US Defence Secretary Leon Panetta was in Cairo on Tuesday in an effort to defuse tensions between Egypt and Israel that have risen since the end of Hosni Mubarak's rule.
Panetta, who met the country's military ruler Field Marshal Hussein Tantawi, strongly urged Egypt to provide better security in the Sinai Peninsula, after Israel said an attack on its south was mounted from there.
"I am concerned about the situation in the Sinai," Panetta told reporters after the talks.
The Pentagon chief "strongly urged" Tantawi "to provide better security in the Sinai," he said, adding that Egyptian leaders reassured him they were "confident" they could ensure security in the peninsula.
"Any friction in that area could create real problems for the region," Panetta said.
On tensions between Israel and Egypt, Panetta "expressed the need for better communication between both countries."
Relations between Egypt and Israel, which have been bound by a peace treaty since 1979, entered a turbulent period after Mubarak's overthrow.
The end of the veteran strongman's rule has coincided with uprisings across the Arab world that could give greater voice to popular anger over Israel's treatment of the Palestinians.
Last month, Egyptian protesters staged a demonstration outside the Israeli embassy and called for the expulsion of the ambassador, before crowds smashed through a security wall, tossed embassy papers from balconies and tore down the Israeli flag.
Before flying out of Tel Aviv to Cairo, Panetta said he would ask the military rulers to release an alleged Israeli spy, Ilan Grapel, who has been in custody since June.
Panetta said Grapel's detention came up in the talks but that he was not directly involved in any negotiations.
"We're confident that ultimately the Egyptian government will deal with that fairly," he said.
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Grapel, a US-Israeli dual national, is accused of spying for Israel and has been in custody since June 12, but Israeli officials say it is all a mistake.
Grapel has been charged with being an agent of Israel's Mossad intelligence service and of sowing sectarian strife in Egypt during the uprising which ousted long-time US ally Mubarak in February after three decades in power.
Egypt said on Saturday it was considering releasing Grapel.
Panetta, who also met Egyptian Prime Minister Essam Sharaf, discussed plans for elections and a transition to a civilian-led government.
He said he reiterated an appeal for an end to Egypt's decades-old state of emergency.
Egyptian leaders told him that "they are seriously looking at the first opportunity to do that," he said.
US Ambassador to Egypt Anne Patterson said the leadership appeared not to have made a decision yet on the timing of the move.
Tantawi said the state of emergency would be lifted "on condition that the security situation stabilises," in remarks published in the state-owned Al-Ahram newspaper.
US Secretary of State Hillary Clinton said last week she hoped Egypt would lift the emergency well before June next year when the powers granted by the Mubarak-era parliament run out.
"We want to see this as soon as possible," she said, adding that it was a key step to "create the context for free and democratic elections."
The ruling Supreme Council of the Armed Forces has laid out the timetable for the first post-Mubarak parliamentary elections.
Voting will begin on November 28 and will take place over four months before a new constitution is drafted. Presidential elections are expected in 2012.
After a day of meetings in Cairo, Panetta is due to fly to Brussels to meet NATO defence ministers who plan to discuss the allied air campaign in Libya and the war effort in Afghanistan.