A total of 160 Israelis have been killed since July 12, most of them soldiers who lost their lives in combat with Hezbollah.

Assad's speech led German Foreign Minister Frank-Walter Steinmeier to cancel a planned visit to Syria, saying his words were "a negative contribution which did no justice to the current challenges and opportunities in the Middle East."

However, a Syrian foreign ministry source told AFP the cancellation was due to "a difference in interpretation" on UN Security Council Resolution 1701 that ended hostilities but also calls for Hezbollah to be disarmed.

The source did not elaborate.

In the hard-hitting address at the opening of a journalists' conference in Damascus, punctuated by cheers and chanting from the audience, Assad accused the Jewish state of not wanting peace.

He said there was now a "new Middle East" after Israel's month-long war against Hezbollah in Lebanon, which he described as a "planned aggression" by the Jewish state.

Assad accused Israel of using the capture of two soldiers in a Hezbollah raid on July 12 as a pretext for launching its massive assault against Lebanon, which came to a halt after a UN-brokered ceasefire took hold on Monday.

"Peace would involve Israel returning occupied lands to their owners and restoring their rights," he said. "Israel is an enemy founded on the basis of aggression and hegemony."

"The peace process has failed. It has failed since its inception."

"We do not expect peace in the near future," Assad said, adding that in the absence of negotiations resistance against the Jewish state was legitimate.

But Israeli Defence Minister Amir Peretz said his country should prepare for talks with Syria, saying military action created political opportunities.

"Every war creates opportunities for a broadened political process ... We must establish talks with Lebanon and prepare the conditions for a dialogue with Syria," Peretz said.

Besides Hezbollah, the main sticking point between Syria and Israel are the Golan Heights, invaded and occupied by Israel in 1967. Talks on the territory, which has been all-but annexed by Israel, broke off in 2000.

During talks in 2000, then Israeli premier
Ehud Barak agreed to an almost total withdrawal from the Golan Heights, save for a narrow strip of land bordering the eastern bank of the Sea of Galilee.

But Damascus rejected the proposal, wanting the return of all of the plateau. Subsequent attempts by Syria to restart the talks have been rebuffed by Israel.

Tuesday's was Assad's first major public speech since the start of the war in Lebanon, where Syria held political and military sway for years until it pulled out its troops in April 2005 undr massive pressure following the murder of former Lebanese premier Rafiq Hariri.

Assad also lashed out at US policies in the region, accusing
President George W. Bush of adopting "the principle of preventative war, which is in complete contradiction to the principle of peace."

There was plenty of hyperbole in the Assad speech. A conflict that has cost 1,000 Lebanese civilian lives can hardly be called a "glorious battle" but he did at least reflect more reality than his opposite number in Washington who, driven by self-delusion or his love of Israel, claimed that Hizbollah had been defeated in Lebanon.

Israel's "victory" in Lebanon presumably has to be added to our own famous "victories" in Iraq and Afghanistan. Syria and Iran, according to Mr Bush, were responsible for the "suffering" of Lebanon - which contains the seeds of truth since Hizbollah provoked this war by capturing two Israeli soldiers and killing three others on 12 July - although it wasn't the Syrian or Iranian air force that was slaughtering the convoys of innocent refugee civilians in Lebanon. So it was that President Assad must have enjoyed his little peroration in Damascus yesterday.

"This is a [American] administration that adopts the principle of pre-emptive war that is absolutely contradictory to the principle of peace," he said. "Consequently, we don't accept peace soon or in the foreseeable future."

Mr Assad can say that again. Indeed, there is no more sign that Hizbollah intends to "disarm" under the terms of UN Security Council resolutions 1559 and 1701 than Israel is prepared to abide by UN Security Council Resolution 242 and withdraw from Arab territories it occupied in 1967.

However, it is clear that President Assad now sees himself back at the centre of Arab power after his army's humiliating retreat from Lebanon last year. There was no more need for defeatism among Arabs, he said - a sentiment widely held in the real Arab world but quite absent from President Bush's fantasy Middle East.

