updated 7/21/2006 11:32:52 AM ET 2006-07-21T15:32:52

Guests: Anthony Shadid, Gareth Smyth, Bob Baer

CHRIS MATTHEWS, MSNBC HOST:  Will the Israeli-Hezbollah conflict explode?  Will Israel occupy Lebanon?  Will it attack Syria?  Will we get dragged in?  And how is this war affecting us here in our politics?  Let‘s play HARDBALL. 

Good evening.  I‘m Chris Matthews.  Welcome to HARDBALL.

From Beirut to Baghdad, there‘s anarchy in the Middle East with civilians caught in the war zone.  Israel has reinforced its campaign in Lebanon by sending in ground troops to hunt down the militant group Hezbollah for a second day in a row, and hints at a full-scale invasion of the country. 

Meanwhile, Hezbollah continues to shoot rockets at Israel as citizens take cover in bomb shelters.  The death toll in the Middle East is mounting, and over a half million Lebanese citizens have been displaced. 

Today in New York, Secretary-General Kofi Annan called for an immediate halt to the conflict, but the United States is still rejecting any talk of a cease-fire.  Secretary of State Condoleezza Rice is in New York tonight for talks, and is expected to go to the Middle East next week. 

Today, Congress gave Israel a vote of confidence with a resolution condemning Hezbollah and Hamas. 

Over in Iraq, innocent men, women, and children are being slaughtered in the streets in broad daylight.  The death rate has reached 100 a day as sectarian violence threatens to swallow any sense of law and order.  Where are the Iraqi security forces we trained to protect that country? 

The war in Iraq has deteriorated into absolute chaos.  Can the Bush administration turn this around?  More of this in a moment, but we begin in northern Israel tonight.  NBC‘s Mark Potter is in Haifa. 

Mark, give us a sense of the direction of this war as you see it from northern Israel. 

MARK POTTER, NBC NEWS CORRESPONDENT:  Well, it‘s clearly intensifying, although I can tell you that immediately here in Haifa, the incoming rocket attacks—and throughout northern Israel—have actually dropped off dramatically today from about 150 yesterday to 35 today.  There was an attack about an hour ago up the road with four rockets, but a dramatic dropoff there. 

However, on the ground, the fighting has massively intensified.  But, Chris, though, I can tell you that what everybody is talking about this hour as they crowd around the TV sets is that video that appears on Al-Jazeera of the Hezbollah leader Hassan Nasrallah. 

There had been widespread speculation here that he might have been killed or badly injured in that fierce bombing attack on the shelter yesterday, but because he spoke of current events, it‘s very clear that he is still alive.

And by the way, as part of his statement, he said that he was demanding third party negotiations with Israel for the release of those captured Israeli soldiers, kidnapped Israeli soldiers, saying that that‘s the only way that they‘re going to be released. 

Now, in the fighting today, it was extremely fierce as small groups of Israeli troops and tanks crossed into southern Lebanon in search of Hezbollah cells and hiding places, and the Air Force also stepped up its attacks.  The fighting was very fierce. 

Three Israeli soldiers were wounded this morning and six others were badly shot up in fighting so intense that the reinforcements had trouble getting to them for awhile before they could pull them out.  Much of that combat today was face-to-face with small arms fire. 

Meanwhile, the Israeli U.N. Ambassador said that Israel has no intention of letting up on its military campaign, at one point referring to the Hezbollah guerrillas as animals—Chris. 

MATTHEWS:  How are the Israelis reading the relenting in the attack from the rockets from Hezbollah?  Do they see the lesser rocket fire today as evidence of a weakening Hezbollah or that Hezbollah is signaling some kind of willingness to negotiate? 

POTTER:  There are two ways of looking at it.  One is that perhaps the fighting has intensified to the point that much of their capability has been stopped, but there are other people who are saying that this is just a temporary lull for strategic or political reasons.  Nobody really knows. 

There‘s a lot of talk that they have a huge arsenal.  There have been quotes in the papers that some Israeli officials say that they‘ve taken away 50 percent of their capability.  The Israeli army is denying that now, so has Hezbollah. 

There‘s a lot more to go, there‘s a lot of talk about this.  Nobody really knows why it stopped today, but that‘s the basic speculation and that‘s what it is, speculation today, Chris. 

MATTHEWS:  Will the Israeli army penetrate in force into Lebanon? 

POTTER:  I don‘t know that, but there‘s more talk of the necessity. 

It‘s clear that from these small incursions they have met fierce resistance.  This is not easy.  They were face-to-face today with small arms combat everywhere they went.  They had a hard time.  The two soldiers that were killed yesterday were ambushed.  They were pinned down again today. 

There is more and more talk of that necessity and Israeli officials have not ruled it out.  So I can‘t tell you if it‘s going to happen, but it‘s something that a lot of people are talking about and may be considering as its only way to settle this, at least to clear that border area. 

MATTHEWS:  Great report.  Thank you very much Mark Potter in Haifa.

