New Delhi, July 25 -- KUALA LUMPUR - When US investor Balaji Srinivasan established his "Network School" in Malaysia earlier this year, he did not advertise that Israeli nationals were among its participants. When Malaysian authorities discovered they were, the school was shut down, its Israeli attendees were deported, and the United States government summoned Malaysia's ambassador to Washington to register its displeasure.

Prime Minister Anwar Ibrahim registered his own.

"That will not deter us," Anwar said Thursday, responding directly to American pressure on Malaysia to reverse its longstanding entry ban on Israeli citizens. "They may issue threats, but I will firmly defend the rights of the Malaysian people."

The State Department's...