Israel has stepped up air raids on Lebanese targets and blockaded Lebanese sea ports following a cross-border attack by Hezbollah guerillas during which two Israeli soldiers were kidnapped and eight killed.

    Russia and the United States are members of the so-called international Quartet mediating for peace in the Middle East. The Quartet also includes the United Nations and the European Union.

    The two sides also failed to cap Russia's longtime bid for membership in the World Trade Organization with a deal which was to be announced by the two leaders.

    Bush said the deal is "almost reached," but more work needs to be done.

    In frantic talks in Moscow and St. Petersburg, Russia agreed to allow U.S. insurance companies access to its market.

    The United States reportedly dropped a demand that foreign banks be allowed to open directly-owned branches in Russia, but wanted more Russian concessions on Boeing plane orders and access for U.S. companies to the Shtokman oil fields.

    The United States remains the last hurdle to Russia's WTO accession bid.

    The Washington Post quoted Dmitri Trenin, an expert at the Carnegie Moscow Center, as saying that the failure to clinch the deal would be seen in the Kremlin as a major blow.

    "They hoped, people within the government, that the U.S. would do that and I think they feel disappointed," he said.

    Russia-U.S. relations dipped following U.S. Vice president Dick Cheney's recent remarks that Moscow was using energy "as tools of blackmail and intimidation" of neighboring countries.

    A Russian international relations expert said the recent downturn in Russia-U.S. ties resulted not only from differences over strategic interests but also from a re-emergence of ideological differences.

    But at the St. Petersburg meeting, Bush said he did not want to lecture Putin on democracy, and Putin said he would welcome discussions on democracy "in a friendly and fair way."

    For all their differences, the United States and Russia share common interests in fighting terrorism and safeguarding the non-proliferation regime. And on issues like the Iranian nuclear program and the Middle East peace process, the United States is also wooing Russia for support, analysts said. Enditem