Episode Three: Israel vs. New York Times

On episode 3, Charles C. W. Cooke asks Richard Epstein about Israel's potential defamation suit against the New York Times. Can a country sue a newspaper? Where would such a case be heard? Does it matter that Israel is a "public figure"? Could "actual malice" be proved? Would the New York Times want to settle? Does its non-retraction update help, or worsen, its position?