According to witnesses, a Reuters cameraman and a freelance cameraman working for an Arabic network were standing outside the vehicle in the Shajaiyeh neighborhood of Gaza filming a nearby Israeli raid when the missiles hit the car.

The white sports utility vehicle was emblazoned with the Reuters logo and had "TV" written on it in English, Arabic and Hebrew, witnesses said.

The cameramen, along with three bystanders, were moderately injured with shrapnel wounds and all five were to undergo surgery, hospital officials said.

Prime Minister Romano Prodi plans to hold a cabinet meeting on Monday to authorise the deployment of the troops. Italy will lead the force after the end of the French mandate at the end of February.

Prodi's office said in a statement that he and U.N. Secretary-General Kofi Annan agreed in talks on Saturday that .".. the commitments in Lebanon must move ahead quickly, without forgetting the other political problems in the Middle East, starting with the Palestinian problem."

Prodi's government hopes a successful mission in Lebanon may pave the way for international peacekeepers to play a role in a broader Middle East peace process between Israel and the Palestinians.

Nasrallah said Lebanese parliament speaker Nabih Berri was in charge of the negotiations and the subject would be discussed during United Nations secretary general Kofi Annan's visit to Beirut today.

There had been "some contacts" to arrange a meeting between him and Annan, he said, but that was unlikely for security reasons.

"The Italians seem to be getting close and are trying to get into the subject. The United Nations is interested," Nasrallah said. "The Israelis have acknowledged that this (issue) is headed for negotiations and a (prisoners) exchange."

A senior Israeli government official would not comment on such contacts, saying only that Israel "does not negotiate with terrorists" and continued to demand the unconditional release of the two soldiers.

Israeli military officials said earlier this month that Israel was holding 13 Hezbollah prisoners and the bodies of dozens of guerrillas that it could swap for the two captive soldiers, but would not include any Palestinian prisoners in such a deal.

Meanwhile, 245 French soldiers arrived at Beirut's airport yesterday to help the Lebanese army rebuild bridges destroyed or damaged by Israeli air strikes.

The troops were separate from a French contribution of 2,000 soldiers to the UN Interim Force in Lebanon, known as Unifil, which was being expanded to 15,000 members under the UN Security Council resolution that ended the Israel-Hezbollah war.

Israeli prime minister Ehud Olmert had received assurances from Annan that new peacekeepers would be on the ground in Lebanon within a week, the prime minister's office said.

Nasrallah, whose whereabouts are unknown as he went into hiding on the first day of the war, said he did not believe a second bout of fighting would break out with Israel, even though he claimed more than half his group's rocket arsenal was still left.

"The current Israeli situation, and the available information tells us that we are not heading to another round," he said.

But he called any possible attacks on Israeli troops "legitimate" as long as even one Israeli soldier remained in Lebanon.

Many journalists come along, most of them by GPO bus. About 15 camera teams have set up their equipment. Twenty radio and print journalists are enjoying their coffee and the specially prepared sandwiches. Then the parents arrive. The father self-consciously steps up to the microphone. The desk in front of him bristles with microphones -- as if a politician were giving a press conference. He's sweating slightly; the veins on his forehead are bulging.

Shlomo Goldwasser doesn't have much to say -- not much more than the banal phrases security officials often teach parents so they stay on message. "They, my son's kidnappers, are responsible for Ehud's safety," Goldwasser says. "They are also responsible for returning him to us soon -- and unscathed." He says he can't think of anything else to tell us. He's a father, he says, not a politician.

"Please don't smile"

Goldwasser has barely finished speaking when a journalistic scrum erupts and cameramen start to shout. "Mr. Goldwasser, over here," one of them calls. "Please don't smile." Others want to hear childhood stories -- "It tugs on the viewers' heartstrings." Elsewhere, the man's wife has to leaf repeatedly through the family photo album. She responds to the orders given her like a robot and would presumably even start crying if she were told to do so. Fortunately no one makes such a request.

