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The Situation Room

11th Hour Diplomacy in Middle East; Israel on the Offensive; President Bush Holds Rare Crawford News Conference on Middle East Crisis

Aired August 07, 2006 - 17:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

WOLF BLITZER, CNN ANCHOR: And to our viewers, you're in THE SITUATION ROOM, where new pictures and information are arriving all the time.
Standing by, CNN reporters across the United States and around the world to bring you today's top stories.

Happening now, the mortal combat between Israel and Hezbollah reaches fever pitch. Hezbollah launches more rockets into northern Israel, and Israeli airstrikes bomb out a building in Lebanon, trapping bodies inside. To secure peace, Lebanon's government has just announced it will send thousands of troops to the border, but there are conditions.

So where is the resolution? The Bush administration hopes to soon answer that question. President Bush says he's hoping a United Nations Security Council resolution can satisfy all parties involved.

Meanwhile, it's 1:00 a.m. in Iraq. Could the now confined crisis spark an even hotter bed of violence? That would be in Iraq. I'll speak with the United States ambassador in Baghdad, Zalmay Khalilzad.

I'm Wolf Blitzer in Jerusalem. You're in THE SITUATION ROOM.

Right now, death is being delivered by rockets and gunfire, and appeals for peace are being delivered but are not yet being fully received. Israeli warplanes are stepping up their airstrikes in one of the heaviest tolls since the war began.

In southern Lebanon, an Israeli raid blasted a building, killing at least five people. Reuters reporting, though, 10 are dead. And right now many are digging in the rubble to recover bodies and perhaps survivors.

A tearful Lebanese prime minister today pleaded for a cease-fire, but demanded that any U.N. plan contain a full Israeli withdrawal. If Israeli troops do withdraw, Lebanon's government has just announced it will send 15,000 Lebanese army troops to its southern border as part of a peace agreement. This new plan is part of the U.S. and French- backed peace plan under discussion at the United Nations. An Arab League delegation is headed to the United Nations to request changes in the draft peace plan before the Security Council votes on the proposal.

Meanwhile, Hezbollah continues to target Israel. One hundred forty rockets fell on northern Israel once again today, according to Israeli officials. And the Israeli army says it's declared an indefinite curfew on the movement of vehicles in southern Lebanon.

Lots going on here in this Middle East crisis. And right now in southern Beirut, they're using bare hands and sheer determination to try to dig out bodies trapped under a blasted building. They're desperately searching for any signs of life after that Israeli airstrike that reduced the structure to rubble.

Meanwhile, Hezbollah is pounding northern Israel with its rockets.

Our senior international correspondence, Matthew Chance, is there with more, but let's begin -- we'll get the latest details on this new Israeli airstrike in southern Beirut. Our Beirut bureau chief, Brent Sadler, is on the scene -- Brent.

BRENT SADLER, CNN BEIRUT BUREAU CHIEF: Yes, Wolf, it was the end of the day when we saw and heard the explosions. Israeli aircraft, it's understood, striking the southern suburbs of Beirut. The echoes reverberated around the capital here.

Very soon after that, the Lebanese government announced a new significant initiative to send 15,000 Lebanese army troops to the border with Israel, providing Israel pulls its troops out from south Lebanon. This part of an 11th-hour diplomacy to try to stop the war through that U.N. plan.

(BEGIN VIDEOTAPE)

SADLER (voice over): First light in Beirut, and Israel strikes at the southern suburbs. Last light, more bombs fall in the area, but hitting a new neighborhood that was thought to be relatively safe.

Residents used bare hands to rescue survivors, recover the dead. Joint condemnation and outrage from the Arab world.

Visiting foreign ministers offer support and sympathy. They hear impassioned comments from Lebanese Prime Minister Fouad Siniora. "We do not want the Lebanese state and its people to remain the punch bag of Israel," he says, "or anyone else."

Siniora appeals to Arab capitals for urgent help at the United Nations to push for a peace deal Lebanon could accept, free from Israeli troops in the south. Choking back tears, Siniora says Lebanon's arguments are based on the nation's sorrows of the widows, their children, the wounded, and the homeless.

UNIDENTIFIED MALE: This is a historic turning point that we're at right now. Israel has overplayed its hand militarily, has met its match, to a certain extent, and must turn to the diplomatic and the political options.

SADLER: But many Lebanese are not so sure. They must not wait hours for dwindling supplies of rationed gas. Frustration boils into anger at one filling station. (on camera): Israel's rigorously enforced land and sea blockade is really starting to bite here at street level. The squeeze on essential fuel supplies has already reached danger levels, with little hope of an early end to the siege.

