A source at the Interior Ministry said 20 employees of the Higher Education Ministry were seized. But a spokeswoman for the department itself said dozens of men -- "100 or maybe 150" -- had been rounded up, including many visitors to the building.

Women were separated from the men and locked in a room after having their mobile phones confiscated by the gunmen, who drove up to the ministry's Research Directorate in the commercial, religiously mixed district of Karrada, in government vehicles.

"All Interior Ministry forces are on alert, searching for this group. We don't know if it's terrorists, militias or even government forces," Interior Ministry spokesman Brigadier Abdul Kareem Khalaf said, declining to say how many people were missing.

Numerous mass kidnappings have been blamed on sectarian militias operating either within the security forces or with the help of police in providing equipment.

The once dominant Sunni minority and U.S. officials have focused particular suspicion on militias from the now dominant Shi'ite Muslim parties, who control the Interior Ministry.

The Higher Education Ministry is headed by a member of the main Sunni Arab political bloc. Most ministries have become fiefdoms of particular parties.

Not far from the ministry building attacked on Tuesday, about 30 sports officials and athletes, including the head of
Iraq's national Olympic Committee, were seized during a meeting in July by gunmen in uniform. Some were later freed but many, including the Olympics chief, have never been heard of again.

Last month, the 26-strong workforce of a Baghdad meat-processing factory were also seized in similar circumstances.

Some kidnap victims are ransomed but many end up among the dozens of corpses, found bound and tortured, on the streets of Baghdad every day. On Monday alone, 46 were found and the morgue says it is taking in about 50 unclaimed bodies a day.

After the incident involving the meat factory workers, the government removed a number of senior police officers who had responsibility for the area and took an entire brigade of police out of service for vetting and re-training.

Washington, under mounting domestic political pressure to start pulling its 150,000 troops out of Iraq, has placed a heavy emphasis on recruiting and training Iraqi security forces, which now number more than 300,000.

But their competence and sectarian loyalties remain a matter of grave concern as the government struggles to slow a slide toward all-out civil war.

Hamas spokesman Fawzi Barhoum said the agenda of the proposed unity government between Hamas and President Mahmoud Abbas's Fatah faction "will not recognize Israel and will not include accepting the two-state solution."

"We reject the two-state solution, which is the vision of U.S. President George Bush, because it represents a clear recognition of Israel," Barhoum said. "Our position in this regard remains unchanged. We reject joining in any government that recognizes Israel."

A U.S.-educated Palestinian academic is the top candidate to replace Prime Minister Ismail Haniyeh of Hamas as part of the proposed unity government.

Mohammad Shbair, 60, the former head of the Islamic University in Gaza, is considered close to Hamas but he is not a member of the group.

The United States and the European Union regard Hamas as a terrorist organization and have cut off direct aid to its administration. As a result, the Palestinian government has largely been unable to pay its 165,000 workers since April.

Washington and Brussels have demanded Hamas recognize Israel's right to exist, renounce violence and abide by existing peace agreements with Israel if it wants to be recognized.

Interior Ministry sources said 13 people were also wounded after U.S. troops called in an air strike when they came under fire from Mehdi Army militiamen loyal to cleric Moqtada al-Sadr.

Shi'ite Prime Minister Nuri al-Maliki is under pressure from Washington to crack down on Shi'ite militias blamed for widespread sectarian killings but that, like the Mehdi Army, are tied to powerful political parties in his coalition. There was no comment from Maliki's office on the events in Shula.

Recent U.S. raids in Shi'ite areas targeting suspected sectarian death squad leaders have prompted angry protests from Maliki's Shi'ite constituency. Maliki has distanced himself from past operations in Shi'ite areas, like Baghdad's Sadr City.

Angry mourners on Tuesday chanted slogans in support of Sadr, a youthful, anti-American cleric who is a partner in Maliki's six-month-old government.

Maliki, struggling to appease powerful political barons in his Shi'ite-led coalition amid soaring sectarian violence and fears of civil war, has insisted he needs time to forge a political consensus to reduce violence.

