Israel's Attorney General Yehuda Weinstein has launched a criminal investigation into one of Israel's best-known religious-Zionist rabbis.

Shmuel Eliyahu is the state-salaried rabbi of the city of Safed and part of the country's rabbinic royalty - he is the son of the massively popular former Chief Rabbi Mordechai Eliyahu, who died last year.

He is suspected of inciting hatred against Israel's Arab minority. The rabbi's alleged comments to the media, which are the focus of the investigation, include an assertion that, "expulsion of Arabs from Jewish neighbourhoods is part of the strategy" and that "a Jew should not run away from an Arab; a Jew should chase away Arabs".

This investigation is about far more than what is acceptable to say and do in Israel - it is about where the source of authority lies.

For secular liberals it is obvious - authority rests with the police and the courts and, if there are public statements that appear to violate laws against incitement or promote racism, the people making them should face the consequences. For many followers of religious-Zionism - an ideology based on a complex mix of faith and political ideology - secular law enforcement is legitimate only so long as it does not clash with what they see as the higher authority of religion.

So, when Rabbi Eliyahu makes statements such as those under scrutiny, secular liberals regard his behaviour as outrageous but his followers see him as bravely speaking the uncomfortable truth. There is now a cycle of growing mutual contempt. With each rabbi arrest - and there have been several in recent months - anger towards secular law-enforcement grows among hard-line religious-Zionists, as does the feeling of victimisation.

Hoping to break this cycle, the Attorney General has tried a compromise. While he is investigating Rabbi Eliyahu for his comments, he is dropping the matter of a letter the rabbi signed in 2008, which said that it is religiously prohibited to sell or rent property to non-Jews. The logic seems to be that Mr Weinstein will probe alleged hate speech but not religious declarations.

This principle could be a way of implementing boundaries that exist in law on the freedom of expression while safeguarding religious freedom. But it could backfire. The Attorney General may have created a loophole: add a reference to "God's will" here and the "Holy Land" there, and you may be exempt from investigation.