Her jaunt to the region is intended to lend the appearance of diplomacy in order to forestall it. As explained to me by several senior state department officials, Rice is entranced by a new "domino theory": Israel's attacks will demolish Hizbullah; the Lebanese will blame Hizbullah and destroy its influence; and the backlash will extend to Hamas, which will collapse. From the administration's point of view, this is a proxy war with Iran (and Syria) that will inexplicably help turn around Iraq. "We will prevail," Rice says.

The administration has traditionally engaged in promiscuous threat conflation - al-Qaida with Saddam Hussein, North Korea and Iran in "the axis of evil", and now implicitly the Shia Hizbullah with the Sunni Iraqi insurgency. By asserting "we" before "will prevail", Rice is engaging in national interest conflation.

According to the Rice doctrine, the US has deserted its historic role as ultimate guarantor of Israel's security by acting as honest broker among all parties. Rather than emphasising the importance of Lebanese sovereignty, presumably a matter of concern to an administration that had made it exhibit A in the spread of democracy in "a new Middle East", Rice has downplayed or ignored it in favour of uncritical endorsement of Israel's offensive. Rice's trip is calculated to interpose the influence of the US to prevent a ceasefire and to give Israel at least another week of unimpeded military action.

To the Bush administration, the conflagration has appeared as deus ex machina to rescue it from the Iraqi quagmire. That this is patently absurd does not dawn on those who remain in thrall to the same pattern of thought that imagined the invasion of Iraq would be greeted with flowers in the streets of Baghdad. Denial is the basis of repetition.

This week has seen the publication of Fiasco, by Thomas Ricks, the military correspondent of the Washington Post, devastating in its factual deconstruction. The Iraqi invasion, he writes, was "based on perhaps the worst war plan in American history". The policy-making at the Pentagon was a "black hole", and resistance by the staff of the joint chiefs to disinformation linking Iraq to 9/11 was dismissed. After the absence of a plan for postwar Iraq, blunder upon blunder fostered the insurgency.

In one of its most unintentionally ironic curiosities, the Bush White House has created an Office of Lessons Learned. But the thinking that made possible the catastrophe in Iraq is not a subject of this office. The delusional mindset went underground only to surface through the crack of the current crisis. There are no lessons learned about the blowback from Iraq; about Iraq's condemnation of Israel and its sympathy for Hizbullah; or about the US unwillingness to deal with the Palestinian Authority that made inevitable the rise of Hamas; or the counter-productive repudiation of direct contact with Syria and Iran.

Indeed, Rice is ushering in "a new Middle East", one in which the US is distrusted and even hated by traditional Arab allies, and its ability to restrain Israel while negotiating on behalf of its security is relinquished and diminished.

- Sidney Blumenthal, a former senior adviser to President Clinton, is the author of The Clinton Wars.

Exxon Mobil, the world's largest oil company by market capitalization, said earnings amounted to $1.72 per share in the April-June quarter compared with a profit of $7.64 billion, or $1.20 per share, a year ago.

The results topped Wall Street expectations but came in behind Exxon Mobil's record profit of $10.71 billion set in the fourth quarter of 2005.

Analysts polled by Thomson Financial expected the company to earn $1.64 per share.

Revenue rose to $99.03 billion from $88.57 billion in the prior-year quarter. That was short of Exxon Mobil's record third-quarter revenue of $100.72 billion _ which also stands as record revenue generated by any U.S. public company ever in a single quarter.

Its shares rose 85 cents to $67.45 in premarket trading. That would top its 52-week high of $67.18.

Exxon Mobil said it spent $4.9 billion on capital and exploration projects during the quarter, up 8 percent from a year ago, while distributing $7.9 billion to shareholders in the form of dividends and share repurchases. Congress has been urging the big oil companies to put more of their profits toward boosting the supply of energy for consumers.

By segment, exploration and production earnings rose sharply to $7.13 billion, up $2.23 billion from the second quarter of last year, a reflection of higher crude and natural gas prices. Production increased 6 percent from a year ago and 9 percent if the impact of divestments and entitlements are excluded.

The company's refining and marketing segment reported a $264 million earnings increase to $2.48 billion, the result of stronger refining margins, slightly offset by weaker marketing margins.

Exxon's chemical business saw earnings rise $26 million to $840 million.

Prices for benchmark North Sea Brent crude averaged $69.51 a barrel in the quarter, compared with $51.65 a barrel a year earlier.