UNIDENTIFIED FEMALE: It's not going to stop.

SADLER: Why?

UNIDENTIFIED FEMALE: We don't believe the U.N. We don't believe all the Arab world. We don't believe anyone.

UNIDENTIFIED MALE: I'm afraid from an American plan to rebuild a Middle East which would be obedient to America, and in such a plan, Israel would be the arms, hands of America in the Mideast.

SADLER (voice over): Many Lebanese fearful that despite 11th- hour diplomacy, they may have to face more war than peace.

(END VIDEOTAPE)

SADLER: While the Arab League is sending a delegation, Wolf, to New York to push Lebanon's case, now it's got the wind at its sails, possibly with this announcement that Lebanon is prepared to send troops to the south, something Israel has been asking for a long, long time -- Wolf.

BLITZER: And Israeli -- Israeli officials here in Jerusalem reacting positively to this latest Lebanese cabinet decision. We'll see where it goes from here, Brent. Thank you very much.

Let's go to northern Israel. Many streets there are not safe to walk, and many homes are not safe to stay in.

Hezbollah rockets are randomly falling down, indiscriminately raining death and disaster. And in response, Israel could expand its ground offensive in Lebanon right now.

Our senior international correspondent, Matthew Chance, is in northern Israel, along the border with Lebanon.

What's the latest, Matthew?

MATTHEW CHANCE, CNN SR. INTERNATIONAL CORRESPONDENT: Wolf, the Israeli officials in the military and in the government have made it quite clear that their number one priority at the moment is to end those Katyusha rocket strikes on Israeli civilians and indeed Israeli military personnel in towns and cities across northern Israel. The Israeli defense minister, Amir Peretz, making the point earlier today that it's a pivotal moment in this conflict and there are two possible options that can be -- can lead to a success in that tactic, in that objective.

The first one is the diplomatic option. Israeli officials, you mentioned, have welcomed the prospect of Israeli -- of Lebanese forces, rather, taking the place of Hezbollah fighters north of the Israeli border, but they want to make sure that it is a Lebanese force that is robust enough to actually rein in Hezbollah and prevent that militant group from rearming and taking up its positions once again in southern Lebanon.

If it doesn't work, if the diplomatic process doesn't work, Israel has made it quite clear there is a military option as far as it's concerned as well. Over the past several days, Israeli military forces have been building up in the north of the country, in this area from which I'm speaking to you now.

Already, there are between 10,000 and 12,000 Israeli forces on the ground in southern Lebanon. That could be dramatically increased, Wolf, if a decision is taking to push more fully into southern Lebanon, perhaps as far as the Litani River, some 20 miles north of the Israeli border in some parts, and for Israeli forces to hold that territory until such times as a force robust enough can actually take over, whether it's the Lebanese or a multinational force -- Wolf.

BLITZER: Matthew Chance on the scene for us.

Matthew, we'll get back to you. Thanks very much.

And today the Israeli air force shot down an unmanned Hezbollah drone.

Let's get details now from CNN's Brian Todd. He's watching this story in Washington -- Brian.

BRIAN TODD, CNN CORRESPONDENT: Wolf, according to Israeli sources and outside experts, the threat posed by this drone was in its potential to do damage not only to itself, but to also guide other Hezbollah weapons.

(BEGIN VIDEOTAPE)

TODD (voice over): A senior Israeli military official tells CNN the drone shot down similar to this one is the third unmanned Hezbollah drone launched over northern Israel over the past few years and the first to be shot down. The official says the vehicle was targeted by an Israeli fighter jet and crashed into the sea. The Iranian-made drone, according to Israeli sources, has a wing span of just a few feet, but may have carried explosives. Experts say Hezbollah does not have drones the size of the U.S. Predator, capable of firing longer-range missiles.

MICHAEL O'HANLON, BROOKINGS INST. Hezbollah probably has relatively simple drones that may be numerous, but would be relatively easy to shoot down. It doesn't mean that none of them will get through. Some could get through, and some of them could be steered quite accurately to a target.

TODD: Hezbollah could easily weaponize its drones with warheads, according to experts, but the drones themselves would have to fly low, get very close to Israel's major cities to hit them, and would likely be intercepted before they reach the target. But one key tactical use, analysts say, is to find Israeli military positions and send pictures of them back to Hezbollah command posts.

JOHN PIKE, GLOBAL SECURITY ORG.: You send out this UAV with a TV camera to look for convoys, people who have not taken shelter. As soon as this thing spots them, the TV sends back the target location, you fire your rockets.

