Who does he think he is?

<em>Middle East War</em> - Is Blair backing Arafat or Sharon? Or does he just want to please Bush? J

Lord Levy has a room at the Foreign and Commonwealth Office. It is down the corridor from the head of the Middle East and North Africa Command. The location is no coincidence. He has been put there as a counterweight to what some in Downing Street regard as the "Arabist tendency" in the FCO.

The role of this new Labour fundraiser-in-chief, well-paid consultant to retail chains and PM's tennis partner, who spends several months a year at his house in Tel Aviv, is crucial in understanding the Tony Blair's beneficent approach to Israel. As Israeli tanks continue to pound the refugee camps of Jenin and the Church of the Nativity in Bethlehem, and as American demands to withdraw are defied, the logic of Blair's indulgence is unravelling fast.

The roots of the British government's current policy towards the Middle East can be traced back to a single event - not the founding of the Jewish state, not the Six Day War, not the Oslo accords or the assassination of Yitzhak Rabin, but Brighton in the autumn of 1994.

"To define yourself as new Labour, you had to prove your credentials as pro-business, anti-tax and pro-Israel," says one party official. "Palestinian sympathies were the preserve of the old left and we quite simply had to get rid of ours if we wanted to get on."

At Blair's first party conference as leader, Labour Friends of Israel assembled in a huge turnout for its main meeting of the week. Every aspiring young apparatchik felt the need to attend. They did then. They still do.

The realignment of policy has infuriated older hands in the Foreign Office. It is not, the mandarins say, based on a detailed knowledge of the conflict, but is a hostage to the broader rebranding exercise that characterises new Labour.

Relations between the FCO's Middle East specialists and Blair's trusted advisers in Downing Street are, to say the least, frosty. Those mandarins who are in favour have allied themselves to the Prime Minister's thinking. For as long as there was a relatively peaceable Labour government in Jerusalem, that thinking went unchallenged. Ehud Barak, as Israel's prime minister, enjoyed a meeting of minds with Bill Clinton and Blair. The Camp David accords were portrayed as an inherently reasonable Third Way solution to the "Palestinian problem". The argument was propagated that it foundered only on the obduracy of Yasser Arafat.

As Barak was defeated by Ariel Sharon and as Clinton passed on the mantle to George Bush, Blair was forced to confront a new reality by 2001.

Even before the events of 11 September, Blair was persuaded that the intifada, much more than Sharon's belligerence, represented the greater challenge to "civilised values". Blair saw no moral equivalence between suicide bombers - whose violence is by nature random - and the actions of a uniformed Israel Defence Force. He remained convinced, throughout the bloodshed of the past 18 months, of two things: that Arafat could stop Palestinian violence if he wanted to, and that, even under Sharon, Palestinians could achieve an equitable solution.

His strategy was clear: Arafat would have to be both cajoled and coerced into "seeing reason" and disavowing terrorism; Sharon should not be antagonised, in the hope that he might temper his aggressive instincts; and nothing should be done to antagonise Bush, in the hope that he might eventually engage.

Enter Lord Levy. According to those who have seen them together, Blair simply feels comfortable in the opulent home of the one-time pop impresario who turned Alvin Stardust into a household name. Levy brought with him not just large donations from other wealthy north London Jewish business figures, but their values, too.

In Levy's case, these are - in Israeli terms - liberal Jewish values. His son, Daniel, works in Israel with Yossi Beilin, the former justice minister who has become a leader of the Peace Now movement. Levy's wife, Gilda, and daughter, Juliet, signed a Peace Now declaration recently, calling for a withdrawal from the occupied territories. Levy himself is far more than a purveyor of messages from Blair - an "emissary", as ministers are forced to describe him. A man without a ministerial rank, answerable to neither house of parliament, Levy is now, according to officials, given access to high-level intelligence information about the Middle East. He has been sent on six "official" missions on behalf of Blair to Israel and the Palestinian Authority. Sometimes, he just goes from his home in Israel, although the Foreign Office insists that Levy is always accompanied by an official from the Middle East Department.

Those six missions compare with just two from Jack Straw, the Foreign Secretary, and two from Ben Bradshaw, a former radio journalist who - as a junior-ranking parliamentary under-secretary at the Foreign Office - has to deal with the Middle East, North Africa, South Asia, South-east Asia, non-proliferation, security issues, counter-terrorism and visa policy.

