Israel is feeling uneasy as it tracks Egyptian President Mohammed Morsi's recent decision to deploy tanks in the demilitarized Sinai Peninsula, which Israeli officials say is a violation of their 1979 peace treaty.

Egypt, for its part, says the deployment has been carried out in coordination with Israel, an Egyptian military officer told the Al Masry AlYoum newspaper. The officer said Egypt had not put a time limit on the operation to root out terrorists in the Sinai and that the Egyptian army would continue to "purge the area of armed criminals, which pose a significant risk to Egyptian national security."

Israel meanwhile has voiced its objections to the Egyptians directly and through American mediators, asking that the tanks be removed, but Jerusalem doesn't believe that the U.S. administration will throw its entire weight behind the issue by threatening to withhold economic aid from Egypt.

According to Reuters, Prime Minister Benjamin Netanyahu’s government has not lodged any formal protest, preferring to try to resolve the issue quietly, including by use of U.S. mediation, to avoid worsening ties with Cairo.

The Israeli daily Maariv reported that Netanyahu has demanded the tanks be withdrawn, though officials could not confirm the report. Netanyahu's office declined comment.

Egyptian presidential spokesman Yasser Ali denied receiving any complaints from Israel. "Security in Sinai is among Egypt's national security priorities, and nothing can stand in front of this," he said.

When asked if this means Egypt will send troops regardless of Israel's approval or objections, he declined to answer.

Egypt has been building up its military presence in lawless Sinai after Islamic terrorists there attacked an army post on Aug. 5 and killed 16 soldiers, but Israeli officials said Tuesday that Egypt's deployment in recent days of heavier U.S.-made tanks went further than agreed and violates the accord.

While the tanks are not aimed at Israel and it does not consider them to be a strategic threat, Israeli officials said they were concerned about the precedent and that the move should have been coordinated. Israel has welcomed the crackdown against Islamist terrorist groups in Sinai and previously agreed to exceptions to the treaty allowing Egypt to add troops and equipment in Sinai.

In a meeting of senior Israeli ambassadors on Tuesday, Foreign Minister Avigdor Lieberman said, "Israel must not come to terms with Egypt's violation of its peace treaty with us."

The foreign minister said "Israel understands Morsi's need to display his authority in Sinai, especially following the bloody attack there recently, but we are very concerned that he deployed tanks without coordinating it."

Former Military Intelligence head Maj. Gen. (res.) Amos Yadlin told Army Radio Wednesday that he wasn't worried about the tank deployment. "Terrorism is fought with tanks," he said.

"As long as the operation in Sinai is focused and comprehensive against the terrorists there, I think we need to look at things realistically and not split hairs — because Israel has already approved in principle allowing Egyptian forces to enter Sinai in numbers that exceed what the peace treaty stipulates."

Zvi Mazel, a former Israeli ambassador to Egypt, said he had no direct knowledge of what weapons Egypt had moved into Sinai. If the reports are true though, he said it could harm Egypt's standing with the U.S., Israel and the international community at large.

"If it is true, then Israel should go to the U.N. as this is a serious breach of the treaty," he said.

U.S. State Department spokeswoman Victoria Nuland backed Egypt's counterterrorism efforts in Sinai, but said any deployments of military assets should respect treaty obligations and be coordinated with Israel.

"As the Egyptians work hard now to defeat terror and turn back other security threats in the Sinai, we've been supportive of those efforts," she told reporters in Washington. "We have encouraged them in those efforts, not only to enhance security in Egypt, but also to enhance security for neighbors, security in the region."

"But as has been long-standing practice, there needs to be transparency," Nuland added, urging that "lines of communication stay open" between Egypt and Israel.

Eli Shaked, another former Israeli ambassador to Cairo, said it's a joint Israeli and Egyptian interest to keep Sinai quiet, so he didn't expect the issue to turn into a major crisis. "In the final analysis, the Egyptian military is coordinating with Israel, but I cannot say for certain when that is done or how," he said.

According to The Associated Press, an Egyptian border official confirmed that his Israeli counterparts had voiced concerns in recent days. "We sat together. They said, 'We are worried about the military presence in Sinai,'" the official said.

Meanwhile, Egyptian media outlets reported Tuesday that Defense Minister Gen. Abdel-Fattah el-Sissi has ordered further deployments of military forces into Sinai, including aircraft and attack helicopters.

On Monday, a senior Pentagon official told CNN that U.S. Defense Secretary Leon Panetta is offering Egypt a package of classified intelligence-sharing capabilities designed to help it identify military threats in the area and reassure Israel that Egypt can deal with rising militancy along Israel's border. These capabilities include satellite imagery and drone flights, as well as intercepts of cell phones and other communication devices among militants suspected of planning attacks, according to an Obama administration official.

According to CNN's Security Clearance blog, Panetta is offering to supply Egypt's military in Sinai with truck-mounted sensors that provide an electronic signal identifying which nation is operating the vehicle. The blog reports that the technology, commonly known as "Blue Force Tracking," has been widely used in Iraq and Afghanistan to identify vehicles at great distances. It is also possible the technology will be offered to the international peacekeeping force in Sinai that includes 700 U.S. troops.

The official told CNN that nothing had been decided yet, and noted that any change in the international peacekeeping force had to be agreed to by all nations.

The package was discussed by Panetta during his recent trips to Egypt and Israel. The administration official emphasized that the offer was aimed strongly at helping Morsi improve security in Sinai, but also to reassure Israel, CNN reported.