(END VIDEOTAPE)

TODD: This deployment has other uses for Hezbollah as well, according to Israeli officials and other experts, propaganda, sending a message to Hezbollah's supporters and its enemies that the group is still capable of tactical surprises -- Wolf.

BLITZER: Brian, thank you.

Jack Cafferty is off today.

The Middle East crisis, though, is continuing, severe enough for President Bush to hold a rare news conference from his Texas ranch. We're going to have details of his take on the unfolding diplomatic and military drama happening right here in the Middle East.

Also, the United States ambassador to Iraq, Zalmay Khalilzad, he'll join us to talk about the war between Israel and Hezbollah, the spillover it's having on what's going on in Iraq, and the prospects of a civil war erupting there big time.

Plus, Lebanon's take on efforts to force a cease-fire. The country's special envoy to the United Nations standing by to join us live.

Stay with us. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Welcome back. I'm reporting tonight from Jerusalem, and we're monitoring all the latest developments in the Middle East crisis, including some dramatic diplomatic efforts under way right now.

President Bush interrupted his vacation today to urge quick approval of a United Nations Security Council resolution on the crisis.

Our White House correspondent, Suzanne Malveaux, is joining us now live from Crawford, Texas. She has all the details -- Suzanne.

SUZANNE MALVEAUX, CNN WHITE HOUSE CORRESPONDENT: Well, Wolf, just recently the Lebanese government has offered new language to the U.N. Security Council resolution, simply calling for parallel tracks here, for the Israeli forces to move out at the same time the Lebanese forces move in along the border there.

They're also saying that this would happen after the end of hostilities. And they are not calling for a new international force, but rather a more robust force, reinforcements of the United Nations monitoring group that's already along the border.

Now, whether or not any of these language is going to be accepted, it is all the devil in the details. They are working out all of that. But President Bush, earlier today, along with Secretary Rice, had a rare press conference at the Crawford ranch, and I asked both of them specifically about that issue.

And U.S. officials are simply saying, look, what they are most concerned about here is, if you withdraw those Israeli forces before a multinational force comes in, that you allow Hezbollah to control that area and to rearm.

This is Secretary Rice from earlier today.

(BEGIN VIDEO CLIP)

CONDOLEEZZA RICE, SECRETARY OF STATE: We believe that the extant draft resolution is the firm foundation, is the right basis, but of course we're going to listen to the concerns of the parties and see how they might be addressed.

(END VIDEO CLIP)

MALVEAUX: And so what the U.S. approach is, is that they are simply trying to buy time here, Wolf, convince the Lebanese government and officials that, look, allow this multinational force to come together, and in the meantime, there will be some sort of cessation of the violence -- Wolf.

BLITZER: All right, Suzanne. Thank you.

Let's get some Lebanese reaction now to all these latest diplomatic efforts. For that, we're joined from New York by the country's special envoy to the United Nations, Tarek Mitri.

Minister, thanks very much for coming in.

TAREK MITRI, LEBANESE SPECIAL ENVOY TO U.N.: Thank you.

BLITZER: This proposal to dispatch some 15,000 Lebanese army troops to south Lebanon, Israeli officials here in Jerusalem are welcoming it. The devil, they say, though, is in the details.

What can you tell us about this government decision to deploy troops to the southern part of Lebanon?

MITRI: This government decision is very important. If taken, if well received by the international community, by those who are drafting the U.N. Security Council resolution, then it would make the call for the cessation of hostilities effective.

It speaks about two processes that will have to happen at the same time, the withdrawal of Israeli forces from Lebanon, and the deployment of the Lebanese army. Now, the Lebanese army will be a robust force in every sense that will extend the authority of the state to southern Lebanon. It will robust, because it will be enjoying the full support of Lebanon's various political forces, as expressed by the unanimous vote of the council of ministers, and by the Lebanese people who would like to see an end to the present carnage.

BLITZER: So let me just get it straight, because there are a lot of unanswered questions. Would the Lebanese army, 15,000 troops, work together with an expanded United Nations presence there to make sure that Hezbollah no longer fires rockets or has cross-border raids into northern Israel?

MITRI: The Lebanese forces will have definitely to enjoy the political support of the international community, but also the support of the United Nations forces in southern Lebanon that needs to be enhanced to be even more effective than what it is now. Now, in doing so, the Lebanese army would be exercising both its duty and responsibility to extend the authority of the government of Lebanon so that there is no weapon but the legitimate weapons of the national army controlled by the national government of Lebanon.

