Intel analysis from multiple sources says this:
1. Only an invasion on the ground can provide Israel with the solution it wants to the threat Hezbollah has posed.
2. A diplomatic or political settlement not only cannot guarantee this outcome, but it would make later Israeli responses to Hezbollah even more difficult. Israel has more room for maneuver internationally now than it will have later.
3. The internal politics of Israel will make it very difficult for Olmert to come out of this with a less-than-definitive outcome.
4. Israel will seek to deal with Hezbollah without undertaking counterinsurgency operations in the long term. This means attack, sterilization of the threat, and withdrawal.
There has been much speculation about diplomatic solutions, the possibility that there will not be an invasion, and so on. But when we ignore the rhetoric and look at the chessboard, it is difficult to see how this conflict ends without some action on the ground. When we examine the behavior of the Israelis, they are taking the steps that would be needed for an invasion. Obviously we could be wrong, and clearly the invasion has not come at the earliest possible moment, as we had predicted. Nevertheless, when we step through the logic, we keep coming out with the same answer:
invasion.
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FYI for perspective, and I'm quoting a very knowledgable source, Robert Baer (this is public info):
"Hezbollah's divided into many parties. There's the Islamic Resistance in the south, which beat the Israelis. They attacked the Israeli army. They defeated the Israeli army on Lebanese soil. I do not know how we can describe that other than a national liberation movement.
I don't agree that Hezbollah itself is a terrorist organization. It delivers powdered milk; it takes care of people. It's a social organization; it's a political organization. It fights corruption.
Then there's the Islamic Resistance, which is an army, which is a guerrilla force, fighting for control of its own country. And then, under the Hezbollah umbrella, was the Islamic Jihad, which I call their special security, which was controlled by Iran, which carried out terrorism against the West. And you can paint Hezbollah as a terrorist organization. You can do that for political reasons, but strictly speaking, it is many things. Just as [with] the IRA, you got Sinn Fein and you've got the real IRA, which is conducting terrorism."
- Quote is from Robert Baer interview with Frontline, PBS
http://www.pbs.org/wgbh/pages/frontline/shows/tehran/interviews/baer.html
Read the interview.