On Tuesday, Lebanese Hezbollah fighters and Syrian soldiers, backed by air strikes and artillery, renewed an offensive aimed at driving Syrian rebels from the town of Qusair near the Lebanese border, opposition activists said.

Bitter fighting in the town since Sunday has claimed the lives of up to 50 fighters from the Iranian-backed guerrilla group, among their worst losses so far in the war, and prompted renewed fears that Syria’s two-year-old civil war will spread beyond the country’s borders.

A senior U.S. official said reports from Syrian rebel commanders indicated that Iranians were at Qusair along with fighters from Lebanese Hezbollah, but he did not know if the Iranians were actually fighting.

“It is the most visible effort that we have seen of Hezbollah to engage directly in the fighting in Syria as a foreign force and we understand there are also Iranians up there. That is what the Free Syrian Army commanders are telling us,” said the official, who spoke on condition of anonymity.

In further hostilities, Syria announced for the first time since the civil war began that its soldiers had targeted Israel’s armed forces. It said its troops had destroyed an Israeli vehicle that crossed into Syrian territory from the Israeli-occupied Golan Heights.

Israel’s most senior general warned Assad he would bear the consequences of any further escalation on the Golan Heights. Israel said the incident took place on its side of the Golan ceasefire line, that the vehicle was only damaged, none of its soldiers were hurt and they returned fire.

Violence has left at least 80,000 Syrians dead as world powers have argued over how to end it but on Tuesday foreign diplomats said Assad’s government was preparing to join a peace conference promoted by the United States and Russia, while his opponents said they too were ready to take part.

SECTARIAN FIGHTING

In the northern Lebanese city of Tripoli, three people were killed in further sectarian fighting on Tuesday, security sources said, raising the death toll from four days of sporadic violence related to Syria’s civil war to nine.

The sources said 60 people, including civilians, had been wounded over that period in Tripoli, where an pro-Assad Alawite minority lives on a hill overlooking the mainly Sunni Muslim port city.

With international pressure rising for a return to the table by both sides, the United Nations-Arab League mediator, Lakhdar Brahimi, said the U.N. was working to organise the peace talks.

“The Syrian people are building great hopes on the conference, as the opposition prepares itself to take part and likewise the Syrian regime prepares to take part in this conference,” he told reporters at the Arab League in Cairo.

Western powers and Russia back opposing sides in the cross-border Syrian conflict – though Washington and its allies have been unwilling to intervene militarily in support of fractured and partly Islamist rebel forces.

The talks are due to take place in Geneva in June. U.S. Secretary of State John Kerry is due to discuss current planning for the conference at a meeting in Jordan on Wednesday of the “Friends of Syria” club of countries, many of which are sceptical about the peace initiative.

Brahimi said: “There are many problems in the preparation for this conference, the first of which is the formation of the delegations of the regime and the opposition.”

Syria’s opposition is also due to meet in Istanbul on Thursday to announce its stance while the Arab League’s Syria committee will meet in Cairo.

FIVE OFFICIALS

European Union diplomatic sources said Assad had put forward the names of five officials from his administration to take part in the talks.

The list includes Prime Minister Wael al-Halki and more junior officials. According one EU diplomat, the opposition has rejected some of the names because of their lack of influence.

But opposition figures say they are likely to agree to attend the talks anyway in a bid to isolate Assad.

Diplomats say it is too early to say when the talks might take place.

The senior U.S. official hinted at U.S. scepticism about Russia’s commitment to a negotiated solution, suggesting that Russian arms deliveries to the Assad government would probably stiffen the president’s resolve to hang on to power.

“The Russians, on the one hand, strongly support, they say, holding this conference in Geneva but on the other hand they are continuing to deliver weapons, very modern weapons, very dangerous weapons to the Syrian regime,” said the U.S. official.

Assad is battling an uprising in which rebel forces, including radical Islamists, have taken swathes of territory.

The latest battleground is Qusair, which lies on an important supply route from Lebanon for rebels in the central province of Homs.

Opposition activists said fighting was raging in the town, as well as in areas to the east where several army bases are located, and in the Hezbollah-held southern and western approaches to the town.

The number of rebel and civilian deaths in the last 48 hours had reached more than 100, according to the opposition.

Syrian state media have said Assad’s forces had reasserted control over most of Qusair, but rebels said the offensive had been ineffectual.

