The powerful Arab League has lodged an official protest with Australia over concerns the Abbott Government has become too pro-Israel.
The move comes as Arab bankers warn that trade with the Middle East could be at risk after Australia's move to stop referring to Israeli settlements in East Jerusalem as "occupied territories".
_The West Australian _has been told the Deputy Secretary-General of the Arab League, Ahmed Ben Helli, met the Australian Ambassador in Cairo this week to lodge an official complaint about the Abbott Government's shift.
Foreign Affairs Minister Julie Bishop said yesterday she had replied to the Arab League's letter, insisting there had been no change to Government policy.
She would use a meeting with Arab ambassadors in Canberra today to reaffirm the Government's support for a two-state solution to the Israel-Palestinian issue. Attorney-General George Brandis sparked anger among Islamic countries last week when he said Australia would stop referring to East Jerusalem as "occupied" and would instead call it "disputed".
The ambassadors' governments have threatened to dump imports of Australian wheat and meat in protest.
East Jerusalem fell under Israeli control in the 1967 war and the territory remains a point of intense sensitivity.
Prime Minister Tony Abbott said at the weekend there had been a "terminological clarification" and that the Government would "absolutely refuse to refer to occupied East Jerusalem".
Ms Bishop adopted less strident language yesterday.
"We urge the people of Israel and the Palestinians to come together, and urge their leaders to come together, to negotiate a just and lasting peace," she said.
"I don't intend to make the job of the negotiators any harder."
Sources said the issue was also causing tensions within the Opposition, but Labor leader Bill Shorten last night sought to present a unified position. "The territory is occupied, and that's why Labor describes it like that," his spokesman said.
"This is an almost universal position across the international community and it's the position of Bill Shorten and the Labor Party.
"It's the Liberal Party who's making a mess of Australia's relations, with senior ministers like George Brandis given licence to freelance." 'We urge the people of Israel and the Palestinians to negotiate a just and lasting peace.'" Foreign Affairs Minister Julie Bishop