From the article:

"The demand, which would require Google and Amazon to effectively sidestep legal obligations in countries around the world"

"Like other big tech companies, Google and Amazon’s cloud businesses routinely comply with requests from police, prosecutors and security services to hand over customer data to assist investigations."

The way I interpret this is Google, Amazon operates in multiple countries under multiple jurisdictions. The security services for any of these countries(including for example Egypt where Google has offices according to....Google), can produce a legal(in Egypt) order requesting Google to produce data of another customer( for example Israeli govt) and Google has to comply or leave Egypt.

It seems to me that being under constant threat of your government sensitive data being exposed at the whims of another, potentially adversarial government is not a sustainable way of operating and Im surprised that Israel havent either found ways of storing its infrastructure locally or encrypting it five way to Sunday.

This is not a comment on the specific accusation of actions by Israel but for strange reality of being a small-country government and a customer of a multi-national cloud vendor.