Let‘s go now to the Lebanese seaside town of Tyre, which has been pounded for days by Israeli warplanes and gunboats.  Anthony Shadid of the “Washington Post” is there and joins us right now by phone. 

Anthony, your sense of the firepower of the Hezbollah forces from that area.  Anthony?

ANTHONY SHADID, “WASHINGTON POST”:  It‘s a little bit of a bad line, but where I‘m at in Tyre, which is about 12 miles north of the Israeli border, we‘ve seen pretty much a barrage of Israeli air raids on both the city and the area around. 

There was a lull today.  It seemed more arrested than anything else, and the people who are left in this city—tens of thousands have already left, of course, but the people left here are definitely bracing for more ahead.  There‘s a sense that the raids will probably will pick up and a lot of people are talking about the prospect of a ground invasion that might unfold over the next couple of days. 

MATTHEWS:  Does it look like the Hezbollah forces are weakening?  Can you tell from your position there whether they‘re weakening or they‘re trying to signal the Israelis they‘ve had enough? 

SHADID:  I think I heard the question about Hezbollah forces, and we‘re not really—we‘re not seeing much of that here at least, and it‘s not—you know, I can only speak anecdotally, since we have a little bit of a limited perspective here, but what we‘ve seen in terms of the repercussions of these attacks over the last week is, you know, they‘re overwhelmingly civilian casualties.  The one hospital I visited today had 23 dead, more than 200 wounded in the attacks. 

In terms of popular opinion, you know, you get the sense in Lebanon that the people who were against Hezbollah before it started are still against it.  The people who are for it, are still for it.  You know, politics in Lebanon are sometimes very existential.  In other words, each community rallies around its own leadership.  The leadership becomes its guarantee of survival. 

And I think that‘s what we‘re seeing to a certain degree among Shiite Muslims in Lebanon.  The fear is less, you know, whether Hezbollah wins or not, it‘s more that Hezbollah won‘t be around in the future, to protect basically their interests in terms of Lebanese politics. 

MATTHEWS:  Let me ask you about the possibility of third party talks that have been raised by the Hezbollah side if this fight, the role of Germany perhaps.  What third party are they talking about being the middle person between the United States—or rather between Israel and the Hezbollah group? 

SHADID:  You know, Germany was a mediator in a past round of talks between Israel and Hezbollah that led to a pretty significant prisoner exchange a couple of years ago.  You do hear some talk about Germany again, although the Israelis seem to have shied away from it.  I think that‘s the case. 

I think the expectation in Lebanon at least is that this is all very preliminary stuff and that there‘s really not serious diplomacy underway right now.  I think the expectations here—at least from the vantage point of southern Lebanon is that we haven‘t seen the worst of it yet, that, like I said, a ground invasion may be in the works and at the very least, a much more severe air attack. 

Like I said, you‘ve seen tens of thousands flee the border regions.  The Israelis have broadcast warnings that everyone south of the Litani River, the civilians, should leave.  Basically anyone traveling in anything but a car might be a target, and you have seen a vast exodus. 

What you‘re dealing with, I think, in part of southern Lebanon, though, is people just can‘t afford it, they‘re too worried about the roads, they don‘t have the gasoline to fill their cars, so you‘re also starting to see a certain humanitarian crisis unfold a little bit down here. 

MATTHEWS:  You said, Anthony, that people‘s politics have not been changed by this conflict, by all this violence and destruction, that people who are for Hezbollah before are still and those against them are still.  But what about the attitude of the Lebanese people as you talk to them, toward Israel?  Is that changing for the worse or what‘s happening in that way? 

SHADID:  Well, I think almost across the board, you get the sense that the Lebanese are upset by what they consider to be the forcing a response of Israel over the capture, the abduction of these two soldiers.  I mean, what we‘ve seen over the past week in Lebanon is basically the dismantling of the country‘s infrastructure.  You know, people often throw out this line that the country has been thrown back 20 years and I think that‘s a fair statement to say.  That definitely upset people.

I think you also hear people talking—it depends on where they are on the political spectrum.  I think there‘s a certain hope that maybe this will lead to something more substantial, that this idea of Hezbollah‘s arms has been an issue in Lebanese politics ever since the Syrian withdrawal last year.

And some people are—and I think it may be wishful thinking to a certain degree, but I think there is some hope that that issue might finally be resolved.  I think the more pessimistic and more gloomy of people suspect that this country is headed toward, you know, a much grimmer future, that you can‘t necessarily negotiate Hezbollah‘s existence or Hezbollah‘s arms, and the only—the outcome of trying to do that, trying to force it to disarm perhaps might be actually civil war.

MATTHEWS:  OK, thank you very much for that great report. Anthony Shadid of the “Washington Post” is in Tyre in southern Lebanon.  He‘s author, by the way, of “Night Draws Near.”

Let‘s go now to Beirut and NBC‘s Kerry Sanders.  Kerry, give us a full sense, if you can, of the evacuation of Americans there, the role that Hezbollah is playing with regard to that evacuation. 

