The US cannot do this? What on earth does he mean? At first sight his contention seems plain wrong. While Israel intends to sustain its occupation of Palestinian territory, a wider settlement is impossible. It surely follows that the country that has the greatest potential leverage over Israel is the country with the greatest power to broker peace. Israel's foreign policy and military strategy is dependent on the approval of the United States.

Though Israel ranks 23rd on the global development index - above Greece, Singapore, Portugal and Brunei - it remains the world's largest recipient of US aid. The US government dispensed $11bn of civil foreign assistance in 2004. Of this, Israel received $555m; the three poorest nations on earth - Burkina Faso, Sierra Leone and Niger - were given a total of $69m. More importantly, last year Israel also received $2.2bn of military aid.

It does not depend economically on this assistance. Its gross domestic product amounts to $155bn, and its military budget to $9.5bn. It manufactures many of its own weapons and buys components from all over the world, including - as the Guardian revealed last week - the United Kingdom. Rather, it depends upon it diplomatically. Most of the money given by the US foreign military financing programme - in common with all US aid disbursements - is spent in the United States. Israel uses it to obtain F-15 and F-16 jets; Apache, Cobra and Blackhawk helicopters; AGM, AIM and Patriot missiles, M-16 rifles, M-204 grenade launchers and M-2 machine guns. As the Prestwick scandal revealed, laser-guided bombs, even now, are being sent to Israel from the United States.

Many of these weapons have been used to kill Palestinian civilians and are being used in Lebanon today. The US arms export control act states that "no defence article or defence service shall be sold or leased by the United States government" unless its provision "will strengthen the security of the United States and promote world peace". Weapons may be sold "to friendly countries solely for internal security, for legitimate self-defence [or for] maintaining or restoring international peace and security".

By giving these weapons to Israel, the US government is, in effect, stating that all its military actions are being pursued in the cause of legitimate self-defence, American interests and world peace. The US also becomes morally complicit in Israel's murder of civilians. The diplomatic cover this provides is indispensable.

Since 1972 the US has used its veto in the UN security council on 40 occasions to prevent the passage of resolutions that sought either to defend the rights of the Palestinians or to condemn the excesses of Israel's government. This is a greater number of vetoes than all the other permanent members have deployed in the same period. The most recent instance, on July 13, was the squashing of a motion condemning both the Israeli assault on Gaza and the firing of rockets and abduction of an Israeli soldier by Palestinian groups. Over the past few days, the United States, supported by Britain, has blocked all international attempts to introduce an immediate ceasefire, giving Israel the clear impression that it has a mandate to continue its assault on Lebanon.

It is plain to anyone - and this must include Paddy Ashdown - that Israel could not behave as it does without the diplomatic protection of the United States. If the US government announced that it would cease to offer military and diplomatic support if Israel refused to hand back the occupied territories, Israel would have to negotiate. The US government has power over that country. But can it be used?

A paper published in March by the US academics John Mearsheimer and Stephen Walt documents the extraordinary influence the "Israel lobby" exercises in Washington. They argue that the combined forces of evangelical Christian groups and Jewish American organisations such as the American Israel Public Affairs Committee ensure that "Israel is virtually immune from criticism" in Congress and "also has significant leverage over the executive branch". Politicians who support the Israeli government are showered with funds, the paper contends, while those who contest it are cowed by letter-writing campaigns and vilification in the media. If all else fails, the"great silencer" is deployed: the charge of anti-semitism. Those who oppose the policies of the Israeli government are accused of hating Jews.

All this makes an even-handed policy difficult, but not impossible. Standing up to bullies is surely the key test of leadership. A US president in his second term is in a powerful position to demand that Israel pulls back and negotiates.

But if Ashdown meant that it is impossible psychologically and intellectually for the US government to act, he might have a point. At his press conference with Tony Blair last Friday, George Bush laid out his usual fairy tale about the conflict in the Middle East. "There's a lot of suffering in Lebanon," he explained, "because Hizbullah attacked Israel. There's a lot of suffering in the Palestinian territory because militant Hamas is trying to stop the advance of democracy. There is suffering in Iraq because terrorists are trying to spread sectarian violence and stop the spread of democracy." The current conflict in Lebanon "started, out of the blue, with two Israeli soldiers kidnapped and rockets being fired across the border".

I agree that Hizbullah fired the first shots. But out of the blue? Israel's earlier occupation of southern Lebanon; its continued occupation of the Golan Heights; its occupation and partial settlement of the West Bank and gradual clearance of Jerusalem; its shelling of civilians, power plants, bridges and pipelines in Gaza; its beating and shooting of children; its imprisonment or assassination of Palestinian political leaders; its bulldozing of homes; its humiliating and often lethal checkpoints: all these are, in Bush's mind, either fictional or carry no political consequences. The same goes for the US invasion and occupation of Iraq and the constant threats Bush issues to Syria and Iran. There is only one set of agents at work - the terrorists - and their motivation arises autochthonously from the evil in their hearts.

Israel is not solely to blame for this crisis. The firing of rockets into its cities is an intolerable act of terrorism. But to understand why the people assaulting that country will not put down their arms, the king of fairyland would be forced to come to terms with the consequences of Israel's occupation of other people's lands and of its murder of civilians; of his own invasion of Iraq and of his failure, across the past six years, to treat the Palestinians fairly. And this he seems incapable of doing. Instead, his answers last Friday suggested, Bush is constructing a millenarian narrative of escalating conflict leading to the final triumph of freedom and democracy.

So I fear that Paddy Ashdown may be right. The United States cannot pursue a wider settlement in the Middle East, for it is led by a man who lives in a world of his own.

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