The senior U.S. official said there were concerns that if Syrian government forces captured Qusair, there would be retaliation against the thousands of civilians there.

“And so it is important that the regime know that the world is watching this and we are watching this and we will know if they commit massacres and we will know who it was that committed it and they will be held accountable,” the U.S. official said.

Assad, who is from Syria’s minority Alawite sect and has long backed Hezbollah in Lebanon, is fighting a Sunni-led revolt which began with peaceful protests in March 2011. His violent response eventually prompted rebels to take up arms.

(Writing by Giles Elgood; Editing by Alastair Macdonald)

Israel said the incident took place on its side of the Golan ceasefire line, that the vehicle was damaged but not destroyed, none of its soldiers were hurt and they returned fire.

The clash highlighted the potential for renewed conflict along a frontline that has become increasingly fraught after nearly four decades of calm overseen by Syrian President Bashar al-Assad and his father.

It also followed Israeli airstrikes near Damascus against suspected missile stockpiles two weeks ago, after which Syria threatened to retaliate.

Assad is battling a two-year-old uprising in which rebel forces, including radical Islamists, have taken swathes of rural territory and attacked army posts near the Golan frontier.

There are frequent reports of cross-border gunfire from Syria during clashes between army and rebel forces but Tuesday’s incident was the first time since the start of the crisis that Syria’s armed forces said they targeted Israel’s military.

“Our noble armed forces destroyed an Israeli vehicle … which entered from the occupied territories and crossed the ceasefire line,” Syria’s military leadership said in a statement broadcast on state media. The incident occurred at 1:10 am (2210 GMT, Monday), it said.

Shortly afterwards, Israeli forces fired two rockets towards a Syrian position, without causing any casualties, Syria said.

The Israeli military’s chief of staff, Lieutenant-General Benny Gantz, said the Israeli army vehicle had been patrolling on the Israeli side of a border fence when it came under repeated fire.

“They fire on it once. They fire on it twice. They fire on it a third time, from a clear Syrian position,” he said in a speech. “One time, okay. Two times, okay. Three times, too many. The position was destroyed.”

Defence Minister Moshe Yaalon said: “Our policy on Syria is clear: We are not intervening there, of course, in the civil war … But as for the situation in the Golan Heights, we are not allowing and we will not permit a spillover of fire into our territory.”

AGGRESSION

Tension in the Golan Heights region has been fuelled by the fighting on the Syrian side and several recent abductions by rebel fighters of U.N. peacekeepers, who have monitored a narrow zone of separation between Syrian and Israeli troops since 1974.

The abductions led the Philippines government to say it was considering withdrawing its troops from the UNDOF observer mission. Austria, the other main troop contributor, is concerned that French and British calls to drop an EU arms embargo on Syrian rebels would render its continued presence untenable.

Adding to the sense of alert, the militant Popular Front for the Liberation of Palestine said two weeks ago it was forming combat units to try to recapture the Golan, after Assad and Lebanon’s Hezbollah said they would support such operations.

The announcement followed Israel’s air strikes near Damascus against suspected missiles stocks destined for Hezbollah, which fought a 34-day war with Israel in 2006.

Syria’s Foreign Ministry sent a written complaint to the United Nations on Tuesday, saying Israel’s actions violated the United Nations charter and a 1974 military disengagement agreement between the two foes.

Syria’s military command said the incident showed that Israel was supporting the anti-Assad rebels and aimed “to raise their morale which collapsed after the tough blows struck by our noble armed forces … especially in Qusair.”

Syria’s army, backed by Hezbollah, has launched an offensive to capture the central town of Qusair, which has been in rebel hands for most of the two-year uprising which has now killed more than 80,000 people, according to the United Nations.

“The blatant Zionist aggression confirms that any violation, or attempted violation of the country’s sovereignty will be met with immediate and firm retaliation,” the Syrian army said.

(Additional reporting by Allyn Fisher-Ilan and Jeffrey Heller in Jerusalem; Editing by Robin Pomeroy)

Israel said the incident took place on its side of Golan ceasefire line and the vehicle was damaged but not destroyed, and none of its soldiers was hurt. It said its troops returned fire.

The clash highlighted the potential for renewed conflict along a frontline that has become increasingly fraught after nearly four decades of calm overseen by Syrian President Bashar al-Assad and his father.

It also came two weeks after Israel launched airstrikes near Damascus against suspected missile stocks after which Syria threatened to retaliate.

