Minister Ahmad abu-Reit visited Jerusalem, promising that Azzam would be freed soon. “How soon?” Sharon reportedly asked his guests. “Sunday or Monday next week,” they said. “Make it Sunday,” Sharon said. Sunday it was. During the Egyptians’ visit, Sharon’s tone was softer than ever. He promised that he was determined to carry out the Gaza withdrawal “at any cost,” and pledged that the Israel Defense Forces soon would withdraw from Palestinian population centers and that eastern Jerusalem residents would be allowed to vote in Palestinian Authority presidential elections scheduled for Jan. 9. As Azzam’s release developed, it factored into a number of developments: Earlier this year, Sharon selected Egypt as Israel’s primary natural gas supplier, rejecting the British-Palestinian option of offshore gas from Gaza. Last week, Mubarak used exceptionally warm words to praise Sharon’s role as a potential peacemaker, saying Sharon could be the Palestinians’ last, best chance for peace. “It will be very difficult to make progress in the peace process after Sharon,” Mubarak said. Egypt has hinted it soon will return its ambassador to Tel Aviv. Mohammad Basyouni was called back to Cairo in 2000 after an Israeli air raid on Gaza, and has not been replaced. Israel sees several advantages in improving relations with Cairo: Israel needs Egypt as a possible mediator in assuring a smooth withdrawal from Gaza. This could involve not only contacts with the Palestinian Authority, but help in maintaining a cease-fire that would blunt violent Palestinian terrorist groups such as Hamas and Islamic Jihad. Improvement of relations with Egypt could radically change the atmosphere in the Middle East if other Arab countries were to follow suit. The Tel Aviv stock exchange already has reacted favorably to the upswing in relations. Egypt, too, sees benefits from cozying up to Israel: Mubarak is concerned that further deterioration in the Palestinian-Israeli situation could spill over to Egypt. He saw the Taba bombing as a warning that Egypt could be next on the target list for international terrorism. Egypt wants to play a more active role in Middle Eastern politics, particularly the Palestinian case. It has a vested interest in the success of Palestinian moderates such as newly elected PLO head Mahmoud Abbas as bulwarks against the ascendance of fundamentalists like Hamas. Better relations with Israel will allow Egypt to influence Israel to adopt a more flexible policy toward the Palestinians. The change is particularly significant in light of the fact that Sharon’s relationship with Mubarak has until now been formal and cool. Only rarely, when necessary, did they exchange telephone calls. In the last few weeks, they did so quite often. Sharon called Mubarak to thank him for Egyptian aid in rescuing Israelis in Taba, despite complaints in Israel that Egypt could have done more and faster. Sharon also called to apologize when the Egyptian soldiers were killed by Israeli fire in Rafah, and this week he finally was able to call to thank Mubarak for Azzam’s release. In the past, Sharon had made certain overtures toward the Egyptians contingent upon Azzam’s release. For example, when Shalom recently asked Sharon to speed up implementation of certain understandings with Egypt, Sharon said he would honor Israel’s commitment only when Egypt freed Azzam. Improved Israel-Egypt relations already are apparent in a number of fields: Israel has agreed to the deployment of Egyptian soldiers along the border between Sinai and the Gaza Strip. Sharon is willing to give up Israeli control of the Philadelphia corridor dividing the Egyptian and Palestinian parts of Rafah. The Egyptians are considering a request from Shalom to renovate the grave of a rabbi near Alexandria and increase the number of visas given to Jews who want to visit the grave. Israel, for its part, will facilitate reconstruction work at Deir Sultan, the Egyptian-Coptic church above the Tomb of the Holy Sepulcher in the Old City of Jerusalem. On Monday, Israeli Defense Minister Shaul Mofaz said Israel and Egypt were launching joint strategic initiatives that will include security cooperation against terrorism. Israel’s minister of trade, Ehud Olmert, was expected to visit Cairo in coming days to sign a series of agreements with Egypt geared toward using American customs benefits for products mutually manufactured in Egypt and Israel. The net result of the improvement of relations is that the two countries have upgraded their security and diplomatic contacts to an unprecedented level. Next on the agenda is a meeting between Sharon and Mubarak, perhaps even before the appointment of a new Egyptian ambassador to Israel. The weak link in the rapprochement between Egypt and Israel is the fact that it relies heavily on two aging leaders. For the time being, it remains a peace between leaders more than a peace between peoples.