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Maj Gen Abdul Aziz Mohammed Jassim, head of military operations at the Iraqi defence ministry, told Reuters news agency he believed the plane's entry into Iraq had probably been a genuine error. "It crossed 10km into Iraq," he said. "It's most likely that its entrance was a mistake."

The Ababil 3 is a reconnaissance drone. Israeli forces reported downing several Hezbollah Ababils during the 2006 Lebanon War.

In July 2008, Robert Gates, the defence secretary, issued a three-page directive spelling out US policy on cluster munitions which described the ordnance as "legitimate weapons with clear military utility". Under that policy, the US will continue to use cluster munitions and, after 2018, will use only munitions with a tested failure rate of less than 1%.

The Palestinian ambassador to Beirut, Abbas Zaki, said in a television interview in early May that the two state solution would result in Israel's collapse, the use of weapons wouldn't solve anything, but political negotiation without the use of arms wouldn't work either. "In light of the weakness of the Arab nation and the lack of values, and in light of the American control over the world, the PLO proceeds through phases, without changing its strategy." With Allah's help, Zaki said, "we'll drive them out of all of Palestine." That doesn't sound much like a solution for the Israelis.

Obama risks nothing by offering to negotiate with Iran. As he said on Monday, he wants to see results by the end of the year. If Iran doesn't budge, Obama will have to change his strategy. If Bush was a cowboy with a soft heart, Obama is an iron fist in a velvet glove. He shouldn't be underestimated, just because he's charming, polite and obliging. Such traits alone have yet to make an American president.

Obama knows that Iran won't attack Israel, because as much as the ayatollahs and mullahs want a "world without Zionism" and wish that Israel would disappear from the map or better yet, from the history books, they still prefer to live in the lap of luxury and -- when needs be -- they send others to paradise. But an nuclear preventative or counter strike by the Israelis would end their comfortable lives for good.

For their part, the Iranians know that their threat of force, if credible enough, is just as effective as the actual employment of the threatened means. They don't need to attack Israel; it's enough to float the threat. Israel is not going to collapse overnight, but it could erode with time -- through emigration, demoralization and economic decline. Who wants to live or invest in a country that may one day go up in an atomic mushroom cloud?

What happens to annual revenues estimated in the hundreds of millions--perhaps billions--of dollars? Not all of it goes to cover the maintenance costs of mosques, cemeteries, religious schools and libraries. Over the past decade the foundation has bought new businesses and properties, established investment banks (together with investors from Saudi Arabia and the United Arab Emirates), funded real estate projects and financed big foreign trade deals.

The driving force behind the commercialization of the Razavi Foundation is Ayatollah Tabasi's son, Naser, who was put in charge of the Sarakhs Free Trade Zone, on the border with the former Soviet republic of Turkmenistan. In the 1990s the foundation poured hundreds of millions of dollars into this project, funding a rail link between Iran and Turkmenistan, new highways, an international airport, a hotel and office buildings. It even paid $2.3 million to a Swiss firm to erect a huge tent for the ceremonies inaugurating the Iran-Turkmenistan rail link.

Then it all went wrong. In July 2001 Naser Tabasi was dismissed as director of the Free Trade Zone. Two months later he was arrested and charged with fraud in connection with a Dubai-based company called Al-Makasib. The details of the case remain murky, but four months ago the General Court of Tehran concluded that Naser Tabasi had not known that he was breaking the law and acquitted him.

Other charities resemble multinational conglomerates. The Mostazafan & Jambazan Foundation (Foundation for the Oppressed and War Invalids) is the second-largest commercial enterprise in the country, behind the state-owned National Iranian Oil Co. Until recently it was run by a man named Mohsen Rafiqdoost. The son of a vegetable-and-fruit merchant at the Tehran bazaar, Rafiqdoost got his big break in 1979, when he was chosen to drive Ayatollah Khomeini from the airport after his triumphal return from exile in Paris.

Khomeini made him Minister of the Revolutionary Guards to quash internal dissent and smuggle in weapons for the Iran-Iraq war. In 1989, when Rafsanjani became president, Rafiqdoost gained control of the Mostazafan Foundation, which employs up to 400,000 workers and has assets that in all probability exceed $10 billion. Among its holdings: the former Hyatt and Hilton hotels in Tehran; the highly successful Zam-Zam soft drink company (once Pepsi); an international shipping line; companies producing oil products and cement; swaths of farmland and urban real estate.

A picture emerges from one Iranian businessman who used to handle the foreign trade deals for one of the big foundations. Organizations like the Mostazafan serve as giant cash boxes, he says, to pay off supporters of the mullahs, whether they're thousands of peasants bused in to attend religious demonstrations in Tehran or Hezbollah thugs who beat up students. And, not least, the foundations serve as cash cows for their managers.

