In Battle to Remove Hezbollah, Both Israel, Lebanon Pay Price

Jay Solomon, Karby Leggett, Guy Chazan, and Neil King Jr., The Wall Street Journal:

As Secretary of State Condoleezza Rice arrives in the Middle East Monday, the U.S. and Israel must balance their goal of defanging the militant group Hezbollah against the growing toll the war is taking on Israel, Lebanon and President Bush's hopes for reshaping the region.

Amid growing calls for a cease-fire, including at the United Nations, the first question Secretary Rice and Israeli Prime Minister Ehud Olmert will tackle is how long Israel should aggressively attack Lebanon to try to debilitate Hezbollah. Permanently damaging Hezbollah's military capacity could take weeks, or even months. READ MORE

The rising casualties, especially in Lebanon, after nearly two weeks of fighting are adding to a humanitarian crisis in both Israel and Lebanon. That could ultimately put pressure on Israel to rein in its ambitions to destroy Hezbollah, leaving it potentially lethal and even more popular in the Islamic world.

Hezbollah has avoided direct confrontations with better-equipped Israeli troops. But by firing a constant barrage of rockets on northern Israel -- more than 200 over the weekend and more than 2,000 since hostilities broke out -- it has succeeded in seriously disrupting much of the country's economy. The war has paralyzed a large swath of northern Israel, shuttering factories, offices and stores and sending large numbers of people into bunkers or searching for safe haven further south. Of Israel's two million northern residents, a third are estimated to have fled south. In Haifa, Israel's third-largest city, there had been hope going into the weekend that Hezbollah's ability to strike was waning after the number of rockets falling on Israel declined. But after the barrage of attacks Sunday and Saturday -- including one Sunday in Haifa that killed two citizens -- fear and economic paralysis aren't going away soon. Officials say the total death toll has climbed to 36 people in Israel, and nearly 400 in Lebanon.

Haifa now resembles a ghost town. Its once-full beaches are empty. The central business district is shuttered, with mom-and-pop shops, auto dealers, electrical goods stores and restaurants closed.

Not far away, the Haifa Port -- along with Ashdod, one of Israel's two busiest -- has been closed now for nearly a week, with ships directed to a southern port. A battery of huge cranes used to haul goods off of ships stand idle and normally busy wharves are empty of people.

The war has had less impact on Haifa's industrial zone, a sprawling complex of oil refineries and petrochemical plants that form the backbone of Israel's economy. But some fear a direct hit by a Hezbollah missile could have a catastrophic impact, causing an environmental disaster and cutting oil and gas supplies to the rest of the country.

"This is a very sexy target for Hezbollah," says Eli Dolev, head of security and firefighting at Haifa's oil refinery. He says administrative staff have been sent home, but the plant -- whose control center is in an underground bunker -- is still working at full capacity. "We have to keep going -- we're one of only two refineries in Israel," he says.

Some big industrial giants have been affected. Iscar Ltd., a maker of precision tools that U.S. investor Warren Buffett recently invested $4 billion in, was forced to close for three days last week, though it has now reopened. Other companies have reduced staff to skeleton levels. Another toll on Israel's economy is the military's recent call-up of more than 5,000 reserve soldiers. Because the vast majority of reservists hold jobs, calling them up for service has a broad impact on businesses in Israel. If the war expands and more soldiers are needed, some business leaders say the impact will be enormous, especially in economic centers like Tel Aviv.

Though public support for the war is high -- near 90% by some measures -- some Israeli analysts say economic fallout could also shape the debate over the course of the war. The stakes are particularly high for Israel's prime minister. Mr. Olmert -- who never served in the military, aside from a short stint as a military correspondent decades ago -- counts Israel's business community as one of his strongest support bases, and many are eager to bring an end to the fighting.

Meanwhile, in Lebanon, senior officials say they're increasingly struggling to provide services to the country's four million citizens as Israel decimates Lebanon's roads, bridges and airports. Over the weekend, Israeli planes struck telecommunications and television towers, as well as milk-production plants and a Procter & Gamble Co. distribution warehouse. Tens of thousands of Lebanese from the hardest-hit regions in the south continue to migrate north looking for havens in northern Lebanon and Syria.

Some senior officials in Lebanon's government say Israel's offensive -- and the Bush administration's support for it -- threatens to undermine democratic strides made in Lebanon recently and could ultimately strengthen Hezbollah. In what many Lebanese refer to as the Cedar Revolution, after the country's national tree, Syrian troops were forced to withdraw last year after the assassination of then-Prime Minister Rafik Hariri sparked a popular, anti-Syria uprising. A reform-minded government then swept to power in a democratic election.

But few believe the administration of Prime Minister Fuad Siniora can survive a protracted war between Israel and Hezbollah without collapsing.

Israel is "trying to destroy the model for democracy and freedom that the Cedar Revolution was trying to achieve," said Lebanon's finance minister, Jihad Azour, in an interview. "This isn't serving the interests of the U.S. to have this one-sided approach."

Many inside the Lebanese government are rallying around Hezbollah, saying their country needs to remain united at a time of war. Hezbollah's political party holds 14 out of 128 seats in the Lebanese Parliament and two ministerial seats. Many Lebanese also see Hezbollah militants as having played the leading role in ending Israel's occupation of south Lebanon in May 2000.