He criticized a U.S. raid last month on Sadr City in east Baghdad where U.S. troops were seeking a renowned warlord known as Abu Deraa.

The resignation by pro-Syrian Hezbollah ministers and their allies brought to a head a crisis in Lebanon which has grown steadily worse since Hariri's killing last year and escalated further after Israel's war on Lebanon.

Hezbollah, the most powerful group in Lebanon, and its allies see the tribunal as a tool to punish
Syria, blamed by many Lebanese for Hariri's killing in a suicide truck bombing last year. Damascus denies involvement.

A U.N. commission investigating the assassination has implicated senior Lebanese and Syrian security officials.

At the United Nations in New York, U.S. Ambassador John Bolton said his country was prepared to move quickly in the Security Council to approve the tribunal "once we receive formal word form the government of Lebanon."

The approval of the draft follows deadlocked talks over Hezbollah's demands for greater say in government and political tension which threatens to spill into street confrontations.

Environment Minister Yacoub Sarraf, a Christian loyal to Syrian-backed President Emile Lahoud, resigned shortly before cabinet met. Five Shi'ite ministers from Hezbollah and its ally, the Amal movement, quit on Saturday over the collapse of talks on their demands for effective veto power in the government.

Nine of the cabinet's 24 members must resign for it to fall. A Sunni Muslim minister quit in February, though his resignation was not accepted, leaving 17 ministers in the cabinet.

Christian opposition leader Michel Aoun, a Hezbollah ally, vowed to press ahead with demands for a national unity government, saying Siniora's cabinet had lost its legitimacy because the Shi'ites, Lebanon's largest community, had quit.

VIOLENCE FEARED

Politicians and analysts said the crisis was likely to spill into street confrontations.

"It's hard to see how this situation will be resolved without there being some violence," Andrew Exum, research fellow at The Washington Institute for Near East Policy, told Reuters.

The crisis dragged the country's stock market lower with the BLOM stock index ending the day 2.23 percent lower.

The anti-Syrian majority coalition has accused Hezbollah of implementing a Syrian-Iranian plan to overthrow the government and to foil efforts to set up the court to try Hariri's killers.

The Shi'ite group has denied this.

Siniora has rejected all the resignations but a senior source close to the ministers said they stood by their decision.

The United States has already accused Iran, Syria and Hezbollah of plotting to topple the government, which Washington holds up as an example of emerging democracy in the Middle East.

Hezbollah said on Sunday it would stage peaceful street protests as part of a campaign to press its demands for better representation in government for its allies, especially Aoun.

Anti-Syrian leaders have pledged counter-demonstrations should Hezbollah take to the streets.

The killing of Hariri, a leading Sunni, led to mass protests against Syria. Under international pressure, Syria ended its 29-year military presence in Lebanon in April last year and anti-Syrian politicians swept to victory in ensuing elections.

Tehran is dismayed as international jihadists and Sunni insurgents target the Shia majority in the hope of triggering civil war. Mr Bush rejects an overture from Iran, under pro-reform President Mohammed Khatami, to review their relationship, frozen since the US embassy hostage-taking of 1979. Instead, the US accuses Iran of sponsoring terror and seeking nuclear weapons. The crisis deepens after Iran admits it has a uranium enrichment facility. Iran fears the US wants regime change.

Syria is added to the axis of evil by John Bolton, arch hawk, whose position as US ambassador to the UN is under threat after last week's mid-term elections. The neoconservatives believe a new democratic Middle East will sweep dictatorships from power after Saddam's fall, and Syria is in trouble after opposing the war and because senior Saddam aides - and weapons of mass destruction, the US claims - are brought across the border. Syria is accused of harbouring "terrorist" organisations. Syria tightens border controls, but fears of regime change are fuelled when Condoleezza Rice brands Syria as an "outpost of tyranny". Further setback for Syria when France and the US ensure expulsion of Syrian forces from Lebanon.