Today Rafiqdoost heads up the Noor Foundation, which owns apartment blocks and makes an estimated $200 million importing pharmaceuticals, sugar and construction materials. He is quick to downplay his personal wealth. "I am just a normal person, with normal wealth," he says. Then, striking a Napoleonic pose, he adds: "But if Islam is threatened, I will become big again."

Until a few years ago the simplest way to get rich quick was through foreign-currency trades. Easy, if you could get greenbacks at the subsidized import rate of 1,750 rials to the dollar and resell them at the market rate of 8,000 to the dollar. You needed only the right connections for an import license. "I estimate that, over a period of ten years, Iran lost $3 billion to $5 billion annually from this kind of exchange-rate fraud," says Saeed Laylaz, an economist, now with Iran's biggest carmaker. "And the lion's share of that went to about 50 families."

One of the families benefiting from the foreign trade system was the Asgaroladis, an old Jewish clan of bazaar traders, who converted to Islam several generations ago. Asadollah Asgaroladi exports pistachios, cumin, dried fruit, shrimp and caviar, and imports sugar and home appliances; his fortune is estimated by Iranian bankers to be some $400 million. Asgaroladi had a little help from his older brother, Habibollah, who, as minister of commerce in the 1980s, was in charge of distributing lucrative foreign-trade licenses. (He was also a counterparty to commodities trader and then-fugitive Marc Rich, who helped Iran bypass U.S.-backed sanctions.)

Mr. Obama seemed to connect with his audience in his 55-minute speech from Cairo University as he quoted repeatedly from the Koran and occasionally sprinkled his remarks with Arabic, even beginning his address with the traditional Arabic greeting “salaam aleikum,” or “peace be upon you.”

while he spoke uncompromisingly of the American fight against Al Qaeda, Mr. Obama never mentioned the words “terrorism” or “terrorist.” That was a departure from the language used by the Bush administration, but one that some Middle East experts suggested reflected a belief by the new administration that overuse had made the words inflammatory.

Paul D. Wolfowitz, a former top Bush administration official who was an architect of the war in Iraq and is a strong supporter of Israel, offered general praise for Mr. Obama’s address. “I could have used less moral equivalence, but he had to get through to his audience, and it’s in America’s interest for him to get through,” Mr. Wolfowitz said.

Mr. Obama’s stark statement that “the United States does not accept the legitimacy of continued Israeli settlements” is also likely to be seen as a sharp challenge to Israeli assumptions that existing West Bank settlements will always be allowed to remain.

It was noteworthy that the only Palestinian political group that Mr. Obama specifically mentioned was Hamas, the militant Islamic organization that won Palestinian legislative elections in 2006. Hamas governs Gaza, but is loathed by Israel. Mr. Obama called on Hamas to forswear violence and recognize Israel’s right to exist, but Middle East experts said that his mention was an acknowledgment that Hamas might have become a more important actor than the Fatah Party, controlled by Mahmoud Abbas, the Palestinian president. Mr. Obama said, “Hamas does have support among some Palestinians, but they also have to recognize they have responsibilities.”

I turn to you, our Palestinian neighbors, led by the Palestinian Authority, and I say: Let’s begin negotiations immediately without preconditions.Israel is obligated by its international commitments and expects all parties to keep their commitments. We want to live with you in peace, as good neighbors.

I do not want war.  No one in Israel wants war.

Territorial withdrawals have not lessened the hatred, and to our regret, Palestinian moderates are not yet ready to say the simple words: Israel is the nation-state of the Jewish people, and it will stay that way.

to our regret, this is not the case with the Palestinians. The closer we get to an agreement with them, the further they retreat and raise demands that are inconsistent with a true desire to end the conflict. Many good people have told us that withdrawal from territories is the key to peace with the Palestinians. Well, we withdrew. But the fact is that every withdrawal was met with massive waves of terror, by suicide bombers and thousands of missiles. We tried to withdraw with an agreement and without an agreement.  We tried a partial withdrawal and a full withdrawal.  In 2000 and again last year, Israel proposed an almost total withdrawal in exchange for an end to the conflict, and twice our offers were rejected. We evacuated every last inch of the Gaza strip, we uprooted tens of settlements and evicted thousands of Israelis from their homes, and in response, we received a hail of missiles on our cities, towns and children.  The claim that territorial withdrawals will bring peace with the Palestinians, or at least advance peace, has up till now not stood the test of reality.

But we must also tell the truth in its entirety: within this homeland lives a large Palestinian community. We do not want to rule over them, we do not want to govern their lives, we do not want to impose either our flag or our culture on them.

The Palestinian leadership must arise and say: “Enough of this conflict. We recognize the right of the Jewish people to a state of their own in this land, and we are prepared to live beside you in true peace.”  I am yearning for that moment, for when Palestinian leaders say those words to our people and to their people, then a path will be opened to resolving all the problems between our peoples, no matter how complex they may be.

