WASHINGTON, November 16 (IslamOnline & News Agencies) - The U.S. is reviewing all its aid to the Arab world to see how much it can redirect to programs that promote democracy and the rule of law, an Israeli newspaper quoted a State Department official saying.

According to Ha’aretz, the official who wanted to remain anonymous, said that the review includes all assistance to Egypt, the second largest recipient of U.S. aid after Israel and one of Washington's best friends in the Arab world, he said.

"As part of a U.S. Middle East Partnership Initiative, we are currently in the process of conducting a complete review of all our assistance programs in the Arab world, including Egypt," said the official, reported Ha’aretz.

Egypt receives about $1.9 billion a year in U.S. aid - roughly unchanged since the late 1970s, when late Egyptian President Anwar Sadat signed a peace treaty with Israel, the paper added.

Recently, there has been increasing tensions between the U.S. and Egypt.

Just yesterday, the United States registered deep displeasure with Egypt after a state-run television station aired an episode of a controversial mini-series with alleged “anti-Semitic” content, reported News Agencies.

The U.S. State Department said the program had done "great harm" to Egypt's standing as a moderate Arab state but appeared to rule out stern punitive measures, such as suspending aid to Cairo, suggested by the Washington Post on Friday, November 15.

The department, which had previously expressed concern about the series "Knight Without a Horse" but stopped short of direct criticism because early episodes had not contained objectionable material, said it would press the issue again with Egyptian officials, Agence France-Presse (AFP) reported.

"We are very disappointed that a government of Egypt television station would air a program that includes scenes treating the so-called 'Protocols of the Elders of Zion,' an anti-Semitic forgery, as fact," said Nancy Beck, a department spokeswoman.

"This broadcast does great harm to Egypt's reputation," she said. "We will continue to express to the government of Egypt our serious concern over this matter.

"This kind of program does not continue to the climate of mutual understanding and tolerance that the Middle East so much needs," Beck said.

The producers of "Knight Without a Horse" had admitted the series draws from the "The Protocols" but denied that it was anti-Semitic, maintaining it tells the story of an Egyptian who leads the struggle against British colonizers.

The protagonist then discovers a book written in Russian that turns out to be the “Protocols" which provides proof that the real enemy is not the British, but the "Elders of Zion," they said.

The Washington Post on Friday denounced Egypt and President Hosni Mubarak for allowing "Knight Without a Horse" to air on state television and suggested that the United States review its aid program to Cairo.

"Mr Mubarak's poisonous tactics are causing increasing harm to American interests in the Middle East," the Post said in an editorial.

It noted that Washington was trying to promote tolerance and democracy in the region and gave Egypt more than two billion dollars in economic and military aid per year.

Beck said that democracy and rule of law assistance -- that comes under the new US-Middle East Partnership Initiative to Egypt and other Arab nations was under review, but implied that direct aid to Cairo was not threatened by the television series.

"The United States provides assistance to Egypt because it is in U.S. strategic interests to do so," she said.

"The United States continues to have an interest in a stable Egypt and a stable Middle East," Beck said. "U.S. economic and military aid supports stability."

Earlier in August, the U.S.-Egyptian relations were also strained after an Egyptian-American sociology professor Saad Eddin Ibrahim was sentenced to seven years, after the Egyptian state security court released the full details of the seven-year sentence passed against him which included charges of receiving funds from an Israeli university and NATO.

Ibrahim, 63, was sentenced following a retrial on charges that included tarnishing Egypt’s image abroad and misappropriating funds.

The White House confirmed after the verdict that U.S. President George W. Bush would oppose new aid to Egypt to protest against the sentence.

The U.S. decision will not affect existing aid programs to Egypt , but will prevent Cairo from receiving a 130 million dollar package sought to alleviate losses in tourism revenue after the September 11 attacks on the United States.

But the U.S. retaliation prompted Foreign Minister Ahmed Maher to bluntly tell Washington his country would “not accept any pressure” from it, and was also condemned as a double standard by local newspapers and several Arab states.