KERRY SANDERS, NBC NEWS (on the phone):  Well, first of all, the evacuation has been extremely success fell thus far.  About 2,000-plus people got out today, not only using the cruise ship that was very successful yesterday, getting a thousand plus Americans out of here, but the U.S. Marines came ashore in amphibious vehicles and took 1200 Americans back out to a U.S. warship off the coast.  And they‘ll be making their way home to the United States now. 

Of course, this is the first time that Marines have come ashore in Lebanon, and set their boots on the soil as it were, outside of the U.S.  Embassy, since 1983 when the barracks were bombed. 

However, there are Americans who complained that they still are unable to get out.  They‘ve been if contact with the U.S. Embassy, they claim that their names, their phone numbers are on lists, nobody is calling them, nobody is telling them what to do.  I spoke to one family that just plans tomorrow to get in the car and try to drive up to the border with Syria, and see if they can get out that way, because they‘re just getting too anxious. 

There‘s a growing sense among Americans here that if they don‘t get out in the next day or so, that there is going to be the volume turned up, as it were, on Israel‘s attacks here, and that they‘re going to see more missile attacks and it‘s not going to then calm down.  So if they don‘t get out in the next 24 hours, a lot of Americans are saying they‘re not feeling comfortable about what will happen after that. 

MATTHEWS:  What‘s been the relationship in the past and what is it as of now between Americans living in Lebanon and Hezbollah? 

SANDERS:  Well, it‘s a complicated question, because you have some Americans here who are Lebanese Americans, and so they may have political affiliations with Hezbollah, they may be sympathetic to Hezbollah.  I met some children today, American children, but born of one Lebanese parent, one American parent.  So they carry U.S. passports, their lives are split between both coming here to Lebanon and the United States.  And some of those children, 14, 15 years old, told me he not until Israel is off the map will we feel comfortable, and they said they were very supportive of Hezbollah. 

Well, clearly at that age, they are repeating much of what they‘ve heard around their home from their parents.  And so I think it‘s pretty clear, depending on the family you speak to and what their personal family experience is, they feel strongly supportive of Hezbollah, or many of them told me that they‘re very upset, they feel that Hezbollah has incited, they should let the Israeli soldiers go and that if they do that, there can be a cease-fire and hopefully the lost ground here can be made up, even though it will take maybe a decade or more to get back to where they were.  But again, that‘s optimism and hope. 

MATTHEWS:  Great.  Talk about being in the middle of the action. 

Thank you for very much, NBC‘s Kerry Sanders in Beirut, Lebanon. 

Coming up, is there a Hezbollah threat here in the United States, or is it just a scare tactic?  You‘re watching HARDBALL on MSNBC. 

(COMMERCIAL BREAK)

MATTHEWS:  Welcome back to HARDBALL. Israeli ground troops are pressing across the Lebanese border right now in search of Hezbollah hideouts.  The U.S. says that Israel‘s actions are not excessive.  We‘re still backing Israel all the way. 

Meanwhile, here at home, U.S. officials are telling local enforcement figures, that‘s police, to be vigilant.  Is there a threat in the United States from Hezbollah?  Pete Williams is NBC News justice correspondent.  Pete? 

PETE WILLIAMS, NBC NEWS JUSTICE CORRESPONDENT:  Well, Chris, that‘s a question that the FBI and Homeland Security and intelligence agencies have been asking as well, but for now, terrorism experts inside the government and outside as well say staging attacks here in the U.S. is not something that Hezbollah would likely do.  But they caution, that is something that could change. 

(BEGIN VIDEOTAPE)

WILLIAMS (Voice-over):  There‘s no question that Hezbollah has cells operating in the U.S., one of them broken up in North Carolina a few years ago.  Its members, investigators said, were active and well-connected to Hezbollah‘s leaders.  Members of what federal agents say was another cell operating in Detroit were charged in late March, but both times, they were accused, not of plotting attacks, but of raising money to support Hezbollah in the Middle East. 

And while terrorism experts say members here have military training, they have refrained from attacking, in part because Hezbollah has such close ties to Iran, and Iran could be held responsible. 

EVAN KOHLMANN, TERRORISM EXPERT:  Were Hezbollah to strike at the United States, the immediate implication would be that the attack is coming from Iran, that the attack is being either masterminded or, at a minimum, green-lighted by forces in Iran, which would make Iran a direct target for retaliation. 

WILLIAMS:  But some say that could change if Hezbollah feels it‘s about to be wiped out. 

ROGER CRESSEY, NBC NEWS TERRORISM ANALYST:  It could strike at U.S.  targets, both in the Middle East and also inside the United States, for the reason of bringing the United States into the conflict in order to exert pressure against Israel. 

WILLIAMS:  For now, the FBI says it‘s keeping a close eye on suspected Hezbollah cells here. 

ROBERT MUELLER, FBI DIRECTOR:  To the extent that we have identified individuals associated with Hezbollah, you bet that we are taking additional precautions to assure that we do not face a threat from these individuals. 

WILLIAMS:  And in a joint bulletin with the Department of Homeland Security, the FBI also warns local police that individuals residing here who sympathize with Lebanon or Hezbollah could act on their grievances, too. 