That it should be Syria, of all nations, which can state this to so much applause probably says more about Washington than it does about Damascus. And it is, of course, the return of the Israeli-occupied Syrian Golan Heights - see UN Resolution 242 - that lies behind this whole disastrous war.

The truth is Israel opened its attack on Lebanon by claiming the Lebanese government was responsible for Hizbollah's attack - which it clearly was not - and that its military actions would achieve the liberation of the captured soldiers.

This, the Israelis have signally failed to do. The loss of 40 soldiers in just 36 hours and the successful Hizbollah attacks against Israeli armour in Lebanon were a disaster for the Israeli army.

The fact that Syria could bellow about the "achievements" of Hizbollah while avoiding the destruction of a blade of grass inside Syria suggests a cynicism that has yet to be grasped inside the Arab world. But for now, Syria has won.

Iran, as Hizbollah's principal supporter, clearly thinks so too. President Mahmoud Ahmadinejad, who usually talks far more than he thinks, condemned the US for supplying Israel with the weapons it used on Lebanese civilians - perfectly true. But he did not say Hizbollah's missiles come from a new-generation Iranian arsenal that did not even exist during the 1980-88 Iran-Iraq war. While the US will be keen to assess the effectiveness of its weapons - albeit largely used on civilians - no one should doubt that Iran will also be assessing the success of its new Fajr missiles - and their effect on the Israeli army.

However, the newspaper urged decision-makers in Israel "to open up to new perspectives", noting that some in the Jewish state were in favour of making peace with Syria.

"The leaders of this expansionist entity have a choice: either they heed the voice of reason that prohibits them from violating other people's rights or they will face action similar to that carried out by the Lebanese resistance."

Syria has repeatedly demanded the return of the Golan Heights which Israel conquered in the June 1967 Arab-Israeli war and annexed in 1981.

Peace negotiations between the two neighbours broke off in January 2000 amid disagreement over the strategic heights, which overlooks Israel's northern Galilee region and command approaches to the Syrian capital, Damascus.

Syrian President Bashar al-Assad gave a hard-hitting speech to the Syrian parliament on Tuesday describing Israel as the "enemy" and stressing that he did not expect peace any time soon with his arch-rival.

"Peace would involve Israel returning occupied lands to their owners and restoring their rights," President Assad said. "Israel is an enemy founded on the basis of aggression and hegemony."

Mossad agents allegedly posed as volunteers for relief organisations visiting Syria to help refugees from the war in Lebanon, the sources added.

Aljazeera has learnt that Mishaal has stepped up his personal security since the plot.

Shimon Peres, the Israeli vice-prime minister, has accused the exiled Hamas leader of ordering the raid during which an Israeli army reservist was captured.

The capture of Gilad Shalit on June 25 lead to Israeli forces moving back into the Gaza Strip.

Travel restrictions

Mishaal cannot visit Gaza or the West Bank but he is also not subject to Israel's travel restrictions on Hamas members and has played an important role in representing the government at meetings with foreign governments.

In 1997, Mishaal survived a botched assassination attempt while he was living in Jordan. Mossad agents disguised as Canadians injected poison into his ear in the street, but two of the agents were caught.

King Hussein of Jordan demanded the antidote to the poison in exchange for the return of the Israeli agents.

Mishaal became the leader of Hamas after Israel killed the group's founder, Sheikh Ahmad Yasin, in March 2004.

Residents identified the dead as a member of the Al Aqsa Martyrs Brigades, and his father, who they said was not a member of the group.

The Israeli army said that the house was used to store weapons and that the residents were warned to leave before the attack.

Late on Tuesday, Israeli soldiers fired at two Palestinian men, believed to be members of the Al-Qods Brigades - the armed branch of the Islamic Jihad movement - but it was not immediately known if the men were dead or wounded, Palestinian security officials said.

An Israeli military official said that soldiers had fired after seeing two men crawling towards the barrier which separates Israel and the Gaza strip at the Kissufim border crossing.

At least 177 Palestinians and one Israeli soldier have been killed since June 28, when Israel launched operations to rescue a soldier captured three days earlier.