2006: THE PEACE BROKERS?

Robert Gates, the new US Defence Secretary, is an advocate of dialogue with Tehran to enlist its help in extricating allied forces from Iraq. Tony Blair, who wants Iran to help stop cross-border attacks on UK troops, backs this, setting the scene for demise of Bush's neoconservative policy. But Iran is now in the grip of a hardline leadership, headed by Mahmoud Ahmadinejad, who is defiant over its nuclear programme. Iran faces UN sanctions. Ahmadinejad will aim to make Bush and Blair sweat before he agrees to help.

President Bashar al-Assad, flush with success of Syria's proxy militia in Lebanon, holds the key to success in Iraq and Middle East peace. Courted by Bush and Blair, whom he upbraided at their last meeting. Syria harbours a leader of the radical Palestinian Hamas movement, and is a supplier of Hizbollah. Assad will play hardball on the UN's case against Syrian officials accused of assassinating former Lebanese prime minister Rafik Hariri. And there is the Golan Heights, seized by Israel in 1967.

Mr Blair's spokesman denied his call meant a softening of British policy, which has always been keener on dialogue with Tehran and Damascus than the Bush administration, and would not involve concessions to the two nations. But he added that this was a "moment when people are rethinking policy, and the time to articulate a way forward".

Bringing both Iran and Syria in from the cold is likely to be one of the key recommendations of the Iraq Study Group, led by James Baker, the former US secretary of state, which is reviewing Iraq policy. It is also backed by Robert Gates, who will take over from Donald Rumsfeld as the US Defence Secretary after the Republicans' drubbing in last week's congressional elections.

MPs believe Mr Blair is seeking to exert leverage on President Bush over the Middle East at a time when he is weakened domestically and the influence of his neoconservative allies has waned. One Labour source described next month's Study Group report as Mr Bush's "get out of jail card". It is also likely to call for a phased withdrawal of foreign troops from Iraq.

Mr Blair will reinforce his message today when he gives evidence to the Baker panel for an hour by video-link.

But there are signs that the Prime Minister and the President are at odds over Iran and Syria, with Mr Bush declaring that Iran must first halt its nuclear programme. "If Iranians want to have a dialogue, they must verifiably suspend their enrichment activities," he said.

Yesterday Mr Bush met nine of the 10 members of Mr Baker's group. White House officials described the session merely as "a conversation" in which both sides had shared their views, and played down expectations the group might come up with a magic formula to restore stability to Iraq and allow the US to withdraw its troops.

But the pressures on Mr Bush to do precisely that intensified as a leading Democrat in the Senate demanded a change of course. "We must start a phased redeployment of US troops ... within four to six months," said Carl Levin, who is set to take over as chairman of the powerful Senate Armed Services Committee. "We cannot save the Iraqis from themselves."

In his speech at Guildhall, Mr Blair hinted at changes in Iraq policy, saying: "Just as the situation is evolving, so our strategy should evolve to meet it." He called for strong political efforts, led by the Iraqi government, to build up Iraq's governing capability, and the plugging of any gaps in training, equipment and command and control in the Iraqi army, while rooting out sectarianism in the police.

But he argued that a major part of the answer lay in "a whole Middle East" strategy. The starting point had to be Israel and Palestine, then Lebanon, and then an effort to unite all moderate Arab and Muslim voices behind a push for peace in those countries and Iraq.

Accusing Iran of "using the pressure points in the region to thwart us" he said it had helped the most extreme elements of Hamas in Palestine, Hizbollah in Lebanon, and the Shia militias in Iraq. "That way, they put obstacles in the path to peace, paint us, as they did over the Israel/Lebanon conflict, as the aggressors, inflame the Arab street and create political turmoil in our democratic politics," he said.

The Prime Minister insisted that the alliances Britain has with America and within Europe must remain the cornerstones of its policy in a changing world.

He said none of Britain's vital concerns internationally could be addressed without America's support. "We need America. That is a fact," he said. "Europe gives us weight and strength. In fact, in my view, Europe should be far more confident about its potential."