BLITZER: Because that's exactly what U.N. Security Council Resolution 1559 two years ago calls for, the disbanding, the disarming of all militias in Lebanon.

So would the Lebanese army, working together with a new, more robust U.N. force, presumably a lot more European, French troops, for example, coming in, take steps not only to prevent launching of rockets into Israel, but also prevent Hezbollah from being rearmed, shipments of weapons coming in, let's say, from Iran through Syria into Lebanon?

MITRI: You know, the most important thing now is to reach an effective cessation of hostilities. I know that there will be additional discussions about the international force and its role.

At this particular moment in the history of this crisis, we need to have a cessation of hostilities. We need to have an effective cessation of hostilities, and Lebanon is offering a way out of the present situation. And I think this is in the interest of all...

BLITZER: Is there...

MITRI: Yes?

BLITZER: I was going to say, is the Hezbollah on board? In other words, do you have assurances from Hassan Nasrallah, the leader of Hezbollah, that he's willing to cooperate, if you will, and let the Lebanese army come into the south, work with the United Nations, and make sure Hezbollah has no longer have weapons there?

MITRI: The two ministers of Hezbollah who are part of the council of ministers voted the decision of the council of ministers. It was unanimously approved. This is a sign that Hezbollah will abide by this political decision, major political decision that our government has just taken.

BLITZER: Is there a timeline that you have in mind to get this situation under control? In other words, to deploy those 15,000 Lebanese troop to the south, to get an expanded U.N. force? And talk a little bit about the sequencing of how you get the Israeli forces to cooperate and pull out.

MITRI: You know, we have expressed our readiness. We know that for this to stop, it will have to be gradual, it won't happen in one minute. But for that to start happening, you need a United Nations Security Council resolution which states clearly that a cessation of hostilities is a cessation of hostilities.

That is, an end to military operation, that the distinction between so-called offensive and defensive military operations should not be made. For Israel, every military operation claims to be defensive. So, an end to military operation, and a gradual withdrawal, with a gradual deployment of the army, that's the way out of the present situation.

BLITZER: Tarek Mitri is a special Lebanese envoy to the United Nations.

Minister, thanks very much...

MITRI: Thank you.

BLITZER: ... for coming in and explaining this dramatic Lebanese proposal put forward today by the Lebanese cabinet.

Meanwhile, Reuters, the news agency, is withdrawing more than 900 photographs by one of its freelancers after concluding he altered two of them taken during this Middle East conflict. The discovery is thanks in part to some savvy folks in cyberspace.

Let's bring back our Internet reporter, Jacki Schechner -- Jacki.

JACKI SCHECHNER, CNN INTERNET REPORTER: Wolf, this is the doctored photo of smoke over Beirut after an overnight Israeli air raid, and this is the original photograph. Again, here's the doctored photo.

Blogger Charles Johnson at littlegreenfootballs.com was tipped off by a reader who suggested that perhaps the smoke was thickened using image editing software. There you can see the after photo again and then the before photograph.

Now, Reuters has since pulled the photo and all others by photographer Adnan Hodge (ph). They said they've also ended their relationship with the freelancer.

Attempts to reach Hodge (ph) were unsuccessful, but he has denied doctoring the photo intentionally, saying he was trying to remove some dust marks and maybe some mistakes due to poor lighting. In its statement, Reuters has said that manipulating photos is unacceptable and against its principles.

It's important to note, Wolf, that Charles Johnson of littlegreenfootballs.com is also the blogger who questioned the authenticity of some memos regarding President George W. Bush's service in the Texas National Guard. And that incident is the one that we've come to know as Memogate or Rathergate -- Wolf.

BLITZER: He's obviously got something going over there.

Thank you very much, Jacki, for that.

Coming up, new developments in the other front of the conflict here in the Middle East. That would be Gaza. We're going for show you what prompted this demonstration.

Plus, the U.S. ambassador to Iraq will be my guest. I'll ask him about the Middle East crisis, as well as the war in Iraq. Is a civil war erupting?

Zalmay Khalilzad in THE SITUATION ROOM.

Stay with us

(COMMERCIAL BREAK)

BLITZER: Welcome back.

We're following all the latest developments in the crisis here in the Middle East. Among them, the Lebanese government now pledging to send 15,000 troops to the country's border with Israel as part of a peace agreement. But there's one major condition. Lebanon says Israel must withdraw its troops.

Meanwhile, the Israeli arm says it's declared a curfew in southern Lebanon. Leaflets dropped on the area warned that all vehicles out after 10:00 p.m. local time would be at risk of attack, with the exception of humanitarian traffic.

