Time Magazine

With reporting by Christopher Allbritton/Srifa, Andrew Lee Butters/Beirut, Elaine Shannon/WashingtonThe new war in the Middle East is not being fought with bombs or bullets. Instead, it is being waged amid the rubble and wreckage of Lebanon's streets, and the prize is the support and gratitude of the hundreds of thousands of citizens attempting to piece together their shattered lives. At Mehdi High School in Beirut, now a temporary administrative center for refugees who lost homes in the war with Israel, Abdel Hussein Hodroj asks a bearded young official behind a desk for help. The young man doesn't work for the Lebanese government or a humanitarian group or a United Nations agency. He's a member of Hizballah, the militant Shi'ite Muslim group that fought Israeli forces to a draw during 34 days of conflict--and is emerging as the most powerful force in postwar Lebanon.Hodroj, 72, describes how Israeli missiles turned his neighborhood in Beirut's southern suburbs into a Lebanese version of ground zero. The bearded man reaches into a lockbox and pulls out $12,000 in U.S. $100 bills. He presses the money into Hodroj's palm. It's meant to pay for a year's rent and furniture while Hizballah builds him a new home. Hodroj doesn't bother to count the inch-thick wad of cash, equal to more than twice the average Lebanese annual income. Score one for the militants. "We're with Hizballah all the way," Hodroj says, stuffing the cash into his pockets.For Hizballah and its backers, of course, this isn't just about charity. The scramble to rebuild Lebanon's bombed-out landscape has become a central front in a wider contest for influence in the new Middle East. On one side are Hizballah's Shi'ite Muslim militants and their leader, Sheik Hassan Nasrallahwho boast of winning a "divine victory" over the Jewish state--and the group's patrons, Iran and Syria. On the other are the U.S. and its Arab allies, like Saudi Arabia, Jordan and Egypt, who have been blindsided by the surge in Hizballah's prestige across the Islamic world and are trying to bolster Lebanon's democratically elected but chronically beleaguered government. Judging from the activity on the ground in Lebanon, where Hizballah has already handed out grants--ranging from $10,000 to $12,000--to some 15,000 homeless families, it's clear who is gaining. "They pre-empted us," says a Lebanese official, who explains that his government is strapped for cash. "There's no doubt Hizballah is endearing itself further with its supporters."The scale of Lebanon's destruction has provided opportunities as well as heartbreak. According to the Lebanese government, the war not only has killed 1,183 people, wounded 4,055 and displaced 974,184 but has also caused $3.6 billion in damage to residential buildings and civilian infrastructure like bridges, roads, power stations, telecommunications systems and airports. Hizballah has pledged to rebuild apartment buildings and entire villages within three years; it has sent civil-affairs teams wearing hats that read JIHAD FOR RECONSTRUCTION. The group's offensive is most evident in ruined towns like Srifa, south of the Litani River, where piles of rubble are all that mark where houses once stood. Broken guardrails, shattered glass and pulverized concrete make it difficult even to walk around. Thirty-two people, mostly Hizballah fighters, died in the town, but within a day of the cease-fire with Israel, the militants turned into recovery workers, bringing in bulldozers and earth-moving equipment to dig through the debris. Residents say Hizballah is the only group they trust to help. "It's our government," says Abdel-illah Haidar, 24, an electrician.In addition to strengthening Hizballah, the race to rebuild Lebanon has exacerbated conflicts that are tearing the region apart--between the U.S. and the Arab street, between fundamentalists and the West, between Sunni and Shi'ite Muslims. Hizballah's principal sponsor, Iran, has moved quickly to take advantage of the respect the organization is now receiving. According to Lebanese officials, the Tehran regime sent some $150 million in cash for Hizballah's initial postwar handouts, and is expected to give hundreds of millions more to finance reconstruction projects. The consolidation of Hizballah's support in southern Lebanon may make it more difficult, meanwhile, for Lebanese and U.N. forces to oversee the disarming of the group's fighters. That's good news for Iran, which wants to preserve Hizballah's military capacity as a deterrent against any possible U.S. or Israeli attack on Tehran's nuclear facilities. Although Hizballah officials claim that most of their money comes from charitable donations, an official interviewed by TIME acknowledged the importance of Tehran's support. "Thank God that Iran exists in this world," he said.That kind of talk is unnerving the region's Sunni Arab states, which have watched helplessly as Iran's Shi'ite rulers have accelerated their nuclear program and carved out areas of influence in Lebanon and Iraq. Not surprisingly, the Arabs are eager to be in the Lebanon game: between them, Saudi Arabia and Kuwait have pledged an $800 million aid package to the Lebanese government for rebuilding projects while handing an additional $1.5 billion in soft loans to the Bank of Lebanon to shore up the nation's currency. Saudi officials believe that the kingdom's support will far surpass the amount Iran provides Hizballah and will enable Lebanese Prime Minister Fouad Siniora to ride out the group's grab for influence. "You have to empower the Lebanese government so that it can reconstruct the country," says Nawaf Obaid, head of the Saudi National Security Assessment Project, which advises the Saudi government. "Iran and Hizballah will be the losers in the long run."If the U.S. and its allies hope to see that prediction come true, they need to make some big moves. The war in Lebanon has driven Washington's influence to a new low. Even leaders of the country's 2005 Cedar Revolution protests, which at the time was hailed by the White House as a democratic milestone for the Middle East, are angry with the U.S. for not supporting an immediate cease-fire or using leverage with Israel to prevent the destruction in Lebanon. Washington didn't do itself any favors by initially pledging just $50 million for Lebanon's recovery; the Iranians have already spent up to three times that. The White House last week more than quadrupled the U.S. aid package for Lebanon to $230 million, including support for the Lebanese Army to strengthen the central government against Hizballah.But the U.S. could still do more. Siniora wants Bush to pressure Israel to lift a continuing air and sea blockade. He also says the U.S.'s aid pledge won't be nearly enough to get Lebanon back on its feet. A Siniora aide points out that the government is nearly $3 billion short of what it would need just to get the country's infrastructure back to prewar levels. "I almost had tears in my eyes listening to Bush speak about how supportive he was of Lebanon," says Lebanese Economy and Trade Minister Sami Haddad, who accompanied Siniora to an Oval Office meeting four months ago. "But what the Bush Administration has been doing is not acceptable. People are very resentful."The longer such feelings persist, the more Hizballah is likely to press its advantage. The danger for Hizballah is that when the level of destruction fully sinks in, Lebanese leaders and ordinary citizens may well hold the group accountable for triggering Israel's wrath. For the time being, however, even Hizballah's critics are mainly silent, no doubt in deference to the prowess that Hizballah guerrillas have shown against Israel's more powerful armed forces. In Beirut's southern suburbs, where the group's bulldozers have cleared massive piles of rubble from the streets, Hizballah has planted bright red banners declaring MADE IN USA at the sites of destroyed buildings. At Mehdi High School, Hizballah officials move around, carrying walkie-talkies. As they perform their functions with the discipline of Hizballah guerrillas, military music blares from the loudspeakers. "We put it on to keep up people's spirits," says a Hizballah official. And in the Middle East these days, that's the only tune they're hearing.