Assad is battling a two-year-old uprising in which rebel forces, including radical Islamists, have taken swathes of rural territory and attacked army posts near the Golan frontier.

There are frequent reports of cross-border gunfire from Syria during clashes between army and rebel forces, but Tuesday’s incident was the first time since the start of the crisis that Syria’s armed forces said they targeted Israel’s military.

“Our noble armed forces destroyed an Israeli vehicle … which entered from the occupied territories and crossed the ceasefire line,” Syria’s military leadership said in a statement broadcast on state media said. The incident occurred at 1:15 am (2215 GMT, Monday), it said.

Shortly afterwards, Israeli forces fired two rockets towards a Syrian position, without causing any casualties, it said.

Israel said its vehicle had been on the Israeli side of the frontier. Defence Minister Moshe Yaalon said that in response to the Syrian fire, Israeli forces hit a Syrian army target.

“Our policy on Syria is clear: We are not intervening there, of course, in the civil war,” he told reporters.

“But as for the situation in the Golan Heights, we are not allowing and we will not permit a spillover of fire into our territory. Overnight, a Syrian army target was destroyed after such gunfire spilled into our territory in the Golan Heights.”

Tension in the Golan Heights region has been fuelled by the fighting on the Syrian side and several recent abductions by rebel fighters of U.N. peacekeepers, who have monitored a narrow zone of separation between Syrian and Israeli troops since 1974.

The abductions have led the Philippines government to say it is considering withdrawing its troops from the UNDOF observer mission. Austria, the other main troop contributor, is concerned that French and British calls to drop an EU arms embargo on Syrian rebels would render its continued presence untenable.

Adding to the sense of alert, the militant Popular Front for the Liberation of Palestine said two weeks ago it was forming combat units to try to recapture the Golan, after Assad and Lebanon’s Hezbollah said they would support such operations.

The announcement followed Israeli air strikes near Damascus against suspected missiles stocks destined for Hezbollah, which fought a 34-day war with Israel in 2006.

Syria’s military command said Tuesday’s incident showed that Israel was supporting the anti-Assad rebels and aimed “to raise their morale which collapsed after the tough blows struck by our noble armed forces … especially in Qusair.”

Syria’s army, backed by Hezbollah, has launched an offensive to capture the central town of Qusair, which has been in rebel hands for most of the two-year uprising which has now killed more than 80,000 people, according to the United Nations.

“The blatant Zionist aggression confirms that any violation, or attempted violation of the country’s sovereignty will be met with immediate and firm retaliation,” it said.

(Additional reporting by Allyn Fisher-Ilan and Jeffrey Heller in Jerusalem; Editing by Robin Pomeroy)

About 30 Hezbollah fighters were killed on Sunday, Syrian activists said, along with 20 Syrian troops and militiamen loyal to President Bashar al-Assad during the fiercest fighting this year in the rebel stronghold of Qusair, near the Lebanon border.

That would be the highest daily loss for the Iranian-backed movement in Syria, highlighting how it is increasing its efforts to bolster Assad; it prompted U.S. President Barack Obama to voice hi concern to his Lebanese counterpart, Michel Suleiman.

If confirmed, the Hezbollah losses reflect how Syria is becoming a proxy conflict between Shi’ite Iran and Arab states like Saudi Arabia and Qatar, which back Assad’s mostly Sunni enemies. Dozens of dead in sectarian bombings in Iraq on Monday and killings in the Lebanese city of Tripoli compounded a sense of spreading regional confrontation.

Western powers and Russia back opposing sides in the cross-border Syrian free-for-all, which is also sucking in Israel – though Washington and its allies have fought shy of intervening militarily behind fractured and partly Islamist rebel forces.

The White House said Obama spoke to Lebanese President Suleiman and “stressed his concern about Hezbollah’s active and growing role in Syria, fighting on behalf of the Assad regime, which is counter to the Lebanese government’s policies”. The Beirut government, however, has limited means to influence the politically and militarily powerful Shi’ite group.

The two leaders agreed “all parties should respect Lebanon’s policy of disassociation from the conflict in Syria and avoid actions that will involve the Lebanese people in the conflict”.

Israeli Prime Minister Benjamin Netanyahu said his country was “preparing for every scenario” in Syria and held out the prospect of more Israeli strikes on Syria to stop Hezbollah and other opponents of Israel obtaining advanced weapons.

