Developments in the Sinai Peninsula during the past year clearly reflect dramatic changes in Egypt and highlight the delicate situation at the Israeli-Gazan-Egyptian border junction.

Egypt is passing through a transition stage characterized by political power struggles, unprecedented deterioration in domestic security and a worsening economic plight. Most of the forces operating in the public sphere (led by the Islamic parties and the Supreme Council of the Armed Forces) support continuation of Egypt's foreign, security and economic policies. SCAF spokesmen and Muslim Brotherhood senior figures have declared that Egypt would honor its international commitments, including the peace treaty with Israel.

At the same time, there is a growing demand in the Egyptian political arena to reopen parts of this treaty, in particular the military annex in which Egypt agreed to demilitarize most of the Sinai Peninsula and limit deployment there of army and police forces. In parallel, Cairo's policy regarding the Palestinian arena has changed significantly, particularly regarding Hamas and the border with Gaza.

In recent years, Sinai has witnessed increased criminal activity involving smuggling of African labor migrants to Israel and of arms to the Gaza Strip. More recently, militant and criminal groups have exploited the chaos generated by the fall of the Mubarak regime to increase their activities in a territory exceeding 60,000 square kilometers where rough topographic conditions render it difficult for meager security forces to control the region.

Cairo's decision-makers consider the increased terrorist activity and arms smuggling in Sinai to be an Egyptian national-security issue. In an effort to combat this activity, army and intelligence reinforcements have been introduced, with Israeli agreement. While these forces have registered some success, this has not affected the motivation of criminal and militant gangs to continue operating in Sinai. The struggle against smuggling and sabotage operations--foremost among them repeated attacks on the gas transport pipeline to Jordan and Israel--has led to widespread arrests of Bedouin suspects and restriction of Bedouin freedom of movement. Against this backdrop, the already fragile relations between the regime in Cairo and the Bedouin population have deteriorated yet further, along with a worsening economic situation caused by the past year's blow to the Sinai tourist industry--a source of income for thousands of Bedouin families.

Security in Sinai depends more than any other factor on developments in the Gaza Strip and the ongoing confrontation between Israel and Hamas. In this context, Sinai in general and the triple border junction between Egypt, Israel and the Strip in particular have taken on a special sensitivity that threatens to plunge all three sides into a critical crisis.

This was clearly illustrated in the aftermath of the terrorist attack near Eilat on August 18, 2011. Israel blamed Hamas, attacked targets in the Gaza Strip and assassinated leaders of the Popular Resistance Committees there. Hamas responded by firing dozens of rockets at Israeli cities, towns and villages. Israeli analysts and politicians placed a major portion of responsibility for the incident on Egypt, arguing that Sinai had become a no-man's land and the Egyptian army had lost control there.

The death of four Egyptian border policemen in the incident enraged the Egyptian public. There were calls for cancellation of the Camp David agreements, and angry demonstrators took over the Israeli embassy in Cairo. The Egyptian government recalled its ambassador from Tel Aviv, the Israel-Hamas ceasefire was on the verge of collapse and Israeli-Egyptian relations experienced their first serious crisis since the fall of the Mubarak regime. A comprehensive international effort eventually put out the fire, but the causes that instigated it are still around.

The dramatic events in Egypt and the change in its Gaza policy have had significant consequences for Israel's national security concept. Rapid completion of a Negev-Sinai security fence and changes in force deployment along the border are but one link in a chain of substantial adjustments in Israel's approach to its relations with Egypt and toward developments in Sinai.

Still, commitment to the peace treaty and dedication to combating hostile elements active in Sinai reflect a common Egyptian-Israeli interest. In parallel, concern for these critical interests in the current fragile reality requires the two countries' leaders to address Egyptian-Israeli relations in a very broad context. Thus, serious escalation in the Israeli-Palestinian confrontation is liable to escalate Israel's already sensitive relations with Egypt to the point of endangering the peace treaty. On the other hand, Hamas' growing dependency on Egypt could, paradoxically, enable Cairo to play an instrumental role in maintaining the "calm" between Israel and the Gaza Strip and in thwarting hostile activities in the Sinai Peninsula.