The disgraceful spectacle goes on for 90 minutes. The parents say they've got nothing to do with politics, nor with the war. They've been told appearances in public could save their son. And it's all organized and choreographed by the Israeli government's press office -- organized for foreign journalists, so that one of the reasons for the current war, the suffering of parents and civilians, receives the public attention it is due. But the parents, in this story, somehow come off only as extras.

Propaganda is a part of war -- especially when a state wants the world to see its decision to take up arms as justified and just. It's no different than the run up to the first Gulf War or the more recent war in Afghanistan -- or, more perfidiously, to the second US war against Iraq. Vast armies of public relations workers develop an emotionally charged image meant to provide media and public support for the conflict's architects. It's standard procedure -- public relations for war.

Not all the information circulated in such a controlled atmosphere, of course, is to be believed. But it's hard to criticize Israel for wanting to see victims of Hezbollah rockets -- 17 killed since the beginning of the war against the militant group -- in the media. Indeed it is precisely these victims that fuel the Israeli operations currently raging in southern Lebanon.

PR warriors take to the mountains

Still, Israel's support and supervision of foreign journalists seems downright excessive. As soon as you've received your press credentials from the GPO, you're bombarded with e-mails and phone calls. When covering other crisis regions, German reporters often have to make an effort to be extra nice and polite and have to search out interviewees and contacts themselves. Not here. In Israel, reporters are on an all-inclusive package trip -- and are well looked after.

Well-thought-out story ideas including transportation, lunch and selected military experts -- all these things are offered without ever having to be asked for. Many journalists happily accept the offer. For days, images of Israeli artillery units flickered on TV screens the world over -- one reason of course being that the PR warriors always took the camera teams to the frontlines around sunset. The soft, warm twilight is favored by camera men and photographers.

An e-mail that arrived on Wednesday is a good example. It offers no less than 11 news stories. The Israeli refugees, perhaps. Or the problems with Arab Israelis? A feature about how an entire village has been dispersed across Israel? A report on people who had to leave their houses? Former hostages? Or a village that has been shot at for decades? It's all available.

There's no need to go anywhere. "The contacts can be reached by phone," the woman from the press office says. "It's better to do it that way, especially for the radio." The organizers know exactly what the reporters want. Radio and TV journalists often have to go on air so often that they barely get a chance to leave the hotel. So when a Katyusha rocket strikes, an e-mail containing a list of eyewitnesses, complete with their mobile phone numbers, is more than welcome.

Language barriers are willingly breached as well. Every list includes eyewitnesses with different language profiles. There's plenty to choose from in an immigrant country like Israel: English, French, Spanish, Russian and of course several German speakers in every city. Laborious simultaneous translations are rendered superfluous by the service.

The Israeli public relations experts, though, have their work cut out for them. With public opinion turning against the Israelis following the bombing of the UN outpost in southern Lebanon, the country's use of excessive force is once again a major issue. And the war doesn't seem as though it will come to an end any time soon.

The US-Israel bond has become so incestuous that few Americans even question its value. Even fewer ask themselves what the US gets out of its financial, military and moral support of a foreign entity that their government believes can do no wrong. At the same time, they remain suspicious of the Muslim world.

The misguided post-September 11 policies promoted by the Bush administration have reinforced the anti-Arab, anti-Muslim stance of most Americans. A recent Gallop poll suggests four out of 10 Americans feel "prejudice" toward Muslims.

These attitudes are nothing short of a slap in the face to Arab nations that have invested trillions of dollars in the US economy and consider themselves Washington's strategic partners.