Israel has not confirmed or denied reports by Western and Israeli intelligence sources that three raids this year targeted Iranian missiles near Damascus that it believed were awaiting delivery to Hezbollah, which fought a war with Israel in 2006.

FOG OF WAR

Syrian opposition sources and state media gave differing accounts of Sunday’s clashes in Qusair, long used by rebels as a supply route from Lebanon to the provincial capital Homs.

Hezbollah has not commented but in Lebanon’s Bekaa Valley on Monday several funeral processions could be seen. Pictures of dead fighters were plastered on to cars and mourners waved yellow Hezbollah flags. Several ambulances were seen on the main Bekaa Valley highway and residents said hospitals had appealed for blood to treat the wounded brought back to Lebanon.

The air and tank assault on the strategic town of 30,000 people appeared to be part of a campaign by Assad’s forces to consolidate their grip on Damascus and secure links between the capital and government strongholds in the Alawite coastal heartland via the contested central city of Homs.

The government campaign has coincided with efforts by the United States and Russia, despite their differences on Syria, to organise peace talks to end a conflict now in its third year in which more than 80,000 people have been killed.

A total of 100 combatants from both sides were killed in Sunday’s offensive, according to opposition sources, including the British-based Syrian Observatory for Human Rights. Such a death toll would indicate at least hundreds had taken part.

Troops have already retaken several villages around Qusair and have attacked increasingly isolated rebel units in Homs.

“If Qusair falls, God forbid, the opposition in Homs city will be in grave danger,” said an activist who called himself Abu Jaafar al-Mugharbil.

State news agency SANA said the army had “restored security and stability to most Qusair neighbourhoods” and was “chasing the remnants of the terrorists in the northern district”.

Syrian television also showed footage of what it said was an Israeli military Jeep which it said the rebels had been using and which showed the extent of their foreign backing. An Israeli military spokeswoman said the vehicle was decommissioned a decade ago and dismissed the footage as “poor propaganda”.

Opposition activists said rebels in Qusair, about 10 km (six miles) from the Lebanese border, had pushed back most of the attacking forces to their original positions in the east of the town and to the south on Sunday, destroying at least four Syrian army tanks and five light Hezbollah vehicles.

The Western-backed leadership of the Free Syrian Army, the loose umbrella group trying to oversee hundreds of disparate rebel brigades, said the Qusair fighters had thwarted Hezbollah with military operations it dubbed “Walls of Death”.

Syrian government restrictions on access for independent media make it hard to verify such videos and accounts.

“NO DIALOGUE WITH TERRORISTS”

The fighting raged as Western nations are seeking to step up pressure on Assad – Britain and France want the European Union to allow arms deliveries to rebels – while preparing for the peace talks brokered by Russia and the United States next month.

British Foreign Secretary William Hague said “no option is off the table” over the possible arming of rebels if the Syrian government does not negotiate seriously at the proposed talks.

Russian Foreign Minister Sergei Lavrov, whose country has shielded Syria from U.N. Security Council action, said Syrian opposition representatives must take part without precondition, apparently referring to their demands for Assad’s exit before they come to the table.

Assad has scorned the idea that the conference expected to convene in Geneva could end a war that is fuelling instability and deepening Sunni-Shi’ite rifts across the Middle East.

“They think a political conference will halt terrorists in the country. That is unrealistic,” he told the Argentine newspaper Clarin, in a reference to Syria’s mainly Sunni rebels.

Assad ruled out “dialogue with terrorists”, but it was not clear from his remarks whether he would agree to send delegates to a conference that may in any case falter before it starts due to disagreements between its two main sponsors and their allies.

The fractured Syrian opposition is to discuss the proposed peace conference at a meeting due to start in Istanbul on Thursday, during which it will also appoint a new leadership.

Among divisive factors in the rebel camp is fundamentalist Islam, practised by some fighters and opposed by others. In the latest Internet video from Syria to cause discomfort for rebels seeking Western backing, anti-Assad Islamists flogged two men they said had infringed a ban on marrying newly divorced women.

Attacks by troops and militias loyal to Assad, who inherited power in Syria from his father in 2000, have put rebel groups under pressure in several of their strongholds in recent weeks.

Assad, from Syria’s minority Alawite sect, has been battling an uprising which began with peaceful protests in March 2011. His violent response eventually prompted rebels to take up arms.