Meanwhile, strikes and counterstrikes continuing, chaos and carnage that's happening between Israel and Hezbollah. But what might happen in the conflict next? And what could happen that could spark even more violence in another hotbed of violence?

(BEGIN VIDEOTAPE)

BLITZER: And joining us now in Baghdad is the United States ambassador to Iraq, Zalmay Khalilzad.

Mr. Ambassador, as if you didn't have a horrible enough situation over there, it looks like the fallout from what's happening in this part of the Middle East, the war between Israel and Hezbollah, is further complicating and making even more dangerous the situation, the U.S. mission in Iraq.

Give us your assessment. How much more serious, how much more dangerous is your mission as a result of the fallout from the war here?

ZALMAY KHALILZAD, U.S. AMB. TO IRAQ: Well, the conflict in Israel and Lebanon is having an impact here. There are people here, particularly among the Shia Arabs of Iraq, that they're concerned about what's happening in Lebanon. They've expressed that concern through demonstrations.

Some of the groups have expressed support for the Lebanese and for Hezbollah, but as a whole, as of now, it doesn't change things on the ground significantly in terms of attacks against the coalition. But there is a danger that, as time goes on, that Iran might seek to encourage some of the groups associated with it to attack the coalition forces here. I know that the Iraqi leaders do not want their situation to be affected, they do not want Iran to encourage groups to attack coalition forces that are here, but there is that danger, that risk, that over time it could pose a new challenge or additional challenges to our people here.

BLITZER: In other words, if groups like Muqtada al-Sadr, the radical Shiite cleric, and his followers, they might feel further emboldened by what they see Hassan Nasrallah and the Hezbollah doing against Israel. They may want to emulate that? Is that the fear?

KHALILZAD: No, not so much that, but that in order to pressure the U.S. or the coalition to encourage attacks against it, saying or believing that perhaps that will affect our policy.

As I said, we will defend, of course, ourselves here if attacked, and at the same time the Iraqis do not want -- the government does not want Iran to follow such a policy, does not want itself to get entangled in the Lebanon-Israel crisis, and of course our policy will not be affected overall by that potential.

BLITZER: There's a lot of concern now that Iraq is falling in potentially to a civil war, and it was fueled in part by what General John Abizaid, the commander of the U.S. military central command told the Senate Armed Services Committee last week. Listen to this little excerpt.

(BEGIN VIDEO CLIP)

GEN. JOHN ABIZAID, COMMANDER OF CENTRAL COMMAND: I believe that the sectarian violence is probably as bad as I've seen it, in Baghdad in particular, and that if not stopped, it is possible that Iraq could move towards civil war.

(END OF VIDEO CLIP)

BLITZER: What's your assessment, Mr. Ambassador?

KHALILZAD: Well, the sectarian violence has been, as John Abizaid said, quite bad, in Baghdad in particular. But the Iraqi government, supported by the coalition, is seeking to contain and reverse that violence in Baghdad. There is a new Baghdad security plan that is being implemented, with more forces being brought in to increase the risk for those who are involved in sectarian violence, the terrorists, some of the insurgents and some of the death squads. And at the same time we in the government are working very hard to push ahead with reconciliation, and pushing groups that have militias to bring those militias under control and reduce the sectarian violence.

That's what's going on. Not all elements of the plan yet are in place. I believe some are prematurely just already declaring the plan as having failed. No, not all our forces that are needed for that plan's implementations are here, the same is true of Iraqi forces, and a number of steps that are envisioned in the plan are not yet in place. So I believe that we have to give the government the support and the time that it needs to deal with the situation. The Iraqis have had difficulty, issues like the formation of the National Unity Government that they have ultimately dealt with successfully. There is no reason to believe that they couldn't do the same with regard to the violence in Baghdad.

BLITZER: There was also a very gloomy assessment by your colleague, the outgoing British ambassador to Iraq, who said this in a memo to the British prime minister, "The prospect of a low intensity civil war and a de facto division of Iraq is probably more likely at this stage than a successful and substantial transition to a stable democracy." This coming from a diplomat who's been there, like you, for some time. Is he right?

KHALILZAD: Well, I think in the mix of things, there is that potential certainly, but I believe in the midst of things, there is the potential for containing and reversing this. So I believe with the unity government, Iraq is in a stronger position strategically to deal with this sectarian conflict which the terrorists are inciting. I believe that the current plan for Baghdad is a better plan than the previous one. Also I think the government and the political leaders of Iraq are working hard, as we did with regard to the formation of government meeting regularly and intensely, they're meeting tonight to reach an agreement to control militias and to go after death squads, and the terrorists to avoid the drift towards a civil war.