That was in line with other major oil companies reporting results this week. BP PLC said its second-quarter profit rose 30 percent to $7.3 billion, while ConocoPhillips reported a 65 percent increase to $5.18 billion. Exxon Mobil Corp., the world's largest publicly traded oil company, is due to report its earnings later Thursday.

Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers, said it was "good news" that Shell had beaten forecasts, in contrast to BP.

"But going forward, high oil prices will not continue to mask" if Shell's management makes mistakes, he said.

Shell said that excluding the damage caused by militant attacks on its operations in Nigeria and the fallout from hurricanes Katrina and Rita in the Gulf of Mexico, production would have been flat.

Shell is missing around 180,000 barrels per day in Nigeria because of recent attacks, and said Thursday it couldn't confidently predict when production will resume.

Van der Veer said that despite a pipeline rupture this week, possibly due to an attack by militants, the company has no intention of scaling back operations in the West African nation. "We are not afraid to invest in Nigeria," he said.

The Niger Delta region has been the scene of frequent disputes for years between oil companies and communities that demand a greater share of the wealth of Africa's largest crude producer. At least 31 expatriate workers have been held hostage by a variety of militant groups so far this year.

Shell's results Thursday beat earnings estimates compiled by Dow Jones, which had predicted a 17 percent rise in earnings, helped by strong refining margins. Shares rose 2.5 percent to 28.05 euros ($35.43) in Amsterdam trading.

At Shell's second-biggest division, which refines oil and sells it to consumers at the pump, profits increased 13 percent to $3.02 billion.

"Higher earnings due to stronger refining margins particularly in the United States, and increased trading profits from a positive trading environment were partially offset by the impact of lower retail marketing margins and reduced refinery utilization mainly in Europe," Shell said.

Shell's 2004-2005 accounting scandal, in which it was forced to repeatedly reduce the size of its proven oil reserves, continued to affect the company's earnings and prospects.

The company said Thursday it had reserved $500 million in the second quarter to pay shareholder class action lawsuits.

Shell has also been spending heavily to restore reserves, planning investments of $19 billion in 2006, and $21 billion in 2007, most of it in exploration and production.

But in 2005, the company pumped more oil than it added to proven reserves, and in Shell's 2005 annual report those reserves stood at around 11.5 billion barrels.

With Thursday's earnings, Shell said it has added "at least" 48 billion barrels of oil to unproven reserves via acquisitions in Canada in the first half of 2006, at a combined cost of some $2.6 billion.

In a conference call, Chief Financial Officer Peter Voser repeated that the company has a "fair prospect" to replace as much as it pumps between 2004-2008 as a whole.

"But we will not be shy to delay projects or even cancel projects because of the economic situation, cost inflation, and delay the recognition of proved reserves if that is the best economic outcome" for the company, he said.

While production in 2006 has been below analysts' expectations, he repeated that Shell's production is expected to rise to 3.5 million to 3.7 million barrels per day in 2007.

Kneuer said the government's continuing interest in privatization doesn't clash with a list of four principles issued last summer by the Commerce Department. That brief policy statement riled up some in the international community because it asserted the U.S. government's intention to retain control over the Internet's "root," the master file that lists which top-level domains are authorized. It also indicated plans to maintain its oversight over ICANN.

The Bush administration took that position all the way to a world Internet summit in Tunisia last November. It ultimately reported it had not relinquished its Net authority but instead forged a broad agreement with its international counterparts to create an "Internet Governance Forum" under the auspices of the United Nations, scheduled to meet this fall in Greece.

The focus in the Commerce Department principles is intended to be "extraordinarily technical in nature and tied to security and stability from a technological standpoint," Kneuer said. "It should not be read so expansively as to say we're going to retain all of our historic controls."

The public speaks

It remains unclear when or if the U.S. government will fully shift to private control of the Internet DNS. Meanwhile, nearly 700 written comments from the public have streamed in to the Commerce Department about how it should proceed.

A number of the responses consisted of a two-paragraph form letter that urged the United States to "work cooperatively with all stakeholders to complete the transition to a domain name system independent of U.S. governmental control."

"No single government should have a pre-eminent role in Internet governance," read the form letter, which came from commenters in about a dozen countries including Australia, Canada, Germany, Luxembourg, Morocco, Nigeria, Sweden, Trinidad and Tobago, and the United States.

A greater diversity of views emerged from about a dozen representatives selected to speak on panels at Wednesday afternoon's hearing. They came from a wide variety of sectors including Internet advocacy groups, domain registries, IP addressing organizations, root server operators, other businesses and the Canadian government.

Some panelists suggested the time has come to let the memorandum of understanding (MOU) lapse, effectively untethering ICANN from U.S. government control except in extraordinary circumstances.