To critics demanding a more independent British foreign policy, he replied: "In today's world a foreign policy based on strong alliances is the only British policy which works."

The Conservatives described hopes of a breakthrough with Iran and Syria as naive, but the Liberal Democrats welcomed the call, saying it was in their interest to avoid a civil war in Iraq.

The television's anchor said the film, the property of Iran's elite Revolutionary Guard, showed a vessel from "the US fleet in the Persian Gulf".

"A source in the Revolutionary Guard said the drone carried out its mission without US fighter pilots reaching it," the television said.

It said there were 10 such films taken by the drone which showed "more precise information and details about military equipment, foreign forces, and their activities in the Persian Gulf."

The station did not name the vessel nor did it say when the footage was shot.

The broadcast comes near the end of Iran's latest 10-day war games, "Great Prophet II", which military chiefs have said were aimed at showing off Iran's defensive prowess and testing new military hardware.

The war games coincided with US-led naval manoeuvres in the Gulf off Iran aimed at halting arms-trafficking, the first time such an exercise has been held in the area.

But Mr Shabir's appointment will probably only happen after further talks between Hamas and the Fatah opposition on the wider composition of a government, as well as the programme it would adopt. Mr Haniyeh and Mahmoud Abbas, the Palestinian President, suggested last week that the process could take between two to three weeks.

Israel, which has been withholding $60m (£330m) a month in duties owed to the Palestinians since March, and the international community have insisted that they will only deal with the PA if it recognises Israel, renounces violence and abides by all agreements made by the Fatah-led predecessor authority.

Mr Abbas had indicated on Saturday that the two sides had made "great progress" on the formation of the unity government which Mr Abbas wants to agree a programme consistent with the "prisoners' document" providing for implicit rather than explicit recognition of Israel.

Other candidates for senior ministerial office being seen as potentially acceptable to the international community include Ziad Abu Amr, another Gaza academic and secular politician who is not a Hamas member but who was given backing by the faction in last January's elections.

A possible finance minister could be Salam Fayad, who is favoured by Mr Abbas, has good contacts in the Washington political and banking community, and made serious, if lonely, efforts to regulate inefficiency and corruption in the Fatah-led PA when he held the post before.

But the prospects of even forming such a government are closely linked with the question of whether the international community, in particular the US, would re-engage diplomatically and economically with coalition at the head of the PA. While Israel and Fatah have blamed Hamas's hardline exiled leadership for aborting the previous attempt to form a unity government in September, some Palestinian sources also say that an obstacle was the US insistence that nothing short of literal acceptance of the three international conditions would be acceptable.

While the US is watching developments, it is unclear whether it would be ready to soften its stance. Israel's Foreign Minister, Tzipi Livni, said: "The issue is not who is sitting in the government but what the government says."

Suggesting the new government would be "Hamas-lite", a senior Israeli military official said last night that Hamas was building up its military infrastructure and would remain the leading player in Palestinian politics. "It will have control of the parliament, control on the ground and [control of the capacity] to make terrorist attacks. It will have influence over every process in the Palestinian arena," the official said.

The Arab League said its members had abandoned the US-led boycott of the PA in response to the US veto of a UN resolution condemning Israel's killing of 19 civilians in Beit Hanoun last Wednesday. "We decided not to co-operate. There will no longer be an international siege," Bahrain's Foreign Minister, Sheikh Khalid bin Ahmed Al-Khalifa, said.

Shabir in brief

* POLITICAL LEANINGS

Although not active in politics, Mohammed Shabir is seen as closer to Hamas than to the other Palestinian factions.

* ACADEMIC RECORD

Graduated in pharmacy at the University of Alexandria in 1968 and took a PhD at the University of West Virginia. He is seen as having successfully built up the Islamic University.

* WORLD VIEW

Told the Israeli newspaper Haaretz yesterday that he has no problem with any party. He said he would not answer questions about his views on Israel before being named to the post, but added he would act "realistically".