What the Arab world gives America:

In reality the Arab world is far more beneficial to the US than Israel. Here's why:

l Members of the Organization of Petroleum Exporting Countries (OPEC), which are all Arab or Muslim (with the exception of Venezuela), exchange their oil for petrodollars, which means non-producing countries must keep vast sums of dollars in reserve, thus bolstering the dollar and the US economy.

l The Gulf supplies the US with approximately one-third of its total oil requirements or some 2.5 million barrels per day.

l The 22 Arab League member countries import more goods and services from the US than any other region, especially vehicles, machinery, equipment, building materials, chemicals, medicines and aircraft. Saudi Arabia alone buys more than Israel and Egypt combined.

l US sales of goods and services to the GCC have totaled more than $20 billion annually and "create or sustain more than half-a-million jobs in the United States," according to the American Business Council of the Gulf Countries.

l The GCC states invest billions of dollars annually in US acquisitions, property and bonds. Saudi Arabia alone invests an estimated 60 percent of its global investment in the US, according to Tanya C. Hsu, a senior analyst of Middle East political economy at the Institute for Research: Middle Eastern Policy.

"This commitment has enabled the US to finance an ongoing trade deficit and produce new economic growth opportunities," Hsu says.

l Many Arab countries, in particular Jordan, Egypt and various GCC countries, are strategic partners of America within the region, hosting US bases and working closely with the American government in the "war on terror."

l Morocco and several GCC countries have signed up to free-trade agreements with the US which the US hopes will lead to a Middle East Free Trade Agreement (MEFTA).

l Over 50,000 American civilians live in the GCC, representing the largest US expatriate community in the world.

What Americans sacrifice for Israel

What about the American people? What are they obliged to sacrifice for the sake of maintaining America's favored relation with Israel?

First on the list is the official figure of $3 billion each year, which American taxpayers donate to Israeli coffers whether they like it or not.

This is split up into $1.2 billion in economic aid and $1.8 billion in military aid, two-thirds of which must be spent on American-made military hardware and planes.

In reality, Israel receives much more than that because there are extra sums, which according to The Washington Report on Middle East Affairs "are buried in the budgets of governments departments such as the Defense Department."

The US also gives Israel billions of dollars in loans and often writes off these amounts so that it can say with hand over heart honesty that Israel has never defaulted on a loan. It further guarantees loans to Israel to the tune of $2 billion annually.

By conservative estimates, by the end of a US citizen's life he or she will have contributed $25,000 in taxes to support Israel, which for some signifies an entire year's pay.

Since 1949, the US has given the Jewish state a whopping $140 billion or more. To put this in context, this represents almost one-and-a-half times the annual GDP of the United Arab Emirates, which in 2005 stood at $98.1 billion.

Is Israel grateful?

Are Israelis grateful for all this financial support? Do they feel loyalty to their kindly big brother across the ocean?

The answer is no. Many Israelis I've spoken to over the years feel positively hostile toward the US. They both resent having to rely on Washington's generosity as well as having to abide by its orders. This is anecdotal rather than science but the proof that Israel is deeply suspicious of the US is the fact that Israel continually spies on its number one ally.

Fox News, which is generally to be perceived as a propaganda arm of the Bush administration, detailed these spying activities in a four-part series hosted by one of its investigate reporters, Carl Cameron.

Cameron was told by investigators within the FBI and other intelligence agencies that to pursue or even suggest that Israel was spying on Americans is nothing less than "career suicide."
http://www.dailystar.com.lb

Cameron quotes a defense intelligence report explaining why Israel would want to spy on its ally. It reads:

"The Israelis are motivated by strong survival instincts which dictate every possible facet of their political and economical policies. It aggressively collects military and industrial technology and the US is a high-priority target."

Put simply, each US citizen pays an average of $25,000 in tax to Israel, which, in turn, is spying on his country. It's inconceivable that most ordinary Americans are even aware of Israeli treachery on such a large scale.

Israel's strategic worth

The question is: What does the American government get in return for its unerring devotion to Israel? From the US government's perspective Israel stands as the guardian of its strategic interests throughout the Middle East.

It uses Israel to stir up trouble throughout the region, fight its proxy wars, test out cutting-edge US-made weaponry, and create a regional demand for American fighter jets, helicopters, tanks and missiles.

In previous years, Israel has served its master well by shipping illegal arms to prop up pro-US Central American dictatorships, Apartheid South Africa and groups within the Arab world out to topple anti-American nationalist regimes.

In turn, the US is committed to fighting Israel's wars.

