Israel's and Hezbollah's War of the Rockets has entered a new
phase: the War of the Wallets, the race to gain political capital by
rebuilding southern Lebanon.

Diplomats and military analysts continue to debate The War of
the Rockets. The conventional wisdom -- or more accurately, the wisdom of
first impressions -- said Israel lost the military war and Hezbollah won by
surviving.

But the emerging "big picture" suggests the War of the Rockets
physically punished and politically damaged Hezbollah, despite its media
touts of victory.

On the other hand, Israel cannot claim a victory -- at least,
not yet.

What did Hezbollah lose? The Israel-Hezbollah war began with
Lebanon as a "hijacked nation state." Hezbollah (supported by Iran and
Syria) controlled southern Lebanon and Lebanon's southern border, which put
the area in a geo-political limbo. Southern Lebanon was not fully sovereign
Lebanese territory.

At the moment, Israel exerts more control over Lebanon's
southern border than Hezbollah, U.N. peacekeepers or the Lebanese
government. That may not be an Israeli win, but it is no victory laurel for
Hezbollah's leader, Hassan Nasrullah.

Hezbollah still dominates swaths of southern Lebanon and in
those areas retains the ability to intimidate Lebanese locals and fire
rockets at various current and potential adversaries -- Israel for sure, but
also U.N. peacekeepers and the Lebanese Army. However, positioning Lebanese
government forces and U.N. peacekeepers in south Lebanon could slowly
diminish Hezbollah's military and political capacities.

Yes, peacekeepers could end up protecting Hezbollah. However, if
the United Nations' military Rules of Engagement (ROE) are robust,
Hezbollah's ability to act will be very circumscribed. The United Nations'
1995 failure to protect Srbrenica, Bosnia, is a huge stain that aggressive
policing in south Lebanon would help remove.

If Turkish troops are part of the U.N. contingent, Hezbollah
will face even stiffer political and military constraints. Turkey wants to
make the case that its confrontation with the Kurdistan Workers Party (PKK)
in northern Iraq is analogous to the one Israel faces with Hezbollah. A
Turkish U.N. contingent would be a tough Muslim opponent for Hezbollah.

Hezbollah isn't poised to win The War of the Wallets, either.
Using Iranian cash, Hezbollah has bought influence in Lebanon by funding
social services. Hezbollah announced it will provide funds to rebuild homes
destroyed in the war.

But the U.S. government has countered with its own "green"
strategy, as in greenbacks to rebuild the whole of Lebanon.

Amir Taheri, in an Aug. 25 Wall Street Journal essay, has made
the most cogent argument that Hezbollah has actually lost the war.
StrategyPage.com (which carries this column) and its editor, James F.
Dunnigan, started making the case for Hezbollah's looming defeat in late
July.

Taheri argues that Hezbollah is on the edge of a huge political
defeat within Lebanon. "The leaders of the March 14 movement," Taheri
writes, "which has a majority in the Lebanese Parliament and government,
have demanded an investigation into the circumstances that led to the war, a
roundabout way of accusing Hezbollah of having provoked the tragedy."

StrategyPage.com noted Hezbollah's political and military
failure as it occurred. StrategyPage wrote on July 26: "Hezbollah knows,
however, that as long as they can launch at least one rocket a day, they can
claim victory. This is because Arabs no longer expect to ... defeat Israel
militarily, so that if the Arab force is still fighting, it is considered a
victory. While ludicrous, this attitude has been widely accepted throughout
the Middle East. However, this twisted logic is beginning to fray, and an
increasing number of Arabs are questioning it. But in the short term, it
still works."

StrategyPage is arguing that what happens on the battlefield, in
the neighborhood and on the street eventually trumps "media perception"
generated by propagandists and the sensationalist press.

Most presciently, StrategyPage noted on July 25: "While
Hezbollah has been able to muster public support throughout Lebanon and the
Arab world, they know that in the aftermath of all this, despite declaring a
victory, they are already being blamed for causing a disaster, and will
suffer substantial losses in the aftermath of this war."

We're in the aftermath. Hezbollah experienced a moment of media
glory, but that glory has faded. For Hezbollah, the "continuing aftermath"
is anything but promising.