"While we recognize and applaud the 'light hand' the U.S. government has always taken with respect to the Internet, we believe it is time to move to a minimal, transitional MOU where the U.S. government plays a 'backstop' role that would only come into play in the event of a serious organizational failure," said Lynn St. Amour of the Internet Society, a worldwide network of nonprofit public interest groups.

ICANN has room for improvement, but it has nonetheless "proven well-suited to the evolving structure of the global Internet community" and should be allowed to complete its transition to privatization, said Ray Plzak, CEO of the American Registry of Internet Numbers, one of the world's five regional IP addressing organizations.

Others said they didn't think ICANN is ready to function independently of governmental oversight. Tim Ruiz, a vice president of GoDaddy.com, which runs the world's largest domain name registrar, said it's "premature" for total privatization of ICANN because the organization hasn't yet proven it can be as transparent, open and accountable as outsiders would like.

The Center for Democracy and Technology's David McGuire suggested the current system is working reasonably well, so the U.S. government needs to be more certain of what would result from cutting its ties with ICANN before doing so. "We're very concerned that if ICANN becomes subsumed by some yet-to-be-named international body, that we'd see much more government involvement," as opposed to the "hands-off approach" the Commerce Department has taken, he said.

The event also featured an appearance from ICANN CEO Paul Twomey, who refrained in his 10-minute speech from suggesting what should happen next with the organization. "I do think the ICANN community has many reasons to be proud of the last eight years," he said, pointing to "introduction of competition in the top-level domain space" and the creation of country-code domain name organizations as examples of successes.

Borne from a secret meeting in Cambridge, Mass., in 1998, ICANN has been no stranger to controversy over the years. Critics in the past have dogged it for acting in secret and moving sluggishly to approve new top-level domain names. More recently, it has drawn fire on Capitol Hill and through court challenges for agreeing to what amounts to a perpetual contract with VeriSign to run the .com registry, which critics say would result in unnecessary price hikes and a veritable monopoly.

Kneuer emphasized that as the Commerce Department weighs its next steps, "we will take no actions that will call into question the stability and security of the Internet."

Among the contracts that raised questions were deals for hiring airport screeners, securing borders and housing Hurricane Katrina evacuees, the newspaper said.

Investigators also found a surveillance system for monitoring activity on the borders with Mexico and Canada does not work because the cameras malfunction when exposed to snow, ice or humidity, the report said.

The Washington Post said the congressional report warns that DHS is setting itself up to make more mistakes by giving contractors too much latitude.

A report released July 19 by the Government Accountability Office faulted poor oversight for allowing DHS employees to make a wide range of questionable purchases during the response to hurricanes Katrina and Rita.

A separate GAO review last month found that roughly 16 percent, or $1 billion, of aid payments to hurricane victims were based on bogus claims or spent on questionable items like diamond rings and sex videos.

David Norquist, DHS's new chief financial officer, said the agency has approved tighter spending guidelines and vowed that incidents of possible fraud and abuse cited by GAO would be investigated.

According to the embassy, the "statement by the European Union alleging that the United States failed to show flexibility in the Doha agriculture negotiations and attempting to divert blame for the stalemate is false and misleading.

"Unable to endorse the US proposal given substantial opposition from France and a few other member states with strong farm interests, the EU attempted, alternately, to criticize the US proposal as too ambitious or too weak."

Referring to a European trade minister who had been quoted by the Financial Times, the statement repeated that "the fear from French farmers is stronger than the ambitions of European retailers."

On Monday, WTO chief Pascal Lamy recommended that the Doha round of trade talks be suspended after six key trading powers, including the EU and United States, were unable to bridge fundamental differences on agricultural aid, import tariffs and market access.

Deadlock had gripped the Doha Round almost since its launch in Qatar in 2001 in an effort to reduce barriers such as subsidies and customs duties, and improve the lot of developing nations.

France is the biggest beneficiary of the EU's Common Agricultural Policy and has steadfastly refused that Brussels, which negotiates at the WTO on behalf of all 25 EU members, give any ground on reducing import tariffs unless the United States and other trade partners also made concessions.

France says its position is supported by around 15 EU members.

Mandelson said that the United States had requested the talks be suspended on Monday, but according to the US embassy, the EU had taken its offer off the table, at which point "the United States reluctantly had to agree with (WTO) Director-General Lamy's assessment that the differences among G-6 members remained unbridgeable."

The embassy said the EU had insisted "on the right to lavish more than twice as much trade distorting subsidies on its farmers."