Afghan police denied the claim, saying the victims were local families who had gathered to resolve a dispute with the help of village elders.

More than 1,000 people, mostly militants, have died in the last three months in Afghanistan in the worst spate of violence the country has seen since late 2001 when U.S.-led forces ousted the Taliban regime.

The U.S. military said it launched the raid after people inside the compound opened fire on U.S. and Afghan forces.

"Afghan and coalition forces came under direct fire when approaching the compound and defended themselves with return fire," the U.S. statement said.

"All of the men killed were engaging Afghan and coalition forces with hostile fire."

Soldiers also seized multiple weapons, ammunition and grenades, the U.S. statement said.

The raid comes in the wake of a suicide bomb attack on Tuesday that killed a Canadian soldier and wounded three others. Cpl. David Braun died when a suicide bomber plowed his vehicle into a Canadian military convoy.

Braun is the 27th Canadian soldier to be killed in Afghanistan since Canada first sent troops there in early 2002. His body was being flown on Thursday back to Canada. The plane carrying his remains is expected to arrive before the weekend.

Two hours after that attack, an Afghan boy was shot and killed after the motorcycle on which he was a passenger crossed the security perimeter of the suicide bombing site. Canadian soldiers warned the driver, a teenager, to stop. He failed to do so, and a Canadian soldier fired a shot that passed through the teenager, injuring him, and killed the boy.

Canadian soldiers braced for a backlash after the shooting, but the incident did not spark riots. The city of Kandahar remained calm after the event.

Canada has about 2,200 soldiers in Afghanistan.

The London-based human rights organization issued a report Wednesday saying both Israel and its Lebanon-based foe, the militant group Hezbollah, have repeatedly committed grave violations of international humanitarian law over many years of conflict.

As in the past, the Israeli government rejected Amnesty's charges.

The report focuses on Israel's latest air and ground campaign in Lebanon, a bid to crush Hezbollah and halt its practice of firing rockets into Israel.

"The widespread destruction of apartments, houses, electricity and water services, roads, bridges, factories and ports, in addition to several statements by Israeli officials, suggests a policy of punishing both the Lebanese government and the civilian population in an effort to get them to turn against Hezbollah," the report said.

"Israeli attacks did not diminish, nor did their pattern appear to change, even when it became clear that the victims of the bombardment were predominantly civilians, which was the case from the first days of the conflict."

In her statement, Gilmore dismissed the idea that Israel targeted Hezbollah positions and support facilities and that other damage to infrastructure was a result of the group using civilians as human shields.

"The pattern, scope and scale of the attacks makes Israel's claim that this was 'collateral damage' simply not credible," she said.

Israeli foreign ministry spokesman Mark Regev said his country acted legally.

"Israel's actions in Lebanon were in accordance with recognized norms of behaviour during conflicts and with relevant international law," he said. "Unlike Hezbollah, we did not deliberately target the Lebanese civilian population."

Regev said that Lebanese infrastructure was "targeted only when that infrastructure was being exploited by the Hezbollah machine, and this is in accordance with the rules of war."

Israel began attacking targets in southern Lebanon after Hezbollah guerrillas operating there killed three Israeli soldiers and captured two in a cross-border raid July 12. The fighting, which included a rain of Hezbollah rockets on Israel, continued until a United Nations-brokered ceasefire on Aug. 14.

The UN children's fund, UNICEF, estimates that some 1,183 people died in Lebanon, mostly civilians and about a third of them children.

On Syria's role in Iraq, he said, "we know that there has been crossings of the Syrian border of insurgents. I'm not sure if I can go much further than that."

Washington has long been accusing Iran and Syria of "destabilizing Iraq."

U.S. and European officials said in private that Iran's reply had fallen short of the requirements set out in the Security Council resolution.

However, the Bush administration held to its official line that the United States was still evaluating Iran's reply to the package, and that the administration needed to confer with its European partners on the issue, the report said.

John Bolton, U.S. Ambassador to the United Nations, said on Tuesday that Washington would study Iran's response carefully.

However, "we are also prepared, if it does not meet the terms set (by the six major powers), to proceed in the Security Council with economic sanctions," Bolton said.

"I think we will be prepared to submit the elements of a resolution in the council very quickly," Bolton added.

The UN Security Council has demanded that Iran stop its uranium enrichment by August 31, or it would face possible sanctions.

