The crisis between Israel and New Zealand ended yesterday, as Israel extended a formal apology to New Zealand for sending two Mossad agents to operate in the country last year.

Normal relations between the two countries, which were suspended last July in retaliation for the affair, are being resumed immediately, New Zealand Prime Minister Helen Clark announced in Wellington yesterday.

The announcement followed several months of diplomatic negotiations between the two countries. Israel's agreement to apologize and submit a commitment that such acts would not recur constitutes a victory for Clark and her cabinet, who demanded this from the moment the affair erupted.

Israel's relations with New Zealand deteriorated in March 2004, when two Israelis believed to be Mossad agents were arrested for attempting to obtain a New Zealand passport fraudulently. The two, Elisha Cara and Uriel Kellman, who were working with two other agents, according to the New Zealand police, applied for the passport using the identity of a quadriplegic man.

In their interrogation the two denied working for Israel and insisted they were private businessmen. However, after Israel hired local attorneys on their behalf, they reached a plea bargain and admitted to some of the charges.

They were tried for attempting to obtain a passport fraudulently, but not for spying, were sentenced to six months in prison and fined some $50,000. After serving three months in prison they were released and sent back to Israel.

It transpired during the police investigation and from statements of New Zealand cabinet ministers that the group was involved in a Mossad operation to obtain New Zealand passports, which they had planned to use in future operations of an unclear nature. The investigation also revealed that Cara had served as a department head in the Mossad for more than 20 years, but quit and joined a private company at the beginning of the year.

The New Zealand government said two other Israelis were involved in the affair. One was identified as Ze'ev Barkan, a former Israeli diplomat who served in Israel's embassies in Brussels and Vienna. The local police were also searching for a citizen of New Zealand, David Reznick, who was believed to have assisted the Mossad agents. All three managed to flee the country before they were caught.

When Israel refused to apologize for the affair, New Zealand suspended all high-level contacts with Israel. It barred President Moshe Katsav and Deputy Chief of Staff Major General Gabi Ashkenazi from visiting New Zealand earlier this year, on their way to Australia.

Clark said New Zealand has changed its regulations for issuing passports and that if Israel managed to obtain passports prior to the arrests, it would be foolish to use them because they had been voided.

"The Israeli letter of apology, signed by Foreign Minister Silvan Shalom, states that Israel apologizes for the involvement of its two citizens in the activities which led to their arrest and convictions in New Zealand," Clark said.

Israeli sources emphasized that Shalom's letter did not accept Israel's responsibility for the acts attributed to the Israelis. As in other recent affairs of Mossad agents being arrested in Cyprus and Switzerland, Israel at first refused to assume responsibility or apologize, but at a later stage did so.