As the two naval chiefs talked in Moscow, Russian foreign minister Sergei Lavrov met Iranian foreign minister Manouchehr Mottaki in the Russian capital for talks on the completion of the Bushehr nuclear power plant by the end of the year.

DEBKAfile’s military sources report Russia’s leaders have determined not to declare a Cold War in Europe but to open a second anti-Western front in the Middle East.

In the second half of August, DEBKA file and DEBKA-Net-Weekly’s analysts focused on this re-orientation (Russia’s Second Front: Iran-Syria), whereby Moscow had decided to use its ties with Tehran and Damascus to challenge the United State and the West in the Middle East as well as the Caucasian, the Black Sea and the Caspian region.

In aligning with Tehran and Damascus, Moscow stands not only against America but also Israel. This volatile world region is undergoing cataclysmic changes at a time when Israel is without a fully competent prime minister.

Hamas gunmen are systematically bulldozing the Jihad bases, built over the ruins of the former Israeli Gush Katif villages, and flattening the sites. They have seized control of Jihad mosques in the southern part of the Gaza Strip and are making arrests.

Damascus has signaled to Washington and Paris: Don’t interfere.

The Syrian incursion coincided with the expected arrival of Russian naval and engineering experts for renovating Tartus, the Syrian port 40 kilometers north of Tripoli, to serve as the Russian fleet’s first permanent Mediterranean base.

Seen from Israel, once Assad’s army completes its advance on Tripoli, he will control the full length of the military supply route for Hizballah from the Syrian ports of Latakia and Tartus. The Russian presence will add a new and troubling dimension to this development.

Washington sources predict this may be the prelude to more serious actions, such as a naval blockade to choke off Iran’s imports of fuel products.

Moscow continues to support the European Union’s diplomatic drive to trade incentives for Iran’s consent to curb “some of its nuclear activities.”

The nuclear watchdog has asked Tehran to account for 50-60 tons of missing uranium from its main enrichment site at Isfahan. It is enough to produce five or six nuclear bombs and is suspected of having been diverted to secret sites to boost the covert production of weapons-grade uranium.

Russian authorities reported the plane’s sudden disappearance off the radar at the moment cockpit communications shut off. This indicated the craft may have exploded in mid-air. They suspect terrorism as the cause of the crash because –
1. At least five passengers bought tickets but did not turn up for the flight. Security officials are trying to locate their addresses and sifting through the wreckage for unaccompanied luggage.

2. One of the passengers has been identified as Gen. Gennadiy Troshev, a Russian hero for quelling the Chechen rebellion.

3. Our sources name one of the Jewish – or possibly Israeli – families aboard the doomed flight. They have been named as Ephraim Nakhumov, 35, his wife Golda, 24, and their two children, Ilya, aged 7, and Eva, aged four.

The guests were attending an Iftar banquet, when Muslims break their fast during the month of Ramadan, in Balad Ruz, 70km (45 miles) north of Baghdad.

Earlier, two car bombs exploded in central Baghdad, killing 12 people.

The exercise was launched on the day the UN nuclear watchdog reported that non-cooperation from Tehran had stalled its efforts to establish whether or not Iran was developing nuclear warheads, enriching uranium for military purposes, testing nuclear explosives or building nuclear-capable missiles.

Tehran is not deterred by sanctions or tempted by international diplomacy to give up its nuclear aspirations, especially since the Georgia conflict with the United States has presented Iran with Russian backing for its nuclear program and opposition to sanctions.

Iran’s defense minister Mostafa Mohammad Najjar said scornfully Monday: “Threats by the Zionist regime and America against our country are empty” – showing that Tehran feels free to go forward with its nuclear plans.

Furthermore, despite three rounds of UN Security Council sanctions, Iran has not stopped nuclear enrichment. At present, 4,800 centrifuges are operating and another 2,000 are getting read to start work in the near future.

DEBKAfile’s Iranian sources report that the Tehran administration shows more contempt than ever before toward the UN, international diplomacy and potential sanctions, certain that the prospect of a US and Israeli military strike on its nuclear facilities recedes further day by day.

“Threats by the Zionist regime and America against our country are empty,” said defense minister Mostafa Mohammad Najjar,”

This is reported by DEBKAfile’s political circles.

Barak’s Labor and Netanyahu’s Likud combined with Eli Yishai’s Shas hold more Knesset seats – 43, than Kadima’s 27. They are in a position to prevent the winner of the Kadima primary from automatically taking over from Olmert as head of the incumbent government coalition. Without Labor, Kadima lacks the numbers to form a viable coalition government.

DEBKAfile’s sources report that Netanyahu and Barak are close to accord on the general principles of their partnership but are still working on details. Netanyahu would go first up until a general election because Barak, who is not a member of Knesset, cannot become prime minister. Barak believes he can use his pact with Netanyahu to push Kadima’s buttons and at the right moment, take the party over and form a left-of-center Labor-Kadima bloc to fight his current partner, head of the right-of-center Likud.

DEBKAfile’s counter-terror sources disclose that Yemeni president Abdullah Salah, formerly a US partner in the war on terror, recently began working with al Qaeda to win their help for quelling plots by army dissidents to overthrow his regime and for beating back an Iran-backed Shiite rebellion.

In March, al Qaeda mounted a mortar attack which missed the US embassy but injured 13 girls at a nearby school; other attacks targeted the Italian mission and Western tourists. Non-essential US staff were ordered to leave Yemen in April.

North Korea and Iran were also threats. Hayden confirmed that the nuclear reactor Israel destroyed in Syria last year was similar to one in North Korea. Iran, he, has the scientific, technical and industrial capacity to produce nuclear weapons.

DEBKAfile notes: This comment contradicts the US intelligence assessment last year that Iran had discontinued its military nuclear program in 2003.
Tuesday, diplomats said that the UN watchdog had intelligence showing Iran had tried to refit a long-distance Shehab missile to carry a nuclear payload.

After meeting bank heads Wednesday, Bank of Israel governor Stanley Fischer issued a statement that Israel banks are “relatively well run.”

Economic experts foresee an Israeli recession around the corner. Lehman Brothers is a major player in Israel’s structured-products market and options market. Personal savings schemes, exports to the United States and Europe and foreign investment are also susceptible.

As foreigners employed on Wall Street, Israelis are second only to Canadians.

Thousands have been thrown on the job market. Aside from those recalled by Lehman Brothers after the Barclays buyout, many will return home adding to the pressures on the job market. Israel’s hi-tech industry, second only to the US in annual start-ups, was already facing difficulties before the current crisis, as export orders began drying up.

The real results differed dramatically from the three TV exit polls which wrongly awarded Livni a landslide victory and were up to 10 percent wide of the mark. Throughout the campaign the foreign minister was a media favorite and inaccurately described as unchallenged successor to Ehud Olmert both as party chair and prime minister.
Kadima comes out of the primary bitterly divided.. Livni faces the daunting dual challenges of uniting the party and persuading all the government coalition parties to accept her as prime minister.
Kadima’s two senior partners, Labor and Shas, are already looking at alternatives.

The low Kadima turnout, according to DEBKAfile’s political analysts, was a public vote of non-confidence in the party. At the Tel Aviv stock exchange Wednesday, another popular vote of no confidence took place – this one against the economic system ruled by Kadima ministers and the banks