BLITZER: You've got your hands full over there, as usual, Mr. Ambassador. Thanks for spending a little time with us here in THE SITUATION ROOM.

KHALILZAD: Well, it's great to be with you, Wolf.

BLITZER: And coming up, the war from above, our Tom Foreman will have a unique perspective on the terrain of the attacks.

And just when you've had enough of high gas prices, guess what? They could go up even more. This after a major oil company takes an action that will remove thousands of barrels a day from the supply. We're standing by for details. Stay with us, you're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Some major political story unfolding in Washington. Let's bring back Zain Verjee. Zain, what do you have?

ZAIN VERJEE, CNN ANCHOR: Wolf, this just coming in to CNN. The Supreme Court Justice Antonin Scalia has rejected a request to block a ruling that Tom DeLay's name must appear on the November ballot in Texas. The state Republican Party today filed an emergency application with the U.S. Supreme Court, it's basically an effort to remove former Congressman Tom DeLay's name from the November ballot. An appeals court ruled last week that DeLay's name must stay on the ballot even though he ended his reelection bid and quit Congress. And for now, his name remains on the ballot.

Protesters rallied in Gaza today to demonstrate solidarity with the Lebanese people and to protest Israel's offensive in Lebanon. Many children took parts in today's demonstration. Israeli warplanes have struck Palestinian government buildings in Gaza after Hamas militants captured an Israeli soldier this summer.

More deadly violence unfolded in Iraq today. At least two police commanders were killed when a suicide truck bomb exploded in the northern city of Samarra, 19 other people were hurt. And in Baghdad, gunmen shot and killed a barber at his own shop today. Police say they then planted a bomb outside the building. At least one person was killed when it exploded.

The FBI and the Department of Veterans Affairs are investigating the disappearance of a V.A. computer that has data on 38,000 veterans. The V.A. announced today it's gone missing from a subcontractor's office in Virginia. It's believed to contain patient's names, addresses, social security numbers, and a lot of other confidential information possibly exposing them to identity theft. Last week Maryland authorities announced three arrests in the theft of another V.A. computer. Wolf?

BLITZER: Thank you Zain, for that.

Still to come, we'll go back to our top story, the crisis here in the Middle East. We'll go to Tyre in south Lebanon. It's cut off from much of the outside world. Ben Wedeman standing by live.

And when a major oil company announces an action that will cut eight percent of the U.S. oil production, it likely means one thing. You know what I'm talking about. Higher gas prices. Stay with us, we have details.

(COMMERCIAL BREAK)

BLITZER: Welcome back. Let's get more now on our top story, the enduring conflict between Israel and Hezbollah, it's happening right here in the Middle East. The Israeli army saying it's declared an indefinite curfew on the movement of all vehicle traffic in southern Lebanon. Some exceptions though include humanitarian supplies. CNN's Ben Wedeman has more from Tyre. Ben?

BEN WEDEMAN, CNN CORRESPONDENT: Wolf, there's a profound sense of foreboding here in Tyre. Israel has announced that after 10:00 p.m. local time, anyone who goes out of their home and onto the roads is a legitimate target. The city is essentially out of touch, cut off with the rest of the country. Overnight there was an Israeli airstrike on the main road going north to Beirut. Now, the only way to get out of here to the north is either to wade through the Litani River or walk over a log that has been placed across the river. The local relief agencies and international relief agencies are bracing for the worse. (INAUDIBLE) or Doctors without Borders have established a combat hospital in the old town. Meanwhile, today we have seen the most intense bombardment of the area to the east and the south of Tyre. Air raids, artillery barrages, firing from warships, the feeling is here in Tyre Wolf, that something bad is about to happen. Wolf?

BLITZER: All right, Ben. Thank you very much. Ben Wedeman on the scene for us in Tyre. We're monitoring all the latest developments in the crisis in the Middle East. We want to bring in CNN's Tom Foreman. He's in THE SITUATION ROOM, he has some unique perspective. Tom?

TOM FOREMAN, CNN CORRESPONDENT: Wolf, it's easy to get lost in looking at all of the things that have developed out here, but let's take a look. Israel down here, Lebanon up here. One of the most important strikes you've heard about all day today happened up here in Beirut. And it's important because of where it happened in Beirut. This strike over here is right on the edge of the Christian part of the city. This has not been where Israel has been hitting before, and it's excited a lot of concern. Why? Because look where they have been hitting so much before. This southern Beirut neighborhood, they've just been pounding and pounding as a Hezbollah stronghold. Look at the size of this and look at the details of what has happened over the past couple of weeks as this has happened.

