1. (C) Summary: Terje Roed-Larsen told Ambassador Rice on
June 22 that the June 7 Lebanese Parliamentary elections had
been "good news" and described three possible regional
scenarios going forward in order of probability: (1) business
as usual, (2) a regional war started by Hizballah involving
Israel and possibly Syria, and (3) a spectacular breakthrough
on the peace process. He urged the U.S. to focus on the
second phase of the Road Map in order to resolve the border
issue, which would solve the settlements questions through
land swaps. He said he was flying to Rome to finalize
negotiations between the Vatican and Saudi Arabia for the
establishment of an international organization, to be based
in Vienna, for inter-religious dialogue. On Iran,
Roed-Larsen said that Egypt and Saudi Arabia, are concerned
the protests in Iran could impact their own populations. End
summary.



2. (C) In a June 22 meeting, Ambassador Rice discussed with
Terje Roed-Larsen his "three hats" as (1) Special Envoy of
the Secretary-General for the implementation of UNSCR 1559;
(2) President of the International Peace Institute (IPI); and
(3) the Secretary-General's envoy for interfaith initiatives.



3. (C) On Lebanon, Roed-Larsen described the June 7
Parliamentary elections in Lebanon as "good news" and said
that IPI's 2008 opinion poll had accurately predicted the
results. Looking forward, Roed-Larsen said there were three
possible scenarios for the Middle East which he listed in
order of probability: (1) business as usual, including the
possibility of an assassination or two; (2) regional war: and
then (3) a spectacular breakthrough in the peace process. He
described the regional war scenario as beginning with
Hizballah attacking Israel or an Israeli target to revenge
Imad Mughniyah's assassination with Israel then retaliating,
thereby starting a war. Roed-Larsen said that Israeli
leaders believe Hizballah will complete its transformation
into a regular army within two years, and so believe they
will more likely "win a war if they engage Hizballah before
this transformation is completed and are looking for a
"causus belli." Roed-Larsen said Syria might be drawn into
such a war either willfully or if Israel attacks some 800
ground-to-air missiles that are stored on the Syrian side of
the Syrian-Lebanese border.



4. (C) On the Palestinian situation, Roed-Larsen said that
IPI has commissioned an opinion poll in the West Bank/Gaza
and they should have the results in September. Early
indications from test polls show that Hamas would win an
election in the West Bank but is very weak in Gaza,
Roed-Larsen shared. He commented that if there is a good
peace deal, Fatah will win in both places. Turning to
Israel, he described Israeli Prime Minister Netanyahu as not
an ideologue but boxed in by his coalition. In order to get
a peace deal, Roed-Larsen said Netanyahu will have to join a
coalition with Kadima. Roed-Larsen characterized Israeli
Foreign Minister Lieberman as "thuggish" and "not a great
charmer" but someone who is very bright and pragmatic and
wants to be a future Prime Minister. Given the Palestinians'
current weakness, Roed-Larsen urged the U.S. to bring in the
key, moderate Arabs and have them press President Abbas to
make a deal. Roed-Larsen stressed that everything should be
based on the second phase of the Road Map in order to resolve
the border issue, which would solve the settlements question
through land swaps. He described how Arab League
Secretary-General Moussa, at a recent dinner of key European
and Arab Foreign Ministers in Luxembourg hosted by
Roed-Larsen and Spanish Foreign Minister Moratinos, had
argued persuasively for a six month moratorium on settlements
in order to negotiate the second phase of the Road Map.



5. (C) Turning to his third hat -- interfaith initiatives,
Roed-Larsen said he was flying to Rome to finalize
negotiations between the Vatican and Saudi Arabia on a new
international organization, to be based in Vienna, for
inter-religious dialogue. Roed-Larsen said that Saudi King
Abdullah views this as the "most important thing he has done
in his life." Roed-Larsen noted that the Saudis had recently
recognized the Jewish nature of the Western Wall in Jerusalem
and this could lead to establishment of normal bilateral
relations between Saudi Arabia and the Vatican but the Saudis
were treading slowly so as to not upset the religious
clerics. Roed-Larsen suggested that there could be a role
for Saudi Arabia to play in Jerusalem's Holy Basin.



6. (C) On Iran, Roed-Larsen said that while Egypt and Saudi
Arabia believe that Iran is the "main enemy," they are
concerned that their own populations may draw inspiration

USUN NEW Y 00000618 002 OF 002


from the protests in Iran. Roed-Larsen said, "whatever way
it ends, it could have huge consequences and Iranian society
will not be the same." He said that both Hizballah and Hamas
are nervously watching what happens in Iran.
RICE