(Adds Egyptian security and Rafah council comment)
GAZA, Dec 9 (Reuters) - Egyptian earth-moving machinery was at work on the Gaza Strip border on Wednesday and an Israeli newspaper said a project was under way to build a subterranean metal wall to block Palestinian smuggling tunnels.
Witnesses in the Gaza border town of Rafah said they could see Egyptian vehicles working just across the fenced frontier but not what they were doing precisely.
Egyptian security sources said the authorities had started digging and placing steel tubes through the ground at several points on the border, without giving details.
Suleiman Awwad, a council representative on the Egyptian side of Rafah, which straddles the border, said the authorities had uprooted trees along the boundary to pave a dirt road and plant devices to monitor and secure the border.
He also did not give details about what the work on the border, where smugglers have built tunnels to take goods into blockaded Gaza. Israel says the tunnels are also used to supply militants of the Islamist Hamas group with explosives and arms.
Awwad said farmers affected by the work on the border were being compensated with about 150 Egyptian pounds ($27) per peach tree and 250 pounds for each olive tree.
The Israeli daily Haaretz reported Egypt was installing an underground metal wall about 20 to 30 metres (70-100 feet) deep along the short border strip where Palestinians have dug a warren of tunnels to break the Israeli blockade of Gaza.
Haaretz said the wall would be nearly 10 km (6 miles) long and "impossible to cut or melt".
Egyptian officials could not be reached to comment on the Haaretz report. Hamas, which rules Gaza, said it was checking.
In spite of Israeli aerial bombing, the tunnel network has not been shut down. Palestinian sources say the flourishing business works with the paid collusion of local Egyptian border guards who are supposed to impede it.
Israel withdrew from Gaza in 2005 and its border with the coastal enclave is tightly controlled by the military. Egypt controls the southern border of the strip in a security arrangement with Israel. (Reporting by Nidal al-Mughrabi in Gaza and Yusri Mohamed in Ismailia; writing by Douglas Hamilton in Jerusalem and Marwa Awad in Cairo; editing by Samia Nakhoul) ($1=5.480 Egyptian Pound)
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