Despite expressions of concern about the "brutal attack " on Israel's ambassador to the UK, Shlomo Argov, Margaret Thatcher's government in 1982 had very little time for Israel and its invasion of southern Lebanon.

Papers from 1982, just released by the National Archives under the 30-year rule, reveal a government more concerned with maintaining ostensible balance in the Middle East than in recognising Israel's determination to stamp out terrorism from its northern border.

On June 3 1982 Shlomo Argov, leaving a central London hotel after a charity dinner, was shot in the head by Palestinian terrorists, an assassination attempt from which the ambassador never recovered and which provided the spark for Ariel Sharon to spearhead Israel's incursion into Lebanon. But Cabinet and Foreign Office papers — apart from one anonymous handwritten scrawl "Argov shot in London" — barely refer to the shooting.

Overwhelmed with managing the Falklands War, Mrs Thatcher — though MP for Finchley and Golders Green — drew a comparison with invaded Lebanon in Argentina's invasion of the Falkland Islands.

Francis Pym, Foreign Secretary, made it clear publicly that Britain wholeheartedly condemned Israel's invasion. In private, the papers confirm, Britain was furious with Israel. A Foreign Office memo states: "It would be odd if we were now to conduct bilateral business with the Israelis as though nothing had happened."

An invitation to Israel to attend the British Army Equipment Exhibition was withdrawn and licences for arms sales were stopped, the papers reveal, though the Foreign Office noted bitterly that "we have considered the possibility that the likelihood of Israeli arms sales to Argentina will be increased, but given what we know of Israel's attitude and practice on this already, we do not believe that this is likely to make much difference in practice."

The papers include considerable discussion as to what was to happen to the Palestinians in Lebanon. King Hussein of Jordan, in an emotional July 4 letter to US President Ronald Reagan, included in the files, recommended that the PLO should go to Egypt: "if they must leave Lebanon, then Egypt is the best choice for them to go to. The PLO will then become truly Palestinian."

Ambassador Richard Viets, the American ambassador to Jordan, gave a comprehensive guide to regional thinking when he briefed the British ambassador in Amman. On July 6, the British ambassador wrote to London: "The Americans had concluded four or five days ago that Egypt was the logical place for the PLO to go and President Reagan had sent a message to President Mubarak proposing this. [But] Mubarak had told the US ambassador in Cairo that the proposal was unacceptable. Mubarak claimed that his colleagues in the Egyptian goverment had already expressed their dismay at his earlier offer that the PLO should establish a government in exile in Egypt and added that Egyptian public opinion would not stand for the transfer of the PLO to Cairo... Mubarak had agreed that the Palestinians were an Arab problem and favoured their dispersal in different Arab countries, in which case Egypt would be prepared to take its share of them."

Later, in response to the proposed visit of a Lebanese delegation to Britain, Mrs Thatcher wrote: "I will be delighted to see two foreign ministers but NOT a PLO representative". The Prime Minister noted in the file that "the US just does not realise the resentment she is causing in the Middle East". Mrs Thatcher stated that she did not want the United States and Britain to act alone in taking measures against Israel.