Still, many politicians in Beirut acknowledge that once the Israeli offensive subsides, Beirut will need to come to grips with Hezbollah and its leader, Hassan Nasrallah. Among the thorniest issues: how to reconcile the fact that Hezbollah, which initiated the crisis by attacking an Israel military patrol and kidnapping two soldiers, remains a key part of Lebanon's elected government. This question will become even more pronounced if the Lebanese government turns to western nations to secure reconstruction funds.

Indeed, to get international funding, some believe Lebanon will face pressure to boot Hezbollah out of the coalition. Others, however, believe Hezbollah must remain in the government in order to ensure the country's large Shiite population gets adequate representation. Either way, the result will be an enormous test for Lebanon's sectarian political system -- one that could end up in new elections for a government increasingly viewed as unable to serve its citizens' needs.

The difficulty facing Lebanon's young government is evident in the offices of Mohammad Safadi, the minister for transport and public works. A Sunni politician from the northern Lebanese city of Tripoli, Mr. Safadi took to the streets in support of last year's Cedar Revolution and says Lebanon's pursuit of economic revival was being realized. Below his office, he points to a string of cranes and construction sites where Lebanese and Arab companies have been constructing new residential towers and retail spaces, though the work sites have recently been abandoned.

Mr. Safadi says he can't even begin to plan for the rebuilding of Lebanon's infrastructure as the Israeli offensive continues unabated. Roughly 80% of Lebanon's major highways have been damaged by the Israeli raids, says the 62-year-old minister, and 95% of the country's bridges. Israel's air and sea embargo against Lebanon also remains firmly in place, he says, making it nearly impossible to import oil and construction materials. Without a rapid cease-fire followed by a major commitment to rebuilding Lebanon, "it's the end of Lebanon as a sovereign state," he says somberly.

The only way forward for Lebanon at this stage, says Mr. Safadi, would be a comprehensive deal struck between Lebanon and Israel over the future of Hezbollah's arms and Shebaa Farms, a piece of disputed land that sits between Israel, Lebanon and Syria. To do so, he says, all sides will need to make concessions, something they may not be in the mood to do. Moreover, because Israel and Lebanon don't have official relations, any such deal would have to be brokered by a third party. He also says Lebanon will now need substantial financial assistance from the international community to recover from the Israeli attacks.

Perhaps the greatest concern if Israel's confrontation with Hezbollah drags on is that Lebanon could once again be plunged into the sort of civil war that ravaged the country between 1975 and 1989.

Members of Mr. Siniora's government stress that his government hasn't ceased operating. Mr. Azour, the finance minister, says that the administration is working closely with the U.N. and international nongovernmental organizations to ensure that humanitarian aid reaches the 600,000 Lebanese who have been displaced by the conflict. He also says that his government is successfully keeping the country's financial system operating, as most banks remain open and the Lebanese currency has stayed largely stable. "These are short-term measures," Mr. Azour says. "We need a cease-fire" in order to ensure the rebuilding of the country.

As Secretary Rice left for the region late Sunday, the Bush administration sought Arab support to pressure Hezbollah to disarm and to give Israel more time to weaken the Islamic militia's strongholds in Lebanon. The first push came at the White House Sunday afternoon, when President Bush and Ms. Rice met with Saudi Foreign Minister Prince Saud al-Faisal and Prince Bandar bin Sultan, the former veteran ambassador to the U.S. and now chief of the Saudi National Security Council.

The Saudis outlined a proposal for a cease-fire that would effectively postpone the matter of disarming Hezbollah. But the U.S. made no public commitment to back the Saudi plan, and American officials sought to downplay the significance of the meeting. The two sides discussed restoring sovereignty to the Lebanese government, building stronger Lebanese armed forces, rebuilding Lebanon and putting conditions in place for an end to the violence, among other issues, an administration spokesman said.

The purpose of the Saudi session, and others to come in Rome on Wednesday, "is to seek a coordinated Arab approach to strengthening the Lebanese government and pressuring Hezbollah," said one senior administration official. The administration is particularly keen to see countries like Saudi Arabia and Egypt keep up their criticism both of Hezbollah and Syria, which for years has been a main supporter of Hezbollah, alongside Iran. Even so, during the meeting, the Saudi officials pressed Mr. Bush to seek a speedy cease-fire, something Washington has been reluctant to do so far.

After talks with Israeli Prime Minister Olmert and Palestinian President Mahmoud Abbas, Ms. Rice will then travel to Rome for talks Wednesday among an array of European and Arab ministers. Much of those talks will focus on what sort of international armed force might be sent into Southern Lebanon as part of a cease-fire and an eventual plan to disarm Hezbollah.

U.S. officials Sunday said that the administration supported proposals to send in a NATO-like contingent under a strong U.N. mandate that would allow the troops, as in Kosovo or Afghanistan, to use force against Hezbollah as needed. The U.S., however, is not likely send American troops into Lebanon.

Write to Jay Solomon at jay.solomon.com, Karby Leggett at karby.leggett.com, Guy Chazan at guy.chazan.com and Neil King Jr. at neil.king.com