Therefore, a fundamental prerequisite for ending the conflict is a public, binding and unequivocal Palestinian recognition of Israel as the nation state of the Jewish people.  To vest this declaration with practical meaning, there must also be a clear understanding that the Palestinian refugee problem will be resolved outside Israel’s borders.  For it is clear that any demand for resettling Palestinian refugees within Israel undermines Israel’s continued existence as the state of the Jewish people.

Tiny Israel successfully absorbed tens of thousands of Jewish refugees who left their homes and belongings in Arab countries.  Therefore, justice and logic demand that the Palestinian refugee problem be solved outside Israel’s borders.

the connection between the Jewish people and the Land of Israel has lasted for more than 3500 years.  Judea and Samaria, the places where Abraham, Isaac, and Jacob, David and Solomon, and Isaiah and Jeremiah lived, are not alien to us.  This is the land of our forefathers. The right of the Jewish people to a state in the land of Israel does not derive from the catastrophes that have plagued our people. True, for 2000 years the Jewish people suffered expulsions, pogroms, blood libels, and massacres which culminated in a Holocaust - a suffering which has no parallel in human history.  There are those who say that if the Holocaust had not occurred, the state of Israel would never have been established.  But I say that if the state of Israel would have been established earlier, the Holocaust would not have occured. 

our right to build our sovereign state here, in the land of Israel, arises from one simple fact: this is the homeland of the Jewish people, this is where our identity was forged. 

the simple truth is that the root of the conflict was, and remains, the refusal to recognize the right of the Jewish people to a state of their own, in their historic homeland.   In 1947, when the United Nations proposed the partition plan of a Jewish state and an Arab state, the entire Arab world rejected the resolution. The Jewish community, by contrast, welcomed it by dancing and rejoicing. The Arabs rejected any Jewish state, in any borders. Those who think that the continued enmity toward Israel is a product of our presence in Judea, Samaria and Gaza, is confusing cause and consequence. The attacks against us began in the 1920s, escalated into a comprehensive attack in 1948 with the declaration of Israel’s independence, continued with the fedayeen attacks in the 1950s, and climaxed in 1967, on the eve of the six-day war, in an attempt to tighten a noose around the neck of the State of Israel.  All this occurred during the fifty years before a single Israeli soldier ever set foot in Judea and Samaria .

In my vision of peace, in this small land of ours, two peoples live freely, side-by-side, in amity and mutual respect.  Each will have its own flag, its own national anthem, its own government.  Neither will threaten the security or survival of the other.

This policy must take into account the international situation that has recently developed.  We must recognize this reality and at the same time stand firmly on those principles essential for Israel.

Palestinians must clearly and unambiguously recognize Israel as the state of the Jewish people.  The second principle is: demilitarization. The territory under Palestinian control must be demilitarized with ironclad security provisions for Israel.  Without these two conditions, there is a real danger that an armed Palestinian state would emerge that would become another terrorist base against the Jewish state, such as the one in Gaza. 

In order to achieve peace, we must ensure that Palestinians will not be able to import missiles into their territory, to field an army, to close their airspace to us, or to make pacts with the likes of Hezbollah and Iran.

It is impossible to expect us to agree in advance to the principle of a Palestinian state without assurances that this state will be demilitarized.

Therefore, today we ask our friends in the international community, led by the United States, for what is critical to the security of Israel:  Clear commitments that in a future peace agreement, the territory controlled by the Palestinians will be demilitarized: namely, without an army, without control of its airspace, and with effective security measures to prevent weapons smuggling into the territory – real monitoring, and not what occurs in Gaza today.  And obviously, the Palestinians will not be able to forge military pacts.

Without this, sooner or later, these territories will become another Hamastan. And that we cannot accept.

Regarding the remaining important issues that will be discussed as part of the final settlement, my positions are known: Israel needs defensible borders, and Jerusalem must remain the united capital of Israel

The territorial question will be discussed as part of the final peace agreement.  In the meantime, we have no intention of building new settlements or of expropriating additional land for existing settlements. But there is a need to enable the residents to live normal lives, to allow mothers and fathers to raise their children like families elsewhere.  The settlers are neither the enemies of the people nor the enemies of peace.  Rather, they are an integral part of our people, a principled, pioneering and Zionist public.

Unity among us is essential and will help us achieve reconciliation with our neighbors.

If the Palestinians turn toward peace – in fighting terror, in strengthening governance and the rule of law, in educating their children for peace and in stopping incitement against Israel - we will do our part in making every effort to facilitate freedom of movement and access, and to enable them to develop their economy.  All of this will help us advance a peace treaty between us. 

