Egypt has approved the passage of two Iranian navy ships through the Suez Canal, an army source said, a move that could annoy Israel, whose foreign minister has called Iran's actions a provocation.

'Egypt has agreed to the passage of two Iranian ships through the Suez Canal,' the army source told Reuters.

State television and Egypt's official news agency subsequently reported the news, without giving sources.

Iran's request was an early diplomatic test for Egypt's interim military government, which has close ties to the US and has been ruling since February 11 when President Hosni Mubarak stepped down in the face of a popular revolt.

Egypt's Western allies are watching for hints of any shift in policy towards its Middle East neighbours, especially Israel with which it has a peace treaty.

The two ships would be the first Iranian military vessels to transit the canal since Iran's 1979 revolution. To navigate the strategic waterway, naval vessels need the approval of Egypt's foreign and defence ministries.

It was not clear when the ships would enter the canal. They were not on the list of vessels scheduled to sail through on Saturday, a Suez Canal Authority official said.

Israeli Foreign Minister Avigdor Lieberman said on Wednesday that Iran's plan to send the ships through the canal en route to Syria was a 'provocation'.

Israel's state-funded Channel One television said later Lieberman, a stridently far-right partner in the conservative coalition, had spoken out of turn and the Defence Ministry 'had preferred to ignore' the ships' approach.

There was no immediate comment from Israel after approval was given.

Egypt's military said the request stated the Iranian ships did not carry military equipment or nuclear or chemical cargo. It said they were in the Red Sea, at the canal's southern end.-Reuters