This is what this neighborhood looks like right now. This is what it looked like before. It was much more grownup, much more fully shaved out buildings. That's right before. Now it looks like this. That is a result of all that bombing. That's why the folks in the Christian part of town are very concerned. Nonetheless, keep a bigger picture on what's been happening, let's widen out here and look. Most of the activity has been happening some over here in the Bekaa Valley, supply line for Hezbollah, but most of it from when Israel has been striking has been south of the Litani River. In this part of the country, this has been the area that Israel has said they want as a buffer zone between them and Hezbollah.

And most of the fierce fighting has been here. Ben Wedeman, right over here on the coast. Many fierce fights all throughout this region and fierce fights the other way from Hezbollah as well. Firing rockets across the border. Here of course where those 12 reservists who had been called up by Israel, were all killed over the weekend. It is still a very pitched battle with a lot more bombings, a lot more artillery shelling and a lot more rockets being lobbed over the past few days Wolf. This gives you a little sense of where it's all happening right now. Wolf?

BLITZER: Thank you Tom, for that perspective. The internet also giving us a striking glimpse into widespread gas shortages and long gas lines, occurring throughout Lebanon. Here with some of the latest images is our internet reporter Abbi Tatton. Abbi?

ABBI TATTON, CNN INTERNET REPORTER: Wolf, this is video here of (INAUDIBLE), just north of Beirut. The shooter, 23 year old Nathalie Semaan, calls this a daily routine, lines and lines of cars at the gas station just underneath her apartment. She says that people get there early and wait for hours at the station. Some days the station runs out of fuel by noon and other days there's no fuel at all. This video was sent in by Nathalie to I-Report at cnn. We're seeing other examples of these shortages online. This is the blog site Beirut Live, from the capital of Lebanon, showing the gas stations closer. Other photos there showing the long lines, the blog poster accompanying these photos saying, there's a sense of hysteria in the crowds, people yelling as they were trying to get fuel, which is being rationed. People worrying that the country is going to be cut off entirely from a fuel supply. Wolf?

BLITZER: Abbi, thank you very much. Lou Dobbs getting ready for his program that begins right at the top of the hour. He's standing by to give us a preview. Hi Lou.

LOU DOBBS, CNN ANCHOR: Hi, Wolf and thank you. Coming up at 6:0 p.m. eastern here on CNN, we'll have the very latest for you tonight on the widening war between Israel and Hezbollah. Israel launching new airstrikes against southern Beirut tonight, as the diplomatic efforts to broker a Mideast cease-fire are dragging on. We'll be taking you to Beirut, northern Israel for live reports. The Arab League today held an emergency summit in Beirut amid new fears of an all out Israeli ground assault on the Lebanese port city of Tyre. The ambassador, the Arab League Ambassador to the United Nations joins us. And also tonight, President Bush says he's kept his promise to the American people and done his part to tighten border security. Now it's time for comprehensive immigration reform. But I have a message for the president tonight, on our broadcast at the top of the hour. We hope you'll be with us for that, and a great deal more. Wolf, back to you.

BLITZER: We'll be with you, Lou. Thank you very much.

Up ahead, the Tour de France winner, Floyd Landis, he says he can respond to those suspicions he used performance-enhancing drugs. And in our 7:00 p.m. eastern hour, our John Roberts is on the Israeli- Lebanese border right now. He's going to join us with some fresh details on what he's seeing. Stay with us. We're live in Jerusalem and you're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Welcome back. While we continue to monitor all the latest developments in the Middle East crisis, we also want to check in with CNN's Ali Velshi. He's in New York with details of significant oil news that could have a dramatic effect on all of us. Ali?

ALI VELSHI, CNN CORRESPONDENT: Hey Wolf, the price on the barrel behind me, the green one, $76.98, that's where oil settled today on the New York Mercantile Exchange in red. $77.03 that was the high price on July 14th. As you can see, we're almost there and this time it really is because of a problem with oil. BP, in an oilfield in Alaska, found some rusty pipes. As a result of that, it's got to replace those pipes, 16 miles of pipes and to do that it's got to shut down 400,000 of barrels of oil production a day. That's 8 percent of all the oil produced in the United States. This isn't war, this isn't terrorism, this is rusty pipes, Wolf. As a result of those rusty pipes, crude oil was $2.22 higher today, $76.98. Gas prices will see that very quickly. In California where most of that oil goes, they'll see a bigger bump, but on average three to five cents a gallon is what you'll see. Right now Americans are paying $3.03 a gallon on average. That's almost as high as it was right after Katrina. All of that of course is wearing on the markets, Wolf. The Dow closing about 21 points lower today to 11,220, the NASDAQ down 12 points to 2072. And tomorrow the Federal Reserve meets with a decision on whether interest rates will once again go up. We'll be following that closely and we'll bring that to you again tomorrow on "The Bottom Line." Wolf?

