Egypt has accused the Lebanon-based Hezbollah of planning terrorist attacks on Egyptian soil, which could lead to more erosion in relations between Egypt and Hezbollah's primary sponsor, Iran.

At the same time, a report in the London-based newspaper Al Hayat alleges that Hezbollah is behind a smuggling operation that funnels arms from Sudan into Egypt, then into the smuggling tunnels on Egypt's border with Gaza.

Egyptian prosecutors are investigating a 49-member cell headed by Hezbollah. The cell includes Palestinians, Lebanese and Egyptians, who are believed to be monitoring sensitive sites in Egypt, including the Suez Canal, the Rafah border crossing between Egypt and the Gaza Strip, and major tourist areas along the Sinai beaches.

Egyptian officials issued a statement that read in part, "The public prosecutor received a note from state security about information confirmed by questioning about Hezbollah leaders sending some elements to the country to attract members to work with the organization…with the aim of carrying out acts of aggression inside the country."

The Egyptians are concerned about a tightening connection between Iran and Hezbollah-both Shiite Muslim groups and Hamas in the Gaza Strip, which is Sunni Muslim.

Iran now funds Hamas and issues orders to the group. Sympathies for Hamas run high among the Sunni population in Egypt, especially inside the Muslim Brotherhood, a radical Islamist group that could potentially destabilize or bring down the regime of Egypt's 80 year-old president Hosni Mubarak or his chosen successor

Sources: Ynet News, Reuters