A former adviser to George W. Bush, Philip Zelikow, tells us the invasion of Iraq had nothing to do with Saddam Hussein's weapons of mass destruction but was rather conducted to eliminate a growing threat to Israel.

The investigative journalist Seymour Hersh, who first broke the Abu Ghraib scandal, quotes insider sources as saying the recent war between Israel and Lebanon was planned by Israel and the US last spring. This was to protect Israel from Hizbullah as a prelude to a possible US pre-emptive strike on Iran's nuclear facilities.

Americans should take note. Almost 2,000 American soldiers have died in Iraq, while billions of dollars have been spent maintaining America's occupation, not to make America safe, not to spread democracy, but to protect Israel.

Cheered on by the US government, Israel furthers regional disunity in the Arab world with some Arab government having signed peace treaties with Tel Aviv while others remain vehemently hostile.

A feuding Arab world allows minority groups within the region supported by the US to stir dissent so as to weaken Arab leaders. This is particularly true in Iraq where Shiites have been set against Sunnis.

In this way, the US gets to control the region's resources and ensure they don't fall into the hands of rising superpowers, such as China and India.

The Bush administration pays lip service to a Palestinian state but if there ever was a comprehensive peace process sealed between all the 22 members of the Arab League and Israel, eventually a united and prosperous Middle East that included Israel would have no further need for Washington.

So, just as Israel is no true friend to America, Washington is no friend to Israel. The difference between Israelis and Americans is this. Israelis are aware of the "I'll scratch your back if you scratch mine" game, while most Americans are not.

This is because Washington and the powerful pro-Israel lobby rely on media propaganda to indoctrinate the American people into believing that Israeli and US policies coincide.

The US government needs Americans to believe Israelis are the good guys, so they will happily open their purses to keep Israel armed to the teeth even if this means the US becomes a target for extremists prepared to use heinous methods to vent their genuine grievances.

"Why do they hate us?"

When it comes to Arabs and Muslims, a small percentage of which are seen on television burning US flags, Americans are fond of asking: "Why do they hate us?"

Until five years ago, the US was held up throughout the Arab world as a beacon of human rights and civil liberties; American technology and culture was admired, while Arab youth dreamt of studying and working in the US. This changed after September 11 when the Bush administration used this pretext to invade Afghanistan and Iraq and began detaining Muslims without charge or trial.

To serve his own agenda, Bush wants us to believe extremist elements "hate democracy and freedom."

However, a 2004 Pentagon report placed on its Web site tackles this subject with rather more honesty. It reads:

"Muslims do not hate our freedom but rather they hate our policies. The overwhelming majority voice their objections to what they see as one-sided support in favor of Israel and against Palestinian rights. Thus, when American public diplomacy talks about bringing democracy to Islamic societies, this is seen as no more than self-serving hypocrisy."

This is true. Arabs and Muslims are angered by American bias in favor of Israel highlighted each time the UN Security Council attempts to pass a resolution censuring Israel. On almost every occasion the US uses its power of veto and is often the lone dissenting voice.

It is time for the US to revert to the honest broker it once was and for the American people to reassess their country's relationship with Israel.

The day will certainly come when Americans will begin to question the US-Israel relationship and ask whether Israel is truly America's best friend or a state that only pretends to be as long as the US props it up financially, wages wars in its interest and turns a blind eye to its growing catalogue of war crimes.

Nasrallah told the privately owned Beirut television station New TV that Italy was trying to involve itself in contacts designed to bring a prisoner-swap, though he did not say how.

"The United Nations is interested and the negotiations would be through (Lebanese parliamentary speaker Nabih) Berri," Nasrallah said.

In Rome, the head of the defence committee of the Italian senate told Reuters he expected talks to begin this week.

Senator Sergio De Gregorio said two Israeli soldiers whose seizure on July 12 sparked a bitter war between Israel and Hizbollah were "still alive, fortunately", but did not discuss their condition.