Hezbollah has supported Assad throughout the crisis but for months denied reports it was fighting alongside Assad’s troops.

The Syrian Observatory for Human Rights put the Hezbollah casualties on Sunday at 28 dead and more than 70 wounded, while 48 rebel fighters and four civilians were also killed.

Tareq Murei, an activist in Qusair, said six more people were killed on Monday as Syrian army artillery and Hezbollah rocket launchers bombarded rebel-held parts of the town.

Video footage purportedly showed a Syrian tank on fire at a street corner in the town. In another video a warplane was shown flying over the town amid the sound of explosions.

Lebanese security sources said at least 12 Hezbollah fighters were killed in Qusair on Sunday. Seven were to be buried in the Lebanese town of Baalbek and nearby villages on Monday, they said.

(Additional reporting by Erika Solomon in Hermel and Dan Williams in Jerusalem; Writing by Dominic Evans; Editing by Samia Nakhoul, Alistair Lyon, Giles Elgood and Alastair Macdonald)

If confirmed, the Hezbollah toll from Sunday’s battles in Qusair near the Lebanese border would highlight a deepening intervention in Syria by the guerrilla group set up by Iran in the 1980s to fight Israeli occupation troops in south Lebanon.

The reported Hezbollah losses also reflect the extent to which the Syrian conflict is turning into a proxy war between Shi’ite Iran and U.S.-aligned Gulf Arab states such as Saudi Arabia and Qatar, which back Assad’s mostly Sunni foes.

Western countries and Russia, an ally of Damascus, back opposing sides in this regional free-for-all which is also sucking in Israel. Three times this year Israeli planes have bombed presumed Iranian arms stocks destined for Hezbollah.

Israeli Prime Minister Benjamin Netanyahu said his country was “preparing for every scenario” in Syria and held out the prospect of more Israeli strikes inside Syria to stop Hezbollah and other opponents of Israel getting advanced weapons.

Israel has not confirmed or denied reports by Western and Israeli intelligence sources that its raids targeted Iranian missiles stored near Damascus that it believed were awaiting delivery to Hezbollah, which fought a war with Israel in 2006.

FOG OF WAR

Syrian opposition sources and state media gave widely differing accounts of Sunday’s ferocious clashes in Qusair, long used by rebels as a supply route from the nearby Lebanese border to the provincial capital Homs. Hezbollah has not commented.

The air and tank assault on the strategic town of 30,000 people appeared to be part of a campaign by Assad’s forces to consolidate their grip on Damascus and secure links between the capital and government strongholds in the Alawite coastal heartland via the contested central city of Homs.

The government campaign has coincided with efforts by the United States and Russia, despite their differences on Syria, to organize peace talks to end a conflict now in its third year in which more than 80,000 people have been killed.

A total of 100 combatants from both sides were killed in Sunday’s offensive, according to opposition sources, including the British-based Syrian Observatory for Human Rights.

Troops have already retaken several villages around Qusair and have attacked increasingly isolated rebel units in Homs.

“If Qusair falls, God forbid, the opposition in Homs city will be in grave danger,” said an activist who called himself Abu Jaafar al-Mugharbil.

State news agency SANA said the army had “restored security and stability to most Qusair neighborhoods” and was “chasing the remnants of the terrorists in the northern district”.

However, opposition activists said rebels in Qusair, about 10 km (six miles) from the Lebanese border, had pushed back most of the attacking forces to their original positions in the east of the town and to the south on Sunday, destroying at least four Syrian army tanks and five light Hezbollah vehicles.

The Western-backed leadership of the Free Syrian Army, the loose umbrella group trying to oversee hundreds of disparate rebel brigades, said the Qusair fighters had thwarted Hezbollah with military operations it dubbed “Walls of Death”.

Syrian government restrictions on access for independent media make it hard to verify such videos and accounts.

“NO DIALOGUE WITH TERRORISTS”

The fighting raged as Western nations seek to step up pressure on Assad – Britain and France want the European Union to allow arms deliveries to rebels – while preparing for the peace talks brokered by Russia and the United States next month.

Assad has scorned the idea that the conference expected to convene in Geneva could end a war that is fuelling instability and deepening Sunni-Shi’ite rifts across the Middle East.

“They think a political conference will halt terrorists in the country. That is unrealistic,” he told the Argentine newspaper Clarin, in reference to Syria’s mainly Sunni rebels.