(END VIDEOTAPE)

(On camera):  Hezbollah supporters overseas have been issuing blustery warnings about potential attacks here, but despite that, law enforcement officials say they know of no credible threat and that they have no intelligence indicating that any kind of attack is in the planning stages here, Chris. 

MATTHEWS:  Pete, if you can, weigh the dangers from al Qaeda, that hit us on 9/11, with Hezbollah to the United States. 

WILLIAMS:  Infinitely greater for al Qaeda, for a couple of reasons.  One is, al Qaeda has nothing to lose from staging more attacks here.  They know they‘re on the run already, they can‘t make us any madder, they can‘t be any more in our cross-hairs, they have nothing to lose by attacking here.

It‘s just the opposite for Hezbollah.  They have many things to lose: 

their political position in Lebanon, their ties to Iran, which would possibly cause retaliation against Iran, their charitable or non-violent sector—so they have something to lose. 

Secondly, al Qaeda definitely—they want to spread radical Islam all over the world.  That is not what Hezbollah is all about.  It‘s a Sunni organization, they have a majority only in Lebanon, in Syria, and in Iran.  So they‘re not, they just have totally different agendas from al Qaeda.  There was a time when Hezbollah exported terrorism, certainly against U.S.  targets.  It hasn‘t done that in years. 

MATTHEWS:  Pete Williams, great report.  Thank you very much.  Let‘s go now to Tehran, to Gareth Smyth, who‘s a reporter with the “Financial Times of London.”  He joins us by phone.  Gareth, thank you for joining us.  What do you make, sir, of this observer status of Iran at the testing of that nuclear, or that missile rather, on the fourth of July in North Korea? 

GARETH SMYTH, “FINANCIAL TIMES OF LONDON”:  Well, I can‘t really tell you anything about that, I‘m afraid.  And I think that Mr. Hill, who made this claim today, the U.S. assistant secretary of state didn‘t provide any information either, but I understand the missile test was more or less a failure, so I don‘t imagine that they learned very much if they were there. 

MATTHEWS:  Do you believe that we are making too much of the possibility of an axis between North Korea and Iran? 

SMYTH:  I think the more these countries are isolated, the more they‘re likely to perceive common interests.  They‘re very different regimes.  They have very different internal approach and they have a very different kind of foreign policy. 

MATTHEWS:  Let me ask you about life in Tehran.  I‘ve always been curious, it‘s the country I‘d most like to visit right now.  Is there a large minority of people in that country you‘re in right now that are secular and are not interested in this east-west cultural war? 

SMYTH:  What do you mean by secular? 

MATTHEWS:  Meaning that they don‘t, they‘re not driven by religion to war with the west. 

SMYTH:  No, this is a religious society and people here are religious and they follow, in the main, Shiite Islam.  I don‘t think they see that as being something that involves a war with the west.  There are people who talk about a clash of civilizations, some of them Muslims, some of them are Christians and some of them are Jews.  I don‘t think that‘s a majority in Iran, or a majority in Iraq or indeed a majority in the U.S.

MATTHEWS:  But the minority there, we know, we‘ve been through a number of elections with Iran, trying to figure out the politics in that country.  You had a relatively secular government before, it was beaten by this more radical group under Ahmadinejad, can it fade back into that other kind of politics, can we have a less militant government in the years ahead? 

SMYTH:  I don‘t think it‘s a question of this government is less secular.  I mean, both these governments are believers in Islam and believe that Islam must play a role in shaping governments.  I think the difference is that the previous government was interested in having a dialogue with the west, was interested in going forward through negotiations and compromise.  The new government here is less interested in compromises, less interested in negotiations, because their view is that negotiations and compromise haven‘t worked, and this is part of the wider problem in the region about where the problems should be resolved, through talking or whether they should be resolved through violence. 

MATTHEWS:  And the earlier government said that if the people in the region of Israel, the Palestinians, etc., were willing to accept a deal with Israel, a peace treaty, Iran would follow it.  That‘s no longer the policy of Iran, is it? 

SMYTH:  Well, officially it is the policy of Iran.  Iran‘s policy is that there should be some kind of referendum in Israel/Palestine, to determine, you know, the future of that part of the world.  I mean obviously there is a lot of concern here about the extent of the Israeli violence against Lebanon and particularly the killing of civilians in Lebanon by the Israeli onslaught.  I think it‘s at least 300, perhaps near 400 now civilians have been killed in Lebanon and that will perhaps harden the opinion here and will push people here more towards thinking that this isn‘t a problem that can be dealt with through dialogue.  This isn‘t a problem that can be dealt with through negotiation. 

MATTHEWS:  Well what do you think, you‘re over there reporting, I‘d love to get your vision, Mr. Smith, as to where this is headed.  Is Iran using Hezbollah to show its strength and to divert attention from the nuclear issue?  What is its strategy in supporting the attack on the Israeli soldiers two weeks ago? 