Straw and Bradshaw continue to receive advice from the "professionals" at the Foreign Office. Many of these officials have spent years as diplomats at any of Britain's two dozen or so embassies in the Middle East, seeing as their main concern the shoring up of the UK's carefully nurtured reputation in the Arab world. In the words of one very new Labour detractor: "Many of these people are past their sell-by date, people who like the Lawrence of Arabia deference of Arab capitals."

Straw has certainly learnt which advice to take and which not. The Foreign Secretary's relations with Israel got off to a terrible start when, on the eve of a visit to Tehran to drum up Iranian support for the war against the Taliban and al-Qaeda, Straw told an Iranian newspaper: "One of the factors that helps breed terrorism is the anger which many people in this region feel at events over the years in Palestine."

Blair and Levy had to intervene to rescue Straw after Sharon refused to meet him, and a member of his cabinet called the remarks "pornographic". Downing Street swiftly distanced itself from the comments. Foreign Office officials were dumped on for the debacle. It was claimed that neither No 10 nor Straw had had a proper look at the offending article. In subsequent media offerings and speeches, Straw chose to emphasise the sufferings of Israelis at the hands of Palestinian terrorists.

Straw's enforced conversion follows a general trend. When Bradshaw called for Israeli restraint in December, during a particularly gruesome spate of suicide bombings, he was forced to harden the line on the Palestinians. As for Blair, though he toyed, in his party conference speech, with showing compassion for the Palestinians ("Those living in want and squalor from the deserts of northern Africa to the slums of Gaza to the mountain ranges of Afghanistan - those too are our cause"), it was quickly put on the back-burner. The more the Labour left denounces his policy, the more - simply by extension - he is convinced he is right.

Having concluded that Arafat had forfeited any special favours, Blair accepted Bush's set of priorities - to defeat the Taliban and to build a coalition against the "axis of evil". All other regional issues were subjugated to that cause.

Underpinning all Blair's calculations was the need to develop a new variant "special relationship" with Bush. Straw's initial links with his counterpart, Colin Powell, were regarded as somewhat wooden, but they are said to have improved with time. The role of the British ambassador in Washington, Sir Christopher Meyer, as schmoozer-in-chief has been important. But the real nexus revolves around Condoleezza Rice, Bush's national security adviser, and Sir David Manning, Blair's chief foreign policy aide in Downing Street.

A consummate executor of policy, since taking up his job last September Manning has rarely left Blair's side. He has made several trips to Washington on the Prime Minister's behalf. He is said at the moment to be talking to Rice on the phone "at least once a day".

During his rapid rise to the top, Manning also had a spell as ambassador to Israel. He was packing his bags to leave London when Yitzhak Rabin was killed and then had a difficult time dealing with the Likud government of Binyamin Netanyahu.

Manning concluded from his tour in Israel the importance of intimacy and informality in dealing with the Israelis, in overcoming their innate suspicion of "stuffy Brits". That advice has been taken up with gusto by his successor as ambassador, Sherard Cowper-Coles, who has delighted his hosts with what the Jerusalem Post reported as "an unusual sympathy" for Israel. Earlier, Cowper-Coles, who works closely with Levy and is said to get on with him well, lamented to the Jerusalem Post that in Britain "the centre of gravity in the chattering classes has shifted against Israel", adding: "I wish I could do more to help Israel's hasbara [public relations] effort."

That PR exercise, to say the least, has been put on hold. Having seen his softly-softly, "try not to offend" policy blown out of the water by Israel's offensive of the past two weeks, Blair is belatedly trying to sound tough. He is now floating the idea of international monitors for the West Bank, something previously the Israelis have refused to countenance. The idea was pushed in Blair's statement to the Commons on Wednesday and Straw's Mansion House speech the same evening in a vain attempt to portray Britain as keeping up with the game and having a real influence to bear.

In the meantime, Blair is praying that, during his talks, Powell might knock some sense into Sharon. For, once the Israeli army does withdraw and the sheer scale of its destruction is brought to light, Blair and his advisers might well ponder what they have achieved by basing their Middle East policy on the hope that being nice to Bush and Sharon would lead to moderation and good sense.