Assad ruled out “dialogue with terrorists”, but it was not clear from his remarks whether he would agree to send delegates to a conference that may falter before it starts due to disagreements between its two main sponsors and their allies.

The fractured Syrian opposition is to discuss the proposed peace conference at a meeting due to start in Istanbul on Thursday, during which it will also appoint a new leadership.

Attacks by troops and militias loyal to Assad, who inherited power in Syria from his father in 2000, have put rebels under pressure in several of their strongholds in recent weeks.

Assad, from Syria’s minority Alawite sect, has been battling an uprising which began with peaceful protests in March 2011. His violent response eventually prompted rebels to take up arms.

Hezbollah has supported Assad throughout the crisis but for months denied reports it was fighting alongside Assad’s troops.

The Syrian Observatory for Human Rights put the Hezbollah casualties on Sunday at 23 dead and more than 70 wounded, while 48 rebel fighters and four civilians were also killed.

Tareq Murei, an activist in Qusair, said six more people were killed on Monday as Syrian army artillery and Hezbollah rocket launchers bombarded rebel-held parts of the town.

Video footage purportedly showed a Syrian tank on fire at a street corner in the town. In another video a warplane was shown flying over the town amid the sound of explosions.

Lebanese security sources said at least 12 Hezbollah fighters were killed in Qusair on Sunday. Seven were to be buried in the Lebanese town of Baalbek and nearby villages on Monday.

(Writing by Dominic Evans,; Editing by Samia Nakhoul and Alistair Lyon)

President Bashar al-Assad, and his father before him, kept the front line between Syria and the Israeli-occupied Golan quiet despite an official state of war between the two countries and Syria’s support for militants in Lebanon and Gaza.

But following Israel’s weekend air raids near Damascus, Assad was quoted as saying he would turn the Golan into a “resistance front” – suggesting he had given a green light to guerrilla groups to launch retaliatory attacks.

Assad’s ally Hassan Nasrallah, head of the powerful Lebanese militia Hezbollah, followed with a promise to support his efforts “to liberate the Syrian Golan”.

“When Assad said this, Israeli officials mocked,” Israeli military affairs analyst wrote in Israel’s Yedioth Ahronoth newspaper. “But when Assad and Nasrallah voice the exact same threat, it should be taken seriously”.

“Hezbollah could begin to find a foothold on the Israeli-Syrian border which, in the absence of a central government in Damascus, is becoming chaotic.”

Hezbollah fought a 34-day war with Israel in 2006, firing thousands of rockets into northern Israel.

Nasrallah said that in response to the Israeli air raid, which intelligence sources said targeted weapons destined for his fighters, Syria would supply Hezbollah with more sophisticated weaponry.

“If the Israeli enemy thinks it can destroy Syria, let me tell you that Syria and Hezbollah can destroy Israel,” Syrian parliamentarian Sharif Shehada told Hezbollah’s Manar television. “When President Assad says Syria has become a nation of resistance, he is certain of what he is saying”.

As well as Hezbollah, Assad could still depend on some loyal Palestinian factions based in Syria to stage attacks on Israel.

A group calling itself the Free Palestine Movement said on Friday its fighters attacked an Israeli observation post in the Golan. Israel’s military said it was unaware of any incident.

FRONTIER “INCREASINGLY SHAKY”

The Syrian side of the frontier has already become a battle ground between Assad’s forces and rebels seeking his overthrow, with fighting breaking out even within the narrow, U.N.-monitored separation zone between Syria and the Golan.

Rami Abdelrahman, head of the Britain-based Syrian Observatory for Human Rights, said rebels had been conducting hit-and-run attacks on Assad’s forces near the Golan frontline.

In some areas, particularly along the southern stretch of the 50 mile frontier, Assad’s forces have pulled back from their positions, although rebels are unable to assert control because of the army’s superior firepower, he said.

“It’s increasingly shaky,” said a Western diplomat in Beirut who is monitoring developments in the Golan area.

The growing strength of jihadi fighters among rebel ranks is already posing a headache for Israel, which worries that al Qaeda fighters are for the first time winning territory close to its northern frontier.

In the latest blow to stability in the Golan, Syrian rebel fighters seized four Filipino observers this week, the second abduction of U.N. personnel in two months.

The Philippines said in response it aims to withdraw its 342 soldiers, casting further doubt on the future of the 1,000-strong UNDOF force patrolling the sliver of territory which has formed a barrier between the two foes since 