SMYTH:  I don‘t think there is a clear strategy, really.  I think the leadership here has made it fairly clear that it wants negotiations.  I mean, particularly over the nuclear file.  I think the problem now is, I think the problem that the Iranian leadership is having is assessing the motivation of the U.S.  Does the U.S. want negotiations or does the U.S.  want confrontations.  Is the U.S. offered to talk, a real offer, or is it an attempt to lure Iran into further confrontation.  I mean, my fear is that the U.S. support for Israel is going to confirm the view in the leadership here, that the U.S. is not interested in negotiation. 

MATTHEWS:  Well, they may be right Gareth.  Thank you very much Gareth Smyth of the “Financial Times,” who‘s posted in Tehran. 

When we return, former CIA officer Bob Baer joins us to talk about the threat of Hezbollah.  Let‘s talk about what their threat is to us.  And later, as fighting between Israel and Hezbollah shows no signs of stopping, a new report by the U.N. paints a dark picture in Iraq.  Can U.S. help solve one Mideast crisis while another one seems to get worse and worse?  You‘re watching HARDBALL on MSNBC. 

(COMMERCIAL BREAK)

MATTHEWS:  Welcome back to HARDBALL.  Bob Baer has been to Tehran and all over the Middle East.  He‘s a former CIA operative and author of “Blow the House Down.”  Bob, over all, what‘s the threat from this war to the United States? 

BOB BAER, FMR CIA OPERATIVE:  The threat is right now ideological. 

Islam against the west, particularly the United States and Israel.  Remember, that Beirut, 1982, is when Hezbollah started.  It‘s the basis of bin Laden‘s hate toward the United States, so a civil war or a continuing war in Lebanon is going to do us no good in the long run. 

MATTHEWS:  Why not? 

BAER:  Well, you‘re going to get a lot of people that are angry and out to take revenge.  It may take 10 years for them to do it.  It may 20 years.  It happened with bin Laden.  Secondly Hezbollah could turn to terrorism.  We don‘t see that right now because it would take an order from Iran to do it.  Hezbollah is a very disciplined organization and it looks to the spiritual leadership in Tehran before it does anything. 

MATTHEWS:  Well, you say that—and certainly it‘s on the record that what spurred the creation of al Qaeda, which hit us on 9/11, was keeping our 10,000 troops in the holy land of Saudi Arabia, the sacred ground of Islam, in a way that showed contempt or indifference to their religious concerns.  Do you believe that the blowing up of all the infrastructure in Lebanon is going to create the same kind of anomies? 

BAER:  Equally, because bin Laden has gone on the record and said that he considered running airplanes into buildings or attacking the United States, an American city, after watching the bombardment of Beirut in 1982, and that‘s what‘s happening today. 

Obviously, the Israelis have known that we‘d expect that this would happen almost 20 years later, that we would be attacked for that bombardment which we had nothing to do, but this is the sort of consequence that comes out of warfare and bloodshed in the Middle East. 

MATTHEWS:  Well, that‘s, of course, historic.  We can tell that from every war in history.  Every time there‘s bloodshed and occupation and killing of people, eventually the occupied country gets even. 

Let me ask you about this strange thing we‘re facing now with the Shia branch of Islam against the Sunni branch.  In effect, we‘ve helped Iran build up more strength in the region because it‘s able to now enjoy the leverage they have with the majority in Iraq that they didn‘t have before. 

Are they also going to have leverage through the use of Hezbollah?  Have we basically put the Shia, the more militant groups of Shia, into the driver‘s seat in the Middle East? 

BAER:  Absolutely.  And this is—you know, what happened when we invaded Iraq was we essentially turned the country over to radical Shia, and the leadership in Baghdad is radical Shia.  I know most of these guys.  In the ‘90s, they took refuge in the southern suburbs of Beirut, with Hezbollah.  There‘s a close connection between the government in Baghdad and Hezbollah. 

And what we‘re seeing now is the development of a radical Shia arc, which goes from Tehran, Baghdad, Damascus, and Beirut now, which is what has the Sunni—and that‘s Saudi Arabia and the rest of the Gulf and Egypt and Jordan—so worried, and this is why they‘ve come out against Hezbollah. 

MATTHEWS:  You know, I‘ve heard that from the mouth of one of the leaders of one of those Sunni countries.  As you just describe it is the wave he described it, the fear of an emerging Shia crescent across all the Middle East. 

The Sunni governments which tend to be moderate are now being overwhelmed by something we may have had a hand in triggering, the continuity now from Tehran, through Baghdad, down through Beirut.  We may have created our worst enemy.  Do you believe that? 

BAER:  Chris, this is a catastrophe, Iraq, and this is going to go on for years.  Iraq is going to change us.  We‘re not going to change Iraq.  I got calls from Damascus just before I got on the phone with you, and the Sunni are worried.  They‘re leaving Damascus, afraid that this war in Lebanon is going to spread to Syria, and they‘re going to pay the Sunni.  You know, they‘re going to flee to the Gulf, wherever they can. 

