General Michel Suleiman, Lebanon’s army chief of staff, was sworn in as the country’s new president on Sunday, amid scenes of popular celebrations at the apparent end of a long drawn out political crisis. His inauguration was attended by foreign ministers from Iran, Syria, Saudi Arabia, France, Italy, Spain and the European Union, and high level delegations from 22 states in the region.

Both the incoming president and the Saudi Foreign Minister, Prince Saud al-Faisal, seized the opportunity to hold talks with Iranian Foreign Minister Manouchehr Mottaki.

Conspicuously absent was any high level delegation from the Bush administration, although there was a US Congressional delegation. This reflects Washington’s concern over the new balance of power in Lebanon, which has shifted from the US and Saudi-backed March 14 coalition of Prime Minister Fouad Siniora and Saad al-Hariri, the son of murdered Prime Minister Rafiq al-Hariri, in favour of the Shi’ite parties, Hezbollah and Amal, which are backed by Iran and Syria.

Suleiman’s election was the first part of a deal worked out in five days of intense talks in Doha, the capital of the Gulf state of Qatar, last Wednesday. All Lebanon’s leaders except Hezbollah’s leader Sheikh Hassan Nasrallah, who did not attend for security reasons, flew to Qatar for the talks called by the Arab League. Iran, the US and France were also present.

The deal is widely seen as a victory for Hezbollah at the expense of Siniora government, which Washington had supported as a central part of its ongoing conflict with Iran and Syria.

The failure to elect a stridently pro-US president and the consolidation politically of Hezbollah’s recent military success mark another setback for Bush administration and its allies in the region, intensifying the political crisis in the Middle East.

The Qatar-brokered talks were held in the aftermath of an armed show of strength by Hezbollah and its Shi’ite allies in response to calculated provocations by the government. Clashes had left at least 81 people dead in Beirut, Tripoli, the Beka’a valley and the Chouf mountains, and sparked fears of a sectarian war. The speed and ease of the opposition victory demonstrated the government’s lack of support within the population at large. To make matters worse, the army refused to carry out Siniora’s orders to take on Hezbollah, fearing that they would be outgunned.

The deal was aimed at defusing the political tensions that followed Hariri’s assassination in 2005, ending an 18-month political impasse which had left Lebanon without a head of state for six months and preventing the slide into civil war. Since 2005, there have been a series of unresolved assassinations of anti-Syrian politicians and journalists.

Tensions came to a head due to Israel’s US-backed war on Hezbollah in 2006, which killed more than 1,200 people and destroyed homes and infrastructure to the tune of at least $15 billion. The Siniora government was widely seen as a US stooge. Hezbollah accused the government of conspiring with the US and Israel to extend the war to get rid of Hezbollah.

Washington and Riyadh encouraged Siniora to oppose Hezbollah and the opposition, leading in November 2006 to Hezbollah and Amal, its political ally, resigning from the National Unity government when the government broke with the post-civil war tradition of consensus cabinet rule and overruled its dissent over key legislation. Hezbollah leader Nasrallah argued that without the Shi’ites, the cabinet was unconstitutional. He refused to disarm until the contested Sheba’a farms, on the border of Israel, Lebanon and Syria, were liberated from Israel.

Hezbollah and its supporters staged anti-government demonstrations and set up protest encampments and roadblocks outside government and public buildings in downtown Beirut, paralysing the commercial district. Parliament has been all but inoperable since 2006 and unable to convene to elect a president since November. Earlier this month, tensions erupted, culminating in the rout of the government by Hezbollah.

While Hezbollah had long ago agreed to support Suleiman’s nomination for the presidency, this was conditional upon greater political power for itself, including regaining an effective veto of government policy via a “blocking third” of cabinet positions. The ruling coalition refused fearing that the veto would be used to bring down the government, block the approval of the United Nations Tribunal to adjudicate over the assassination of former Prime Minister Rafiq al-Hariri that it blamed on Syria, and prevent the government enforcing UN Security Council resolution 1559 for the disarming of Hezbollah’s militia.

Hezbollah and its Christian supporters had also sought a revision of the electoral law, which is based upon large districts that under-represent the Christians’ electoral support in favour of Muslims, and had given the March 14 coalition 72 seats in the 128-seat Parliament, a result widely seen as unfair.

The Qatar deal agreed to elections in 2009 based upon a new electoral law and the formation in the meantime of a new government that would give the opposition a veto over major decisions. The new president would dissolve the government and appoint a new prime minister, likely to be Saad al-Hariri. The prime minister would then select a cabinet made up of 16 members from the March 14 coalition, 11 from Hezbollah, and three to be appointed by the president who, since he is supportive of Hezbollah, will come from opposition forces. This will give the opposition the key one-third veto for major legislation requiring a two-thirds majority, while allowing the government the majority it needs to get through less contentious legislation.

In return, the opposition pledged not to resign from the government or hinder its work. It also dismantled its protest camps in downtown Beirut. While the March 14 coalition had sought the removal of Hezbollah’s weapons, it was unable to secure an agreement on this and had to be content with a ban on the use of weapons in internal conflicts and a vague promise that the president would look at the issue.

This cleared the way for the election of Suleiman, the third military man to become president since Lebanon’s independence from France in 1943. He was the only presidential candidate who, under the confessional-based constitution must be a Maronite Christian, was acceptable to all the main parties.