Hizbollah is still holding the two soldiers and says it wants to exchange them for some of the thousands of Arab prisoners, including Lebanese, in Israeli jails.

Israeli newspaper reports have suggested the Jewish state might be prepared to negotiate.

Nearly 1,200 people in Lebanon, mostly civilians, and 157 Israelis, mostly soldiers, died in the war, which ended with a U.N.-brokered truce on Aug. 14.

Nasrallah said the massive scale of Israel's response to the July 12 raid had taken Hizbollah by surprise. "If I had known that the operation to capture the soldiers would lead to this result, we would not have carried it out," he said.

Since the truce began, Lebanon has started the process of rebuilding and has received pledges of aid, including one for $230 million from Israel's principal ally, the United States.

But a senior U.S. legislator, speaking in Jerusalem on Sunday, said the aid would be released only if Lebanon agreed to the deployment of international troops on its border with Syria.

Tom Lantos, the top Democrat on the International Relations Committee of the U.S. House of Representatives, said he was putting a legal block on the money until Beirut agreed.

"It is very much my hope that I will be able to lift the hold when the reasons will no longer be present," Lantos said.

SYRIAN BORDER THREAT

Israel says U.N. troops must be deployed on Lebanon's border with Syria to prevent the smuggling of arms to Hizbollah, but Syria says such a move would be hostile and has threatened to close the border if it comes about.

That would effectively cut Lebanon off from the outside world as its only other land border is with Israel, which it does not recognise, and which has imposed on it an air and sea blockade.

The U.N. Security Council resolution which ended the war does not specifically call for U.N. troops to be sent to the 375 km (235 mile) Lebanese-Syrian border.

It asks the U.N. force in Lebanon, known as UNIFIL, to assist the government "at its request" in securing the country's borders and preventing arms smuggling.

Lantos urged the international community to "use all our available means to stiffen Lebanon's spine" and to persuade it to accept the deployment of UNIFIL troops to the border.

Aid reached Beirut from another quarter on Sunday -- some 245 French Foreign Legion engineers arrived to install bridges in the south to replace those damaged by Israeli air strikes.

Colonel Rene Lenfant, the officer in charge, said the mission was "a gift from France", separate from France's planned contribution to an expanded UNIFIL.

U.N. Secretary-General Kofi Annan is due in Lebanon on Monday and is expected to discuss the expansion of the force and the Israeli blockade. He is then due to travel to Israel and to Iran and Syria -- Hizbollah's two main backers.

"Israel has not complied with the commitments required of it, first of all lifting the air, sea and land blockade," Lebanese President Emile Lahoud said in a statement.

Israeli operations since the truce, including a commando raid in the eastern Bekaa Valley "confirm once more Israel's hostile intent towards Lebanon," he said.

U.S. civil rights leader Jesse Jackson, also in the region, met Syrian President Bashar al-Assad in Damascus on Sunday, saying later that Syria could play a major role in facilitating a prisoner exchange.

Jackson used his clout as a non-establishment politician to negotiate the release of several U.S. prisoners abroad in the 1980s and 1990s. (Additional reporting by Reuters bureaux in Beirut, Jerusalem, Rome and Damascus)

Mr Annan will meet Lebanese leaders for discussions on the planned deployment of 15,000 UN peacekeepers.

Last week, Mr Annan secured a pledge by EU countries to provide thousands of soldiers for the UN force.

The force was authorised under the UN-backed ceasefire which ended the four-week conflict earlier this month.

Following his visit to Lebanon, Mr Annan will also travel to Israel, the Palestinian territories, Syria and Iran.

Lebanese officials are expected to ask Mr Annan to urge Israel to lift its air and sea blockade of their country, imposed when the conflict erupted last month.

Israel meanwhile is looking for better guarantees that Hezbollah will not rearm and the return of two of its soldiers captured by Hezbollah on 12 July.

'Prisoner swap'

Mr Annan was greeted at Beirut airport by Lebanese Foreign Minister Fawzi Salloukh.

The UN chief told reporters now was "a very critical time for Lebanon".

