* Australian immigrant may have betrayed Mossad secrets
* Dual-identity missions seen risking allies, anti-Semitism
By Dan Williams
JERUSALEM, Feb 14 (Reuters) - The jailhouse suicide of an Australian immigrant who may have betrayed Israel's Mossad has focused attention on the agency's recruitment of foreign-born Jews who could spy under cover of their native passports.
After a three-year blackout was broken by an Australian TV expose, Israel on Wednesday acknowledged that a dual national had committed suicide in prison where he had been kept isolated in the name of state security.
Authorities made no effort to deny reports the man was 34-year-old Ben Zygier, a Melbourne Jew who moved to Israel, became a citizen, joined its military and Mossad, only to be arrested in early 2010 on suspicion of betraying secrets after Canberra began investigating trips he took to Middle East trouble-spots.
Such travel would be impossible for an Israeli but not for an Australian, especially if - according to one media account - Zygier used a passport reissued under a new, Anglicised name.
Israel has made little secret of seeing its influxes of foreign Jews, often from Muslim countries, as intelligence assets given their language skills and cultural savvy. Many immigrants recall being tapped by Mossad recruiters or asked to loan out their original passports, presumably a cover for spies.
But Israeli officials insist that Jews abroad are never used by Mossad against the interests of their countries - a lesson from the enlistment in the 1980s of U.S. Navy analyst Jonathan Pollard, whose discovery provoked lasting outrage in Washington.
While some intelligence veterans say employing foreign-born Jews is consistent with the universally elastic ethics of espionage, it has dangers. Vetting foreign volunteers is difficult, opening Israel up to security leaks less likely with homegrown spies. Some experts say Israel also needs to be wary of miring allies in its shadow wars and stirring suspicions about the allegiances of Jews abroad.
THREAT TO A LOT OF PEOPLE
Warren Reed, a retired officer with Australia's overseas intelligence service ASIS, said the Zygier affair could endanger compatriots who might now be mistaken for Mossad spies while travelling in areas hostile to Israelis.
"This poses a threat to a lot of people, especially journalists who move around frequently," Reed told Reuters.
While all intelligence agencies work with assumed or filched identities, Reed argued, Mossad creates a bigger probability of reprisals by "by being more severe in its actions, given Israel's security predicament".
These actions are reputed to include assassinations, such as of a Palestinian weapons procurer in Dubai in 2010, in which the suspected Israeli hit-team used forged Australian and European passports.
The Kuwaiti newspaper Al Jarida quoted unidentified Western sources on Thursday as saying Zygier took part in the Dubai operation and offered information on the killing of Mahmoud al-Mahbouh in return for the emirate's protection.
In another twist, Australia's Fairfax Media said Australian security officials suspected Zygier may have been about to disclose Israeli intelligence operations, including the use of fraudulent Australian passports, either to the Canberra government or to the media before his arrest.
Israel has not confirmed publicly that Zygier was a Mossad operative. But Avigdor Feldman, a criminal attorney who met Zygier in his isolated jail cell a day or two before his death, appeared to let slip that he was indeed a spy.
"The Mossad liaison I was in touch with informed me that, unfortunately, my client was no longer alive," Feldman told Israel's Kol Barama radio station.
Nick Pratt, a retired U.S. Marines colonel and CIA officer now with the George C. Marshall European Center for Security Studies, took a forgiving view of Mossad passport tactics.
"Israel is a unique country. They live in a bad neighbourhood and they will do anything they can to preserve and protect that country, and quite frankly I have absolutely no problem with that," he said.
Citing his own experience of foreign nationals being brought in as CIA officers and then deployed to their areas of origin, Pratt said the priority was to ensure that their loyalty was exclusively to the recruiting country.
"Intelligence agencies break the law - but other people's laws," he said.
Both Reed and Pratt said disclosures of Jewish diaspora involvement in Israeli espionage could stoke anti-Semitism and allegations of dual loyalty - an opinion shared by Gad Shimron, a former Mossad officer who writes on intelligence issues.
"This is a problem that has always been there, and will remain," Shimron said. "I don't know what to say, other than that the rule is: Never turn a Jew against his host country."
While Zygier's family declined all public comment on his case, friends of the dead man recalled his Zionist upbringing and pride in Israel, where he was married and had children.
The idea that someone like Zygier had violated Mossad's code of silence, perhaps even imperilling lives, provoked soul-searching in Israel. "Did the Mossad operative commit treason?" asked the biggest-selling daily Yedioth Ahronoth on its front page.
Shimron said this was a possibility, given Israel's past cases of double-agents and moles, among them Jewish immigrants.
"There's always the chance of bad apples in a batch of recruits. The trick is to weed them out in good time," he said.
Reed suggested Mossad was likelier to miss warning signs in candidates from abroad, where Israel would find it harder to carry out comprehensive background checks and psychological screening, especially if there were a rush to find recruits to fend off proliferating Middle East menaces.
"If they don't have the time and inclination to carefully build up a picture of the person, including the first 20 years of his or her life, they never really find out what's in their heart," Reed said.
"I would imagine that this paradox is a real problem for Israeli intelligence, and possibly people there are saying now, 'I warned you!'" (Writing by Dan Williams, Editing by Jeffrey Heller and Peter Graff)