Rafi Nelson, a flamboyant, one-eyed restaurateur who says he spent four months in an Egyptian jail in 1957 under suspicion of being an Israeli spy, doesn't plan to stay in this idyllic seaside resort if Taba is returned to Egyptian control.

Nelson, a self-described "aging beatnik," has become something of a legend in the Sinai Peninsula in the 15 years since he moved into a Bedouin tent that he says once belonged to Jordan's king Abdullah.

Nelson presides over his Holiday Village's topless beach and restaurant with a mug of beer seemingly permanently affixed to his right hand, dispensing decidedly undiplomatic analysis of Israeli-Egyptian relations for the thousands of European sun-seekers who descend upon this spot every winter.

He holds a 98-year lease on the beachfront, given by the Israeli government, but he is beginning to wonder about its value.

"I wouldn't stay one day with the Egyptians. Why should I? Egypt never owned the Sinai. The British did and the Bedouin did, but Egypt never did. I wouldn't stay for the same reason that I don't want to stay in Brazil or France or the United States," said the Israeli entrepreneur.

The source of Nelson's anxiety -- and that of other Israeli businessmen here -- is an agreement reached Sunday by Israel's Cabinet ministers to submit the four-year-old Egyptian-Israeli territorial dispute over 250 acres of Gulf of Aqaba beachfront in Taba to international arbitration.

The dispute over the tiny parcel of land has not only soured the 1979 Camp David peace accords between Israel and Egypt, but also has been an obstacle to Egyptian President Hosni Mubarak's active participation in the peace initiative begun last February by Jordan's King Hussein and since embraced by Israeli Prime Minister Shimon Peres.

Nelson, who is also feuding with the Egyptians over skin-diving rights, concedes that he views Taba from a perspective more narrow than comprehensive Middle East peace.

Sweeping his hand across the expanse of his rustic spa and the adjacent Sonesta Hotel that was completed by its Israeli owners long after Israel withdrew from the Sinai in 1982, keeping the disputed Taba beach, Nelson said, "If these two places go, a lot of business in this area falls. If the beach is cut, I think this is the end of tourism."

Economic considerations were also in the forefront for Eli (Papo) Papouchado, owner of the Aviya Sonesta Hotel, also located in the area claimed by Israel and Egypt.

Papouchado, an Egyptian Jew who immigrated to Israel in 1949, said that he welcomed binding arbitration of the Taba dispute because under the terms of the Camp David accords he has been prohibited from expanding or improving his hotel.

Papouchado readily admitted that he knew he was building on contested property when he erected the Sonesta, but he said he did so with the approval of then-prime minister Menachem Begin.

He said that in March 1979, he convinced Begin to write a letter saying, in effect, "We're going to continue to build this area, and we know we have some difficulties."

The difficulties are traceable to 1906, when a British surveying team delineated the border between Egypt, then controlled by Great Britain, and Palestine, then under Turkish Ottoman control. Israel maintains that the surveyors fudged a few hundred yards while laying stone markers to give the British a clear line of sight to the port of Aqaba, and then used an exceedingly thick pencil on a map scaled 1:250,000 -- the width of the line roughly conforming to the width of Taba on the ground.

Egypt and Israel have argued their cases armed with different sets of survey diaries and 19th-century maps. Egypt made it clear that relations would not be fully normalized until the issue is settled.

To Rafi Hochman, the 36-year-old mayor of the nearby Israeli port city of Elat, Taba represents about 20 per cent of the Elat-area beachfront, and beachfront is money. Hochman estimated that about $10 million of Elat's total $100 million-a-year tourism revenue comes from Taba.

The mayor said he welcomed binding arbitration because it will resolve the dispute once and for all and also because the formula approved Sunday by Israel's Cabinet provides that the loser of the arbitration will be guaranteed access to Taba.