He said he would discuss with Lebanon's leaders "the measures we need to take to implement UN Security Council Resolution 1701 and to underscore international solidarity".

The resolution was accepted by Lebanon and Israel as the basis for the ceasefire which ended the month-long conflict on 14 August.

Mr Annan will hold talks with Lebanese Prime Minister Fuad Siniora, Lebanese parliamentary speaker Nabih Berri and other politicians.

It is unclear if he will meet Hezbollah leader Sheikh Hassan Nasrallah.

Mr Annan may be asked to help facilitate a prisoner exchange with Israel, as sought by Hezbollah.

Sheikh Nasrallah said on Sunday that "contacts" had begun about a prisoner swap, possibly involving Italy and Mr Berri, a Hezbollah ally.

Israel denied any negotiations on a prisoner exchange were under way, but Israeli Foreign Minister Tzipi Livni has said the conflict will not be resolved without their return.

"So long as this issue with the two soldiers is not solved, the whole [ceasefire] thing is of little significance. Our sovereignty has been infringed and if this resolution does not make that good, then we still have this problem," Ms Livni said on a visit to Berlin.

Sheikh Nasrallah said he would not have ordered the soldiers' capture, which triggered Israel's blistering offensive, had he known it would lead to such a response.

More than 1,100 Lebanese and 159 Israelis died in the 34-day conflict which left much of southern Lebanon in ruins.

Arms issue

Unifil-2, a force of 15,000 soldiers, including 7,000 from European Union states to replace the existing small Unifil contingent, is due to be deployed to maintain the fragile ceasefire.

The Turkish cabinet agreed on Monday to join the peacekeeping force and the issue of deployment will be debated by parliament this week.

The UN hopes to have some of the troops on the ground within a week, although the EU says it will be two to three months before the whole force is deployed.

Israel has said it will not pull out of southern Lebanon until the UN force deploys in the area alongside the Lebanese army.

The BBC's Jill McGivering in Jerusalem says Israel wants better guarantees that Hezbollah will not rearm.

In practical terms, she says, Israel wants UN forces on Lebanon's border with Syria, stopping the flow of weapons, but that idea does not have support from anyone else.

Mr Annan has also made clear that UN troops will not be asked to disarm Hezbollah by force.

UN TROOP PLEDGES
France - leadership and 2,000 troops
Italy - 2,000 - 3,000 troops
Bangladesh - two battalions (up to 2,000 troops)
Malaysia - one battalion
Spain - one mechanised battalion
Indonesia - one battalion, an engineering company
Nepal - one battalion
Denmark - at least two ships
Poland - 500 troops
Finland - 250 troops
Belgium - 302 troops, later rising to 392
Germany - maritime and border patrols but no combat troops
Norway - 100 soldiers

"Israel is becoming extremely concerned now with what they see as Iran's delaying tactics," said the Israeli Iran expert Meir Javedanfar. "They [the planners] think negotiations are going nowhere and Iran is becoming a major danger for Israel.

"Now they are getting ready for living with a nuclear Iran or letting the military take care of it."

The prospect of Israel "living with" a nuclear Iran appears remote. Last week Giora Eiland, Israel's former national security adviser, told reporters that Mahmoud Ahmadinejad, the Iranian president, would "sacrifice half of Iran for the sake of eliminating Israel".

President Ahmadinejad "has a religious conviction that Israel's demise is essential to the restoration of Muslim glory, that the Zionist thorn in the heart of the Islamic nations must be removed," Mr Eiland said. Gen Shkedy, who was appointed to the role two months ago, will co-ordinate intelligence gathered by Israel's foreign spy agency Mossad and military sources, in order to draw up battle plans. Then, during any war with Iran, he will command the campaign from a "hotseat" in the Israel army's headquarters in Tel Aviv.

"It's natural that Shkedy is nominated to this role, because the air force is Israel's only force that can reach and sustain a military operation against Iran," said Uri Dromi, a former air force colonel and military analyst.

