Defense Minister Ehud Barak told The Economist on Thursday that Israel will allow Egypt to deploy thousands of troops in the Sinai Peninsula, even though the 1979 Peace Treaty forbids it. Barak said that the forces will have helicopters and armored vehicles, but no tanks beyond the one battalion stationed there.

"Sometimes you have to subordinate strategic considerations to tactical needs," the defense minister said. He noted that Prime Minister Benjamin Netanyahu is backing the plan.

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The decision comes in the backdrop of the recent escalation in the south following the terrorist attacks near Eilat which killed eight Israelis last week.

The Economist estimated that troops will not be deployed west of the Suez Canal.

"Israel faces a dilemma with far-reaching strategic consequences," the paper said. "Thirty years of peace with Egypt have rested, above all, on a demilitarized Sinai. (But Israel) urgently needs Egypt to tighten security."

It quoted an aide to Netanyahu as saying that “If nothing is done today you will see extremist groups establishing a larger footprint in Sinai.”

Israel had approved the deployment of Egyptian troops in Sinai earlier this year. Thousands of Egyptian soldiers were deployed in northern Sinai as part of a large-scale operation against al-Qaeda operatives. Troops were sent to the region even prior to President Hosni Mubarak's ouster, following riots in the region.

The Economist described the recent escalation in the south as something which began with the all too familiar "Israeli-Palestinian tit-for-tat" but that descended into a political crisis with Cairo.

It mentioned the anti-Israel protests outside the embassy in Cairo and Egypt's threats to recall its ambassador. The paper also noted that Egypt was not satisfied with Israel's expression of regret over the deaths of Egyptian border guards.