New Zealand Prime Minister Helen Clark suspended all high-level contacts with Israel yesterday after two Israelis suspected of being spies for Mossad were jailed for trying to obtain a passport by fraud.

The government said there were "very strong reasons" to suspect the two men were acting on behalf of Israel's intelligence services and froze all high-level official contact with Israel.

"The Israeli government was asked for an explanation and an apology three months ago. Neither has been received," Ms Clark said in a statement.

She said the actions of the Israeli intelligence agents were "utterly unacceptable" and a breach of New Zealand's sovereignty and international law.

As a result, New Zealand would suspend all high-level diplomatic contacts with Israel, not allow a visit by Israeli President Moshe Katzav after he goes to Australia next month and delay the approval and accreditation of a new ambassador to New Zealand, she said.

"We of course regret this reaction but we think that this is a decision which can be repaired and we will of course act to restore relations to their proper state," Israeli Foreign Minister Silvan Shalom said on Israel Radio.

A New Zealand court sentenced Uriel Zoshe Kelman and Eli Cara to six months in prison yesterday after they pleaded guilty to trying to obtain fraudulently a New Zealand passport by assuming the identity of a wheelchair-bound cerebral palsy victim. They were let off from serving a further three months after offering to donate NZ$50,000 ($32,700) each to a local charity. The pair had faced a maximum penalty of five years in jail. Kelman shielded his face with a hand to avoid being filmed throughout the two-and-a-half hour sentencing.

Ms Clark said no attempt by the Israeli government to intervene on behalf of the men would be accepted, and that Mr Cara and Mr Kelman would serve their sentences in full and then be deported.

Israeli President Katzav said he believed the issue could be bridged. "I very much hope that matters will be clarified and settled," he told Israeli Army Radio.

Israel's acting ambassador in Australia, Orma Sagiv, said she hoped Israel's strong relationship with New Zealand would not see long-term damage from the incident.

"I hope it will keep going on a strong track," the New Zealand Press Association quoted her as saying.

Mr Sagiv declined to comment on whether the men were intelligence agents or on the diplomatic sanctions.

Israel has no direct diplomatic representation in New Zealand.

The two men were arrested in March after police secretly followed them as they were arranging to pick up the passport.

A third man, identified as Zev William Barkan, was said by the defence to have masterminded the operation, but he left New Zealand before he could be arrested.

Mr Cara, representing an Israeli travel company, Eastwood Bound, had lived in Sydney and travelled to New Zealand several times between 2000 and 2004.