"Everyone is playing with dates and timeframes, but the list of options is becoming shorter," he added. "I think we have one year open [to launch military action]. Israel will have to decide."

Officially, Israel stresses that it does not want to take the lead in tackling Iran, and that a massive campaign of air strikes would be best led by America, which has forces in Iraq that are much closer to Iranian targets.

Gen Shkedy's appointment to the Iran command role was made by Israel's chief of staff Dan Halutz in the run-up to this summer's Lebanon war, but emerged only last week.

Gen Shkedy, 49, is the son of Holocaust survivors and has a picture in his office of an Israeli F15 flying over Auschwitz.

The father of three makes no bones about the Iranian threat to Israel. "Ahmadinejad is trying with all his might to reach a nuclear capability. There's no argument about his intentions," he said in an interview two months ago, about the time of his appointment.

"This... nuclear weaponry can come to constitute an existential threat to Israel and the rest of the world. My job is to maximise our capabilities in every respect. Beyond that, in this case, the less said the better."

The deaths bring to eight the number of Palestinians killed during an Israeli incursion which began on Saturday.

Reports say the Hamas militants killed on Monday belonged to a special forces unit of the Palestinian interior ministry, which is controlled by Hamas.

The Israeli army said it entered the Shijaia neighbourhood, a Hamas stronghold, to hunt for explosives used by militants to attack patrols moving along the nearby border fence.

More than 200 Palestinians, many of them civilians, have died since Israel launched a wide offensive in Gaza two months ago, after militants captured an Israeli soldier.

One Israeli soldier has been killed in the offensive, after being shot accidentally by fire from his own side.

The Iranians are the prime sponsor of Hezbollah, and the Israeli authorities are demanding to know whether the equipment sold to Iran three years ago ended up in the hands of Hezbollah, which killed 117 Israeli soldiers during the month-long clashes in Lebanon.

A Department of Trade and Industry official said night-vision equipment of military specification required an export licence. The investigation will look into whether any British company might have breached export regulations.

The batch of 250 night-vision systems were given a special export licence in 2003 because they were intended to be used by Iranian police trying to stem the flow of heroin and opium from Afghanistan into Iran. Although there is what amounts to an arms embargo against Iran, aimed principally at stopping the export of equipment that could benefit Tehran's suspected nuclear weapons programme, the request for night-vision equipment was approved in recognition of the counter-narcotics work.

When the export was agreed, Mike O'Brien, then Junior Minister at the Foreign Office, told the Commons: "The goods are for the use on the Iran-Afghanistan border against heroin smugglers." He said there was "no risk of these goods being diverted for use by the Iranian military".

If any of the equipment has been diverted to Hezbollah, it would be a serious embarrassment for the Government. Hezbollah's "external security", the military wing of the militant organisation, is proscribed as a terrorist group. The Government has also made clear its support for Israel's struggle with Hezbollah and has approved the transit of bunker-busting bombs and missiles for the Israelis from the US through British airports.

Liam Fox, the Shadow Defence Secretary, said: "If this turns out to be true, and Iran supplied backing for Hezbollah, it will have consequences for any future military exports to Iran. And it points the finger all the more strongly at Iranian involvement in destabilising the Middle East."

One set of the equipment was found by Israeli forces in the southern Lebanon village of Mis-a-Jebel on August 10, in a house belonging to a 60-year-old man whose four sons are all Hezbollah fighters.

One was described as a Thermo-vision 1000 LR system with a serial number 155010, part number 193960. Other equipment, including radios also thought to be British, and sophisticated recording and monitoring devices, were found.

Israeli commanders had complained that night-time operations in the border region had been hampered by the ability of Hezbollah fighters to observe and counter their moves. In more than six days of fighting around the village of Mis-a-Jebel, the Israelis lost six soldiers and 20 more were injured.

Lieutenant-Colonel Olivier Radowicz, an Israeli commander, said: "The night-vision unit was used to observe the movement of troops. You can also record what you are watching. Then it is connected to a computer. You can obtain a perfect intelligence picture in real time. It is then connected to firing systems."