As chief of staff for nine years, Suleiman played a key role in crushing the Sunni militants Fatah al-Islam at the Palestinian refugee camp of the Nahr el-Bared last year, and thus was acceptable to the March 14 coalition. Crucially, he had Hezbollah’s support because he had refused Siniora’s orders to dismantle the roadblocks erected last year in protest at government policies and to implement the government’s measures against Hezbollah or intervene earlier this month to quell the clashes between Hezbollah and the government’s Sunni and Druze supporters.

The Lebanese government hailed the agreement as a fair compromise, as did all the delegations attending the talks. “The agreement we reached is an exceptional agreement amid exceptional circumstances for an exceptional phase,” Siniora said at a news conference in Doha. “We avoided civil war,” said Druze leader Walid Jumblatt, one of the key members of the March 14 coalition.

Washington also tried to portray the agreement as a step forward. President George Bush issued a statement saying, “I am hopeful that the Doha agreement… will usher in an era of political reconciliation to the benefit of all the Lebanese.”

But the Qatar deal means that Iranian and Syrian-backed Hezbollah and Amal now hold both the military and political balance of power in Lebanon, and as such is widely viewed as a defeat for the US, Israel and France.

It has, in consequence, exacerbated disagreements within ruling circles in Washington and between the US and Israel over how best to take forward their interests in the region.

Under Bush, Washington has pursued a policy of seeking to dominate the Middle East militarily and to forge an alliance between Israel and the Sunni-based Arab regimes against Iran, which was strengthened as a regional military power by the defeat of Saddam Hussein’s Ba’athist regime in Iraq. But the military and political campaign against the “Shia arc of extremism” has suffered repeated set-backs, with Hezbollah’s victories in Lebanon, Hamas taking control of Gaza, and the Shi’ite militia in Iraq repeatedly demonstrating the vulnerability of the Maliki government.

This has led to a number of initiatives aimed at securing an accommodation with hitherto pro-Iranian forces, including the ongoing talks between Syria and Israel and the May 10 ceasefire reached between the Maliki and the Sadrist movement to restore government control over Sadr City.

Israeli Prime Minister Ehud Olmert, who faces corruption charges and a possible loss of office, gave vent to the sense of crisis that prompts these manoeuvres when he said of the talks with Syria, “The race we have, the race with time, is of a different nature… If we miss the opportunity while President Bush is still in power, then how long will it take before we can restart with a new American administration?” Time was also short for Palestinian Authority President Mahmoud Abbas, he added. “Without the promise of an accord,” the Los Angeles Times reported him as saying, “his counterpart in the peace talks might lose control of the West Bank to Hamas, the Islamic movement that runs Gaza and refuses to recognize Israel.”

Peace negotiations between Hamas and Israel are ongoing.

With Doha, an attempt is clearly being made to incorporate Hezbollah into the apparatus of the Lebanese state and to reach an accommodation with its leadership. In his inaugural speech, Suleiman explicitly called for unity in Lebanon and a “quiet dialogue” to integrate Hezbollah’s weaponry into a national defence strategy, in line with the Doha agreement which calls for discussions on the state’s relations with “all organisations.” He called for a defence strategy that would “benefit from the power of resistance,” a reference to Hezbollah.

Suleiman also held out an olive branch to Syria, calling for formal diplomatic links with Damascus, which were broken in 2005.

However, reducing Syrian and Iranian influence, securing Lebanon’s independence from Syria and disarming Hezbollah were central to the Bush administration’s “creation of a new Middle East.” It had been able to draw in broad support for this among European governments, including France. Today this consensus no longer exists. The European powers, including Britain, have signalled their support for an accommodation with Hezbollah as well as Syria, and significant voices in the US, amongst the Democrats, the Republicans, and the military and security services are also amenable to such initiatives—particularly following Israel’s humiliation in the July 2006 war.

Such a change in strategy is fiercely opposed by neo-conservative hardliners. For these forces, grouped particularly around Vice President Dick Cheney, it continues to be unacceptable to cede to Hezbollah any control in Lebanon. Although the Bush administration has given lukewarm support to the Doha Agreement, as well as to the talks between Israel and Syria, in a pointed reference to Democrat front-runner Barak Obama during his visit to Israel, Bush denounced as “appeasers” those advocating discussions “with the terrorists and radicals.” This was followed by a report on Israeli Army Radio of Israeli officials being told during a closed meeting that “Bush and Vice President Dick Cheney were of the opinion that military action was called for” against Iran—a report that elicited heated denials from Washington.

Amongst the Israeli right, opposition is even more pronounced and bitter. Likud party chairman Benjamin Netanyahu has denounced Olmert for proposing a possible withdrawal from the Golan Heights in talks with Syria, telling an emergency party meeting that “Giving of the Golan Heights will turn the Golan into Iran’s front lines which will threaten the whole state of Israel.”

“This irresponsibility can be added to the failed conduct of the Second Lebanon War, the failure to prevent Hezbollah’s new and heightened rearmament, the failure to prevent Qassam fire on southern Israel,” he said.

Writing in the Jerusalem Post, Barry Rubin declared that “Lebanon has fallen to Hizbullah, another state added to Iran’s bloc,” an event “equivalent to the 1938 sacrifice of Czechoslovakia at Munich to appease Germany.”

Whatever happens in the next weeks and months, the situation is fraught with dangers for the American and Israeli ruling elites. It cannot be excluded that Hezbollah will be amenable to an agreement with Washington, and that it will be equally prepared to utilise its popular support and its militia to more effectively police Lebanon’s Shia population. Indeed the closer Hezbollah gets to power the more fully its pretensions to representing the oppressed Shia masses will be exposed. But Hezbollah’s advances could be just as easily exploited by Damascus and by Tehran, to the detriment of both Washington and Jerusalem.