Above all else, the Palestinians must decide between the path of peace and the path of Hamas. The Palestinian Authority will have to establish the rule of law in Gaza and overcome Hamas.  Israel will not sit at the negotiating table with terrorists who seek their destruction.   Hamas will not even allow the Red Cross to visit our kidnapped soldier Gilad Shalit

If we receive this guarantee regarding demilitirization and Israel’s security needs, and if the Palestinians recognize Israel as the State of the Jewish people, then we will be ready in a future peace agreement to reach a solution where a demilitarized Palestinian state exists alongside the Jewish state. 

Lieberman said the obstacle to a peace deal "is not Israel. It is not the Palestinians. It's the Iranians."

He dismissed the "two-state solution" formula as a "slogan." Lieberman did not rule out peace talks or a Palestinian state in the interview, saying only that the "right conditions" had to be created.

His comments came a day after his deputy Danny Ayalon said Iran must be reined in for any realistic hope of an Israeli-Palestinian peace deal. However, Ayalon said action on Iran was not a "pre-condition" for pursuing peace.

Since the election of the new American president, who promised a change in foreign policy, it is no longer as easy for Ahmadinejad to demonize the United States, especially now that Obama has lived up to his promise of a new beginning -- with a practically revolutionary gesture.

The initial reaction from the Iranian leadership was muted. In a televised address, the powerful religious leader Ayatollah Ali Khamenei, 69, said he was disappointed that Obama had not at least released Iran's frozen assets in the United States.

As hysterical as the Iranian leadership's anti-Americanism seems to be at times, it has valid historical reasons. In 1953, Washington's intelligence service brought down democratically elected Prime Minister Mohammed Mossadegh and then massively supported the Shah dictatorship for a quarter century. Iraqi dictator Saddam Hussein was only able to launch his war against Iran with the help of American weapons and logistical guidance from Washington. The war lasted eight bloody years and ended in stalemate.

Hostility to the United States has become one of the key pillars of the theocracy. Will it collapse under Obama's friendliness and potentially substantial American good will? Can an American "grand bargain," a mixture of comprehensive political and economic concessions, stop the Iranians from building the nuclear weapons many believe they are seeking to develop? The United States, at any rate, will participate in all nuclear talks in the future, Secretary of State Hillary Clinton announced Wednesday. The previous members of the negotiating group promptly invited Iran to enter a new round.

The US president is also under pressure to achieve progress on the nuclear issue. Time is running out for Obama, because the Iranians, according to a report released in February by the inspectors of the International Atomic Energy Agency (IAEA) in Vienna, may already have reached "breakout capability." This means that with their centrifuges and more than 1,000 kilograms of low enriched uranium hexafluoride, the Iranians could soon be able to flip the switch in the direction of having their own bomb.

Tehran installed and placed into service about 6,000 centrifuges needed for uranium enrichment in its nuclear facilities.

Now the existing, low enriched uranium hexafluoride can be refined to make weapons-grade uranium, either in the country's known enrichment facilities or, as many experts assume, in a location that remains unknown. If one thing is clear, it is that once it becomes known that Iran has embarked on this next enrichment step -- which, until now, has apparently been held up by a political decision -- a military strike against the Iranian nuclear facilities will be all but unavoidable. Experts believe that once this decision is reached, it could take less than six months for the Iranians to build their first bomb.

This club is anything but exclusive. Candidate members include Indonesia, Thailand, and Turkey, where there are already signs that the economic crisis is exacerbating domestic political conflicts. And let us not forget the plague of piracy in Somalia, the renewed civil war in the Democratic Republic of the Congo, the continuing violence in Sudan’s Darfur region, and the heart of darkness that is Zimbabwe under President Robert Mugabe. The axis of upheaval has many members. And it’s a fairly safe bet that the roster will grow even longer this year.

The problem is that, as in the 1930s, most countries are looking inward, grappling with the domestic consequences of the economic crisis and paying little attention to the wider world crisis. This is true even of the United States, which is now so preoccupied with its own economic problems that countering global upheaval looks like an expensive luxury. With the U.S. rate of GDP growth set to contract between 2 and 3 percentage points this year, and with the official unemployment rate likely to approach 10 percent, all attention in Washington will remain focused on a nearly $1 trillion stimulus package. Caution has been thrown to the wind by both the Federal Reserve and the Treasury. The projected deficit for 2009 is already soaring above the trillion-dollar mark, more than 8 percent of GDP. Few commentators are asking what all this means for U.S. foreign policy.

The answer is obvious: The resources available for policing the world are certain to be reduced for the foreseeable future. That will be especially true if foreign investors start demanding higher yields on the bonds they buy from the United States or simply begin dumping dollars in exchange for other currencies.

Economic volatility, plus ethnic disintegration, plus an empire in decline: That combination is about the most lethal in geopolitics. We now have all three. The age of upheaval starts now.