Crushing high hopes that Israel might take home its first Academy Award, The Counterfeiters, an Austrian film about a master forger forced to work for Nazis in a concentration camp, won the foreign-language Oscar on Sunday. Though disappointing to many here, the result was not entirely surprising. Jerusalem Post film critic Hannah Brown had predicted a win for Counterfeiters, citing the long history of Holocaust-themed films that have done well in the foreign language film category. Even Joseph Cedar, director of Israel's entry, Beaufort, seemed to keep his hopes in check at a symposium prior to the ceremony, saying he was "happy just to have been nominated. I'm not even thinking about winning." After being chosen from among 65 foreign language entries, Beaufort found itself competing against four other finalists, from Kazakhstan, Poland, Russia and Austria. The winning filmmaker, Stefan Ruzowitzky, also focused on a Jewish theme - the moral dilemma facing a group of Jewish concentration camp inmates who were forced to turn out massive amounts of forged currency to undermine the Allied war effort or face the deadly consequences of refusing. In his acceptance speech, Ruzowitzky acknowledged some of the Jewish movie directors of his country's past. "There have been some great Austrian filmmakers working here, thinking of Billy Wilder, Fred Zinnemann, Otto Preminger, most of them had to leave my country because of the Nazis, so it sort of makes sense that the first Austrian movie to win an Oscar is about the Nazis' crimes." In an earlier interview with JTA, Ruzowitzky went further. "My grandparents on both sides were Nazis, or Nazi sympathizers, so I felt a special responsibility to deal with the Holocaust era," he said. "I felt an equal responsibility not to exercise moral judgment on the Jews who collaborated in [the forgery]." THOUGH ISRAEL'S hopes were dashed by The Counterfeiter's win, Cedar's star won't suffer as a result. Earning an Oscar nomination has elevated him to a new status - he's become a sort of mascot for the country, not unlike Gal Fridman, whose Olympic windsurfing win in Athens made him the man of the year in 2004. Beaufort's nomination, Israel's first after a 23 year hiatus, makes Cedar the hottest director on the scene here. Of course, Beaufort's nomination wasn't a shoe-in either. In September, the Israel Film Academy picked Eran Kolirin's The Band's Visit as top picture of the year, making it the country's automatic entry in the Oscar race. But in a semi-expected upset, the film was disqualified for breaching academy guidelines. More than half of the dialogue in such films must be in the country's own language, and The Band's Visit mostly featured characters communicating in broken English. The technicality gave runner-up Beaufort its big chance. Cedar proved his worth on his first two films (Time of Favor and Campfire were both voted Israel's top films in 2001 and 2004, respectively). And interest and faith in his success encouraged more than a few celebrities to book flights to Los Angeles. Beaufort's Oscar party at LA's Avalon club included guests like Israeli pop idol Ninette Tayeb and more than a dozen Israeli television reporters and hosts, among them Eli Yatzpan and news anchors Aharon Barnea and Gil Tamary. Hosted by the Israeli consulate, the Los Angeles Jewish Federation and the StandwithUs organization, the party was also attended by 10 Sderot teenagers, who were in LA to put on a benefit concert in support of their hometown. Over 350 people rallied for the film at the Avalon, but seemed to take the loss well. "We have shown that Israel can make very good movies," Beaufort actor Eli Eltonyo told the cheering crowd, "and we will prove it again next time." Given the much-hyped renaissance in the Israeli movie industry over the past few years, there is no reason not to believe that an Oscar win shouldn't be expected in the near future. And with Cedar's track record, there's a good chance he may be the one receiving it. Los Angeles correspondent Tom Tugend contributed to this report.