Unless Congress takes legislative action, the newspaper said, President George W. Bush has discretion under US law about whether to impose sanctions on Israel, which US officials said would be unlikely.

The preliminary report is based on a probe launched in August and on information Israel gave the State Department in late 2006 acknowledging it fired thousands of cluster munitions but denying it broke any agreement, the state department told the newspaper.

Israeli foreign ministry spokesman Mark Regev told AFP in Jerusalem tht Israel was fully cooperating with the investigation.

‘We’ve worked in tight cooperation with the United States in full transparency and detail and we are also conducting our investigation into the issue on our side,’ Regev said.

During its July 12-August 14 air war against Lebanon, Israel dropped more than a million cluster bombs in southern Lebanon, according the United Nations, to counter Hezbollah rocket attacks that were killing Israelis.

The cluster munitions, which spread bomblets over a wide area from a single container, included artillery shells, rockets and bombs dropped from aircraft, many of which the US sold to Israel years ago, a US official told the daily.

The Arms Export Control Act bans the use of cluster munitions against populated areas. Israel says Lebanese civilians were not targeted but were warned ahead of the action by dropped leaflets.

Some State Department and Pentagon officials believe Israel used the cluster bombs in self-defence, while others contend they violated US law because they were used on populated areas, officials familiar with the debate told thenewspaper.

State Department spokesman Sean McCormack said Congress would be notified of the report on Monday and that a final determination on whether Israel had violated the agreements was still being debated, the Times reported.

‘It is important to remember the kind of war Hezbollah waged,’  McCormack said. ‘They used innocent civilians as a way to shield their fighters.’

The sanctions could include a ban on the sale of cluster weapons to Israel similar to the six-year ban imposed 25 years ago under then US president Ronald Reagan, after Israel used cluster munitions in its 1982 invasion of Lebanon.