Egyptian politicians - including president Mohamed Morsi - have been caught live on air discussing plans to sabotage an Ethiopian dam project.

Ethiopia has begun diverting the Blue Nile, a major tributary to the Nile River, 500 metres from its natural course to construct a $4.7 billion hydroelectric project known as Grand Renaissance Dam.

It has sparked fears of a major impact downstream in Egpyt and Sudan.

Without knowing their comments were being aired, Egyptian politicians at a meeting chaired by Mr Morsi began to suggest ways to stop the project - including backing rebels to sabotage it.

Ayman Nour, head of the liberal Ghad Party, suggested spreading rumours that Egypt was buying military planes in order to create the impression that it was planning an airstrike to destroy the dam.

He also suggested Cairo send political, intelligence and military teams to Addis Ababa because "we need to intervene in their domestic affairs".

Yunis Makhyun, who heads the conservative Islamist Nur Party, said the dam constituted a "strategic danger for Egypt", requiring Cairo to support Ethiopian rebels "which would put pressure on the Ethiopian government".

An aide to Mr Morsi later apologised for not letting the politicians know that their comments were being aired.

"Due to the importance of the topic, it was decided at the last minute to air the meeting live," Pakinam El-Sharwaki, the presidential aide for political affairs, wrote on Twitter.

"I forgot to inform the participants about the changes.

"I apologise for any embarrassment caused to the political leaders."

The meeting, a huge embarrassment both for the presidency and the opposition members who attended, caused a storm of ridicule and anger in the media and prompted even those who did not attend to apologise on behalf of Egyptians.

"Sincere apologies to the people and governments of Ethiopia & Sudan for the irresponsible utterances at the president's "national dialogue"," wrote leading dissident and former UN nuclear watchdog chief Mohamed ElBaradei on Twitter.

"A scandal in front of the world," read the headline of the independent daily Al-Tahrir.

Popular talk show host Reem Magued, who aired parts of the meeting on her show, said: "It's true that we asked for transparency from the government but not like this, not to the point of scandal."

Ethiopian water and energy minister Alemayehu Tegenu said he had not heard about the incident, but insisted Ethiopia's relationship with Egypt remained "healthy".

He insisted water levels would not be affected by the construction of the dam.

"Why diversion is a headache for some groups, I am not clear about. Any layman can understand what river diversion means," he said.

Egypt believes its "historic rights" to the Nile are guaranteed by two treaties from 1929 and 1959, which allow it 87 per cent of the Nile's flow and give it veto power over upstream projects.

But a new deal was signed in 2010 by other Nile Basin countries, including Ethiopia, allowing them to work on river projects without Cairo's prior agreement.

The first phase of the project is expected to be completed in three years.

Court sentences 43 in case against NGOs

Meanwhile, An Egyptian court has given jail terms to 43 Americans, Europeans, Egyptians and other Arabs in a case against democracy promotion groups that plunged US-Egyptian ties into their worst crisis in decades.

Judge Makram Awad gave five-year sentences in absentia to at least 15 US citizens who left Egypt last year.

He sentenced an American who stayed behind to two years in prison and gave the same sentence to a German woman.

US secretary of state John Kerry harshly criticized the decision, calling it "incompatible with the transition to democracy" and a violation of the government's commitment to support civil society as it emerges from years of authoritarian rule by close US ally former president Hosni Mubarak.

Beginning in late 2011, Egypt's crackdown on organisations which included US-based groups linked to America's two main political parties caused outrage in Washington, which supplies Cairo with $US1.3 billion in military aid each year.

The court ordered the closure of the non-governmental organisations (NGOs) involved in the case, including the US-based International Republican Institute (IRI), National Democratic Institute (NDI) and Freedom House.

The Egyptian government said the NGOs were operating illegally in Egypt and complained that after the anti-Mubarak revolt, the US government had diverted $US150 million from its Egypt aid budget to these NGOs, breaking bilateral agreements.

Civil rights campaigners in Egypt saw it as part of a concerted campaign against NGOs waged by remnants of the Mubarak administration to crush the nascent democracy.

ABC/AFP/Reuters