BLITZER: All right Ali, thank you. Let's check back with Zain. She's watching some other stories making news. Hi Zain.

VERJEE: Hi, Wolf. A protester was forcibly removed from an energy speech being given by New York Governor George Pataki in Washington today. The woman, who's a member of New York's Transport Workers Union, yelled that Pataki was responsible for the city's December transit strike and she told him, quote, "You're not Teddy Roosevelt." Three other protesters were also escorted out of the room.

Martha Stewart won't be able to serve as a director of a public company for five years, that's under a just-announced settlement with the Securities and Exchange Commission to resolve civil insider trading charges. Under her settlement, Stewart will also have to pay a $195,000 fine. She completed a five-month prison term in 2005 for lying to federal investigators about a stock sale.

Landings are now pretty much back to normal at Los Angeles International Airport, that's after an instrument landing system just failed today. One of two runways for incoming planes had to be closed down temporarily, but air traffic controllers were able to reopen it by having airplanes approach LAX from the west over the Pacific Ocean, because visibility is just better that way. Wolf?

BLITZER: Zain, thank you.

Up next, the embattled Tour de France champion Floyd Landis talks with our Chris Lawrence. Landis has some ideas about what he says may be behind drug test results that are threatening to strip him of his title. Stay with us. You're in THE SITUATION ROOM.

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BLITZER: New details from embattled Tour de France winner Floyd Landis. He's now suggesting a possible anti-American agenda may be behind doping allegations that are threatening to strip him of his title. CNN's Chris Lawrence interviewed Landis and Chris is joining us now live from Los Angeles with details. Chris?

CHRIS LAWRENCE, CNN CORRESPONDENT: Well Wolf, sitting across from him, Floyd Landis seemed calm and he seemed confident, even as he's accused of taking synthetic testosterone to boost his performance. (BEGIN VIDEOTAPE)

LAWRENCE (voice-over): His yellow jersey signified victory. Two failed doping tests could spell defeat.

FLOYD LANDIS, TOUR DE FRANCE CHAMPION: There's a myriad of reasons why these tests could have made a mistake, including -- which appears to be the case at this moment -- some other agenda by the people doing the tests.

LAWRENCE: Floyd Landis says one thing, doping experts another.

GARY WADLER, WORLD DOPING AGENCY: The only agenda that the testers have is to have clean sport.

LAWRENCE: Doctors say the average body has equal amounts of testosterone and epitestosterone. A 3:1 t/e ratio is high, Landis reportedly had an unnatural ratio of 11:1. On his website, Landis explains, "The TValue returned has been determined to be in the normal range. The EValue returned was low, thus causing the skewed ratio."

WADLER: There are in fact individuals who have a normal elevated TE ratio, but they have that throughout their lifetime. So if they're a 10:1 or 11:1, every time you test them they're in that range.

LAWRENCE: Landis has never tested positive for that level of testosterone before.

(on camera): What kind of agenda would they have to potentially damage their own sport?

LANDIS: Well this isn't the first time that this same French lab has tried to bring down an American athlete. They did the same thing with Lance Armstrong last year, he proved that they had problems with their testing procedure.

LAWRENCE (voice-over): Landis told me he's hanging that yellow jersey up on a wall.

LANDIS: Because I'm proud of what I did, I won that race with determination and heart.

LAWRENCE: The Tour de France no longer considers Landis its champion. But the International Cycling Union has final say on whether to strip him of the title.

(END OF VIDEOTAPE)

LAWRENCE: Now, one expert told me in his opinion even if Floyd Landis proves that he did not knowingly increase his testosterone levels, he still would not keep his medal because he competed in an enhanced state against all his other competitors. Wolf?

BLITZER: And did he seem totally confident that when all is said and done he'd be vindicated? LAWRENCE: He did and he seemed very calm. His wife said it's a very low point for the family, but Floyd Landis looked at me and said he believes that he is innocent.

BLITZER: Chris Lawrence, thank you very much. Remember, we're in THE SITUATION ROOM, weekdays 4:00 to 6:00 p.m. eastern. Back in one hour at 7:00 p.m. eastern, much more on the crisis in the Middle East. Let's go to Lou Dobbs in New York. Lou?

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