The Prime Minister has speculated that Israel may have wanted New Zealand passports in order to carry out assassinations in another country.
On Thursday suspected Israeli spies Urie Kelman and Eli Cara were sentenced to six months jail for trying to fraudulently obtain a New Zealand passport.
Minutes after the sentencing Helen Clark suspended diplomatic relations with Israel and said she was still waiting for an official apology.
Now she has compared the New Zealand fraud to a previous case in Canada involving an assassination attempt.
"I can't comment on what they might have done but I can point to the precedent when the Canadian passport system was penetrated and agents involved in an assassination attempt in another country were using those false passports," says Clark.
She says it is "entirely a possibility" that the same scenario could be applied to the New Zealand case.
Israel is now trying to repair the damage of New Zealand's move to cut diplomatic ties.
Israeli Foreign Minister Silvan Shalom says the two countries have a very long history of good relations.
"We will do everything we can in order to improve our relations and bring them back to the same stage that they were before," says Shalom.
But former diplomat Terrence O'Brien says the New Zealand-Israel relationship was already thin, with low levels of trade and no embassy in either country.
Meanwhile, lawyers acting for the two Israelis are considering appeals, despite both men pleading guilty.
They claim their clients were denied a fair trial because the government leaked information about their connections with the spy agency, Mossad.
Clark denies this and says when the lawyers tried to run that argument at an earlier stage of the judicial proceedings "they got nowhere".
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