The United States has accused Iran of trying to develop nuclear weapons under the cover of a civilian nuclear program. Iran has repeatedly said its nuclear program was aimed at generating power to meet its surging domestic demand.

"We acknowledge that Iran considers its response as a serious offer, and we will review it," the statement said.

The United States is consulting closely with other members of the Security Council over what the next steps should be, the statement added.

Earlier Wednesday, the White House said that it is carefully reviewing Iran's response.

"We're giving it careful consideration and a careful review, as it deserves," White House deputy spokeswoman Dana Perino told the media.

"The Security Council made clear what its position was, and we're going to parse through and look at their response before responding fully," Perino said.

Perino said on Tuesday that the Bush administration had received a copy of the Iranian response but she did not believe Bush had read it.

"I'm not going to parse the Iranian government's document today here on the airplane. That is a job best left to the diplomats," she said on Tuesday, adding that Bush has made very clear in Monday's press conference that he thought Iran's nuclear program "would be a mistake and dangerous for the region and the whole world."

John Bolton, U.S. ambassador to the United Nations, said on Tuesday that the United States would study Iran's response carefully.

Moreover, "We are also prepared, if it does not meet the terms set (by the six countries), to proceed in the Security Council with economic sanctions," Bolton said.

"I think we will be prepared to submit elements of a resolution in the council very quickly," Bolton added.

Iran's top nuclear negotiator ALi Larijani delivered Teheran's written response on the incentives package on Tuesday to the representatives of the five permanent Security Council members -- the United States, Russia, China, Britain and France, but refused to suspend uranium enrichment, a key demand by the United States and the West.

Washington has accused Iran of trying to develop nuclear weapons under the cover of civilian nuclear programs. Iran has said that its nuclear programs are for peaceful purposes only.

"We acknowledge that Iran considers its response as a serious offer, and we will review it," state department spokesman Gonzalo Gallegos said in a statement. "The response, however, falls short of the conditions set by the security council, which require the full and verifiable suspension of all enrichment-related and reprocessing activities. We are consulting closely, including with other members of the security council, on next steps."

A new report by the staff of the House of Representatives intelligence committee suggested that the administration was ill-equipped to drive a hard bargain. It found "significant gaps in our knowledge and understanding of the various areas of concern about Iran" and said "policymakers will need high-quality intelligence to assess Iranian intentions to prepare for any new round of negotiations".

Iran, by contrast, is widely considered to be in a strong negotiating position. Analysis published yesterday by the Royal Institute of International Affairs at Chatham House said there was "little doubt that Iran has been the chief beneficiary of the war on terror in the Middle East".

The report said Iran had gained from the defeat of two of its most immediate regional rivals, Saddam Hussein in Iraq and the Taliban in Afghanistan.

"The US-driven agenda for confronting Iran is severely compromised by the confident ease with which Iran sits in its region," it said. "Iran views Iraq as its own backyard and has now superseded the US as the most influential power there."

The month-long war between Hizbullah and Israel has strengthened Iran's regional influence further, because the Arab world perceived the US as uncritically backing Israel. Hizbullah, backed by Iran, saw its status soar in Arab public opinion for its ability to survive Israeli attacks.

UN diplomats said any concerted response to Iran's offer of talks would only come after a report on its nuclear programme by the International Atomic Energy Agency at the end of this month.

On July 2 2005, Tony Blair secretly landed in Riyadh to persuade the Saudi princes that this flying scrapheap was the must-have accessory for every fashionable young despot. Three weeks later the defence secretary John Reid turned up to deploy his subtle charms. Somehow the deal survived, and last week his successor, Des Browne, signed the agreement. All of which raises a second question. Why are government ministers, even Blair himself, prepared to reduce themselves to hawkers on behalf of arms merchants?

Readers of this column will know that British governments are not averse to helping big business, even when this conflicts with their stated policies. But the support they offer the defence industry goes far beyond the assistance they provide to anyone else.

Take the Defence Export Services Organisation (DESO), for example. This is a government agency founded 40 years ago to smooth out foreign deals for British arms companies. From its inception, this smoothing involved baksheesh. It was established as a channel for "financial aids and incentives" to corrupt officials in foreign governments.