The division between the Shia and the Sunni in the Middle East is our

greatest threat to the United States.  When people talk about World War

III, it‘s not a traditional war against us from nuclear bombs or anything,

it‘s from the split that will lead to a regional war which will ultimately

and I repeat—will affect oil supplies. 

MATTHEWS:  God help us if we get involved in Syria.  Anyway, thank you, Bob Baer.  Your book is called “Blow the House Down.”

Up next, we‘ll have the latest on what‘s happening in Iraq.  The Iraq prime minister today condemned Israel‘s attacks against Hezbollah.  What does that mean for us?  What‘s it mean for his visit to Washington next week? 

You‘re watching HARDBALL on MSNBC. 

(COMMERCIAL BREAK)

(MARKET REPORT)

MATTHEWS:  Welcome back to HARDBALL.

For the first time in 20 years, U.S. Marines are in Beirut.  They‘re helping Americans evacuate a war zone. 

In the meantime, the sectarian violence in Iraq is getting worse, and on top of it all, the Bush administration now faces a new diplomatic conflict with the Iraqi government. 

HARDBALL correspondent David Shuster reports. 

(BEGIN VIDEOTAPE)

DAVID SHUSTER, HARDBALL CORRESPONDENT (voice-over):  As 40 U.S.  Marines landed in Beirut today and helped hundreds of Americans evacuate, the violence between Israel and Hezbollah again intensified. 

Israeli warplanes launch new airstrikes on Beirut‘s southern suburbs, a Hezbollah stronghold.  Israeli ground troops crossed into southern Lebanon, exchanging intense fire with Hezbollah guerrillas, and Hezbollah rockets continued to rain down on dozens of Israeli villages and towns.  At the United Nations today, there were calls for both sides to embrace an immediate cease-fire. 

KOFI ANNAN, U.N. SECRETARY-GENERAL:  I repeat, hostilities must stop. 

SHUSTER:  But U.S. officials noted that Hezbollah started this war by crossing into Israel, kidnapping two Israeli soldiers and killing three others. 

JOHN BOLTON, U.S. AMBASSADOR TO THE U.N.:  No one has explained how you conduct a cease-fire with a group of terrorists. 

SHUSTER:  For the last nine days, the violence along the Israeli-Lebanese border and the international attention have taken the focus away from an even larger death toll during the same period, the carnage in Iraq.  A new U.N. report says the sectarian violence in Iraq is exploding now and is taking the lives, on average, of more than 100 Iraqis every day. 

This week the most brazen attack came in the town of Kufa.  A suicide bomber killed 53 people after driving up in a van and pretending to offer work to a throng of day laborers eager for a job. 

Across Iraq there are incidents every day, where gunmen wearing Iraqi police uniform stop a bus or van and either spray gunfire at those inside or drag the occupants out of the vehicle and shoot them execution style.  A few days ago, gunmen opened fire on women and children waiting at a bus station.  Last month, Iraq‘s new prime minister announced a security plan for Baghdad that included up to 50,000 more police and soldiers on the streets.  It was a plan that got attention and praise at the White House. 

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES:     I want to thank you.  This operation is a joint effort to restore security and rule of law to high risk areas in the capital city. 

SHUSTER:  But with the violence surging in Baghdad, leading politicians from Shiite and Sunni parties in Iraq have declared the plan a failure.  And today U.S. military officials declared that on top of the sectarian violence, the number of attacks on U.S. troops over the last week alone is up by 40 percent.  And on top of the security problems in Iraq, now there is a diplomatic one.  Iraq‘s prime minister today blasted the Bush administration‘s support for Israel‘s attacks in Lebanon, putting the White House on the defensive. 

TONY SNOW, WHITE HOUSE PRESS SECRETARY:  Prime Minister Maliki is running a unity government and he is going to express the opinions of that government.  The president is conversant with those opinions and he is, you know, he respects it and he looks forward to talking with the prime minister about it, when Prime Minister Maliki comes to Washington next week. 

SHUSTER:  But with all of the problems in Iraq and the congressional midterm elections now less than four months away, a growing list of Republicans are already stepping up their criticism of the Bush administration.  This week, Minnesota Republican Gil Gutknecht, once a strong supporter of the war, returned from Iraq and said conditions were worse than he had been led to believe and declared the U.S. should begin withdrawing troops from Iraq immediately. 

Freshman Republican Senator John Thune told reporters that if he were running for reelection, quote, you obviously don‘t embrace the president and his agenda.  But the focus on Israel has given the Bush administration and Republicans some breathing room, and today a House resolution supporting Israel‘s offensive in south Lebanon passed 410-8.  Still, many lawmakers are convinced that public attention will soon return to Iraq, where U.S. troops, instead of just conducting rescue operations, are getting targeted and killed every day.  I‘m David Shuster for HARDBALL in Washington. 

(END VIDEOTAPE)

MATTHEWS:  Thank you, David.  When we return, Pat Buchanan and Bob Shrum will go at it over all these issues.  Later, we‘ll a live report from MSNBC‘s Tucker Carlson, who is in Haifa.  This is HARDBALL, only on MSNBC. 