Nabil Abu Rudaina, the spokesman for Abbas, told reporters that Abbas briefed Haneya about his recent regional Arab tour, adding that the two leaders discussed the situation in the Palestinian territories and a number of internal issues.

They also talked about the situation in Lebanon after Israel and Lebanon both approved a ceasefire called by the UN Security Council, the spokesman said.

Earlier in the day, the spokesman for the Hamas-led government Ghazi Hamad said that "many issues, including the complicated situation in Palestine and the security, political and economic problems" would be handled in the meeting.

Hamad asserted that the "outstanding problems" between the government and Abbas as well as the issue of forming a national-unity government would be present at the meeting.

There is no suggestion General Halutz did anything illegal and the newspaper quoted him responding to what he called the "malicious and tendentious" report that the sale could not be linked to the war. He said he had made the decision because of previous losses and added: "At the time I did not expect or think that there would be a war."

But the report added a new element to an already mounting post-war debate in the wake of the admission by Ehud Olmert, Israel's Prime Minister, that there had been "deficiencies" in the management of the war. General Halutz, the former commander of the air force, had been criticised earlier in the campaign for relying too heavily on aerial bombardment in Lebanon.

Collette Avital, a Labour member of the Knesset, told the Ynet news service: "There is a serious problem here in his priorities when the security of Israel hangs in the balance... The country burnt and all that interested him was his investment portfolio."

The IDF said: "The chief of staff works day and night to protect the lives of the citizens of the State of Israel and the soldiers of the IDF and any attempt to connect his private matters to the event of the kidnapped soldiers is absurd."

The row came as General Halutz told Army Radio that the withdrawal of Israeli troops from southern Lebanon would take about a week to 10 days to complete. An estimated 2,000 soldiers were withdrawn yesterday, though Israeli troops shot dead five Hizbollah guerrillas said to have advanced against them.

As soldiers and civilians in the Galilee panhandle which juts into southern Lebanon continued to acknowledge Israel had not won a clear victory against Hizbollah, in Kyriat Shmona, shops opened and buses began returning with residents who had fled south to escape Katyusha rockets.

The Foreign Minister, Tzipi Livni, told a meeting of activists in the dominant Kadima party that the international community had a responsibility to implement the UN Security Council decision aimed at keeping armed Hizbollah groups out of southern Lebanon.

Alison Touval, 49, originally from Southgate, north London, who has been a resident in a local kibbutz for the past 18 years, said there were a lot of unanswered questions. She said she hoped the peace would last 10 years until her sons had been through the army but she added: "It's not clear how the peace agreement will work and whether it's a peace."

Marat, 29, a Russian-born Israeli signalman returning from the border, said: "I don't think it was a victory. It seems that Hizbollah was left with the upper hand."

Unicef said relief workers were hastening to follow a stream of about 6,000 Lebanese refugees returning home. In the border village of Kila, the first signs of life could be seen as a few cars drove through the seemingly deserted streets and at least half a dozen yellow flags of the sort flown by Hizbollah fluttered above buildings.

Sam Echadif, the manager of a supermarket in Metulla, said he hoped "next time" the army would prepare a full-scale war to clear Hizbollah out of southern Lebanon completely. "No matter what the politicians say, we have lost," he said.

During the summer months, six EL AL flights will land in Israel carrying 1,500 new immigrants from North America. By the end of the year, it is estimated that there will be a total of 3,400 new immigrants from North America (U.S.A. and Canada), up from 2,987 in 2005.

Record number of European immigrants

In parallel, two special ISRAIR flights - from Paris and Marseille - landed in Israel on July 25 bringing 650 new immigrants from France. This is the first time in decades that such a large number of new immigrants from France have landed in one day.

The expectation is that there will be 3,500 new immigrants from France this year, as opposed to 3005 in 2005.

For the first time, there will be a special EL AL flight this summer from Great Britain bringing 150 new immigrants. Since the beginning of the year, there has been a marked rise in immigration from Great Britain.

By the end of July, the number of new immigrants from Britain was 328, up from 215 over the same period last year. By the end of the year 2006, 500 new immigrants are expected to have arrived from Britain.