In 2003, after bribery of this kind became illegal in the UK, the Guardian found an internal DESO document explaining its guidelines for arms sales. "In certain parts of the world," it said, "it has become commonplace for special commissions to be required. This is a matter for DESO, to whom all requests for special commission should be referred. If DESO confirm that such payments can be made, contracts staff may need to provide the means for payment." A "special commission" is civil service code for a bribe. The document suggests, in other words, that the British government is overseeing the payment of bribes to foreign officials.

BAE's previous deals with Saudi Arabia are surrounded by allegations of corruption. It is alleged to have run a £60m "slush fund" to oil the Al Yamamah contracts brokered by Margaret Thatcher. The fund is said to have been used to provide cash, cars, yachts, hotel rooms and prostitutes to Saudi officials. One of the alleged beneficiaries was Prince Turki bin Nasser, the Saudi minister for arms procurement. The Serious Fraud Office was bounced by the Guardian's revelations into opening an investigation. But among the conditions the Saudi government laid down for the new deal is that the investigation is dropped. Let's see what happens.

With this exception, the big arms companies appear to have been granted immunity from inquiry or prosecution. Letters from the permanent secretary at the Ministry of Defence, Sir Kevin Tebbit, show that he prevented the ministry's fraud squad from investigating the allegations against BAE; that he failed to tell his minister about the investigation by the Serious Fraud Office; and that he tipped off the chairman of BAE about the contents of a confidential letter the SFO had sent him. When the US government told him that BAE had allegedly engaged in corrupt practice in the Czech Republic, Sir Kevin failed to inform the police.

For 14 years, the government has suppressed a report by the National Audit Office into the Al Yamamah deals. Earlier this summer the auditor general refused even to hand it over to the SFO. A parliamentary committee on arms exports published a report this month that expresses its frustration over the government's reluctance to assist its inquiries. It also shows that Mark Thomas, the stand-up comedian, has done more to expose illegal arms deals than the Ministry of Defence, the Export Control Organisation and HM Revenue and Customs put together, simply by searching the internet and the trade press and attending the arms fairs the British government hosts.

In response, the government has investigated not the companies, but the comedian. A confidential email from a civil servant suggested that the trade minister, Richard Caborn, was seeking to gather "background/dirt on him in order to rubbish him". Caborn says that he was misrepresented.

The only arms dealers to have been prosecuted since 2000 are five very small fish. All of them escaped with a small fine or a suspended sentence, including a man who made repeated attempts to export military parts to Iran. Compare this to the treatment of those who upset the arms industry. Nine anti-war campaigners in Derry who occupied the offices of the arms company Raytheon have just been charged with aggravated burglary and unlawful assembly. If convicted, they could be imprisoned for years.

Every government policy designed to protect our national interests or promote world peace is torn up at the arms companies' request. They are not supposed to sell to dodgy regimes or countries in the midst of conflict. So let them first export their arms to the Channel Islands, from which they can be resold. Weapons may not be exported to any country unless it shows "respect for human rights". So get the Foreign Office to note "a small but significant improvement" in the Saudi government's performance and use that as your excuse.

Should we be surprised that, as the Times revealed on Monday, Israeli soldiers have found night-vision equipment made by a British company in Hizbullah bunkers? Should we be surprised that despite a government commitment to sell Israel "no weapons, equipment or components which could be deployed aggressively in the occupied territories", British companies have been supplying parts for its Apache helicopters and F-16 bombers? The government seems to see the escalating dangers in the Middle East as nothing but an opportunity for business.

Perhaps most damning is this. Blair claims that Britain's security comes first. Yet one of the means by which his government managed to secure this deal was to speed it up. How? The Sunday Times reports that "the first 24 planes for the Saudis will be those at present allotted to the Royal Air Force, with the RAF postponing its deliveries until later in the production run". In other words, the Saudis' perceived need for fighter planes takes precedence over our own.

So why does Her Majesty's Government behave like a subsidiary of BAE? A report by the Campaign Against the Arms Trade (CAAT) shows that 39% of all the senior public servants who go to work for the private sector are employees of the Ministry of Defence moving into arms firms. In return, scores of arms dealers are seconded to the ministry. The man who runs DESO, for example, previously worked for BAE, selling arms in the Middle East.

CAAT lists the government committees stuffed with arms executives, the donations, the lobbyists, the Labour peers taking the corporate shilling, and I am sure all this plays an important role. But it seems to me that something else is at work. There appears to be a sense among some at the core of government that peace, human rights and democracy are for wimps, while the serious business, for real players, is war and the means by which it is enacted.