(COMMERCIAL BREAK)

MATTHEWS:  Welcome back to HARDBALL.  Pat Buchanan is an MSNBC political analyst and Bob Shrum is a HARDBALL political analyst.  Gentlemen, both of you this same question.  What is going on in Iraq and what‘s been the impact of this fight in the Mideast between Israel and Hezbollah on our troops in Iraq?  Pat first. 

PAT BUCHANAN, MSNBC POLITICAL ANALYST:   Well, what‘s going on in Iraq, I think, is we got Zarqawi, Chris, but before we did get him and finish him off, I‘m afraid he succeeded in igniting a real sectarian war here.  Beforehand, the Shia sort of, because they knew they‘d inherit the country, did not respond to attacks by Sunni insurgents and terrorists.  But now you‘ve got a blood bath going with 100 being killed every day, 50 bodies showing up at the Baghdad morgue every day.  I think it‘s degenerating in to the kind of sort of India-Pakistan war on a smaller scale, where the populations divide and you could wind up with three countries. 

BOB SHRUM, HARDBALL POLITICAL ANALYST:  I don‘t think it‘s on a smaller scale.  I think in foreign policy terms, the Iraq war is the mother of all mistakes.  We not only have this huge violence going on.  We not only have Prime Minister Maliki, from the government we helped put in power and we keep in power, now attacking Israel and the United States and defending Hezbollah.  We had the speaker of the Iraqi parliament the other day standing up and saying the violence in that country wasn‘t due to the insurgents, it was due to the Jews and the sons of Jews. 

What we have in this situation is something that your previous guest, Mr. Baer alluded to, which is we are creating, by our presence in Iraq, the possibility of a Shiite crescent that will go all across the Middle East.  You know, the Iranians tried to do this in the 1980‘s.  They lost a million people in a war with Iraq.  The great irony and tragedy of this Iraq war is that we‘re going to end up, I think, as being the surrogates for an Iranian empire that‘s going to stretch from Tehran to the Mediterranean. 

BUCHANAN:  Well I do agree there‘s that danger.  I‘m not sure Iran is interested in this war for this reason, Chris.  They are the big winner from the Iraq war.  They have, you know, they‘re rid of the Taliban, whom they hated.  They‘re rid of Saddam Hussein.  They‘ve got their allies in power in Baghdad.  They‘re doing exceedingly well.  An all-out Shia conflict with the Sunnis would mean a horrendous result for both sides.  The Americans coming in against them.  I don‘t think they want that. 

They‘re doing very well as they‘re doing now. 

SHRUM:  That‘s my point, Pat. 

MATTHEWS:  Let‘s assume, go ahead, Bob. 

SHRUM:  That‘s my point.  They don‘t have to fight with the Sunnis.  What‘s happening is there are a series of dominoes that go from Iran to Iraq, where we have installed a radical Shiite government, on to Lebanon.  That‘s what they‘ve always wanted.  That‘s what they spent a million lives trying to get and Saddam Hussein‘s Iraq stopped them. 

BUCHANAN:  All right.  Chris, let me talk about something I think that‘s going on right now in southern Lebanon.  The Israelis are saying get out of there, we may be coming in, they‘re using the 155 Howitzers, and they‘re using airstrikes in there.  They‘re driving the Shia population out of there.  It‘s an expulsion taking place. 

They‘re going toward Baghdad, which will be, first, a humanitarian disaster, with 500,000 already homeless.  Secondly, this will be a complete political disaster if this continues, because I don‘t see how the government of Lebanon can then survive.  We could be on the way to another failed state in Lebanon.  I don‘t know how that‘s in the interest of Israel.  I certainly know it is not in the interest of the United States, but this is the type of thing that could happen.  We all know that look, the Palestinian crisis goes back to the Diaspora of 1948 and the Diaspora of 1967. 

SHRUM:  Pat, you always a reason ...

MATTHEWS:  Bob, you were very supportive of the Israeli actions yesterday, as are many Americans, if not a majority.  Let me ask you, why do you think Israel is targeting the infrastructure of the Lebanese government, the bridges, roads, the very being of that modern civilized city.  Why are at the going after those targets?  I don‘t understand.  I‘m totally open minded on this. 

SHRUM:  I think they‘re doing it to keep the Iranians and the Syrians from resupplying Hezbollah and getting more weapons in there.  You know, Pat will always find a reason why Israel shouldn‘t defend itself, but I‘ve done two political campaigns in Israel, and disagreement in that country is a national habit.  When you‘re sitting in a meeting and somebody says I agree with you 99 percent, you know you‘re in for a long argument.  There‘s remarkable unanimity in Israel about this.  Shimon Peres, who lost as a peace candidate in 1996, is for this action. 

Ehud Barak, who went the last mile to get a peace agreement, is for this action.  And I think I know why, Barak said to me early in 2000, that he thought that there was about 10 years of time during which the other side might get stronger and stronger and stronger.  Israel had to get a peace agreement or find another way to settle the crisis.  I think this is fundamental.  I don‘t think it‘s going to stop easily. 

BUCHANAN:  But let me say, the Israelis are not perfect.  They make mistakes.  Sharon rolled all the way to Beirut when they shot Shlomo Argov in London.  He did that to drive the Palestinians up there and they got him out, but instead, they stayed.  The Shia first welcomed them.  They stayed and occupied and as Rabin said, we let the Shia genie out of the bottle.  They created Hezbollah in southern Lebanon by their occupation all those years.  They did the same thing with Hamas.  They created it, as an Islamic alternative to the P.L.O., which was secularist, and now this monster is right there on their border.  They make mistakes. 

SHRUM:  Pat, the Arabs ...

MATTHEWS:  Bob, you know what Bob, you know what scares me, Bob one concern I have is about this unanimity in Israel.  I agree with you on this from everything I‘ve heard, but there‘s also unanimity from Ehud Barak all the way over to the right that we should go in and bomb Iran.  Do you buy that?  Is that good for U.S. policy, to bomb Iran, if Israel wants us to do it?  In our own interests, open question? 

SHRUM:  As I said on the show yesterday, I don‘t think we‘re in any position to do that.  I think we have 130,000 hostages, namely American troops, sitting in the middle of Iraq.  I think if we did that, the Shia population would become absolutely unmanageable and we would have to send a lot more troops into Iraq to get the troops we already have there out, but I have no sense of the Israelis now asking us to get involved in a wider war.  I think the Israelis are committed to trying to clean out southern Lebanon.  They‘re going to withdraw.  If it gets bad again, they‘ll he go back and if they have to do it for 30 years, they‘ll do it for 30 years.

(CROSSTALK)

MATTHEWS:  Right, on this front, Bob, but not on the other front of Iran.  Go ahead Pat.

SHRUM:  Look, the Israelis are driving these people north.  And with the artillery and the attacks.  If they get in there and the Israelis go in and start slaughtering the Shia and the Hezbollah or attacking, they‘ve got Hezbollah right up there cheek by jaw with 25,000 Americans.  I would hope that the president of the United States is considering the possibility of hostage takings, the possibilities of Americans being killed.  As for these crazies who want us to attack Iran, if you did bring Iran down, or tried to bring it down, they would cut loose Hezbollah here, Hezbollah in Lebanon, the Shia in Iraq, and you would have an all-out war in that region.  I mean, Woolsey and these people and Kristol I cannot understand how they‘re looking out for America‘s interest. 

MATTHEWS:  Pat, if it was only the crazies, I‘d be happier.  Unfortunately, it‘s people like Ehud Barak, the thoughtful centrists in Israel who want us to take an action on Iran and just check it out if you don‘t believe me.  That‘s the fact.  Thank you Pat Buchanan and thank you Bob Shrum.  Up next, we‘ll get a report from Haifa with MSNBC‘s Tucker Carlson.  This is HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

MATTHEWS:  Welcome back to HARDBALL.  Let‘s go straight now to Haifa and to Tucker Carlson who is waiting to talk to us.  Tucker, what is happening up there? 

TUCKER CARLSON, MSNBC ANCHOR:  Chris, we spent most of the day north of Israel, much north of here, part of the time in a town called Matul, which is a farming community directly across, and I mean directly across from Lebanon.  I accompanied apple farmers as they went through their orchards.  There was literally a Hezbollah flag flying at the end of one man‘s orchard.  I learned two things, quickly, one, this conflict is taking a big financial toll on northern Israel. 

Ever since Israel pulled out of Lebanon in 2000, the country has not been to use Lebanese workers for agriculture, so they have imported workers, mainly from south east Asia and Thailand, for instance.  All those workers split immediately, and many went back to Thailand.  The rest went to Tel Aviv to hide out for the duration of this conflict.  So, fruit is literally dying on the vine in northern Israel. 

The second thing I learned this is, and I am not sure how to say this, I‘ll just be as blunt as I can, it‘s not a fair fight, not that it should be, but it‘s not.  You have on the one hand Hezbollah throwing pretty sophisticated munitions southward.  You have on the other hand the IDF, the Israeli Defense Force, throwing a massive amount of very sophisticated hardware north.  I‘m not saying that‘s a bad thing, probably a good thing.  But it‘s also the truth.  We watched round after round after round of enormous artillery shells flying north into southern Lebanon. 

I could bore you all day with recounting the sounds of these massive concussions.  I cannot imagine what southern Lebanon looks like after taking the pounding that it has been taking.  Eve now as I‘m talking to you, we can hear Israeli Air Force planes going over us.  We can hear the concussions 20 miles north in the hills form the bombardment.  They are really taking a pounding in south Lebanon, not that they don‘t deserve it, but they are definitely taking a pounding. 

MATHEWS:  Thank you very much Tucker Carlson.  Great reporting from over there.  Tucker is back at the top of the hour, and be sure to watch Tucker again at 10:00 Eastern tonight for MSNBC‘s again a special report on the Middle East.  Play HARDBALL with us again tomorrow night.  We‘ll have the latest developments in the Middle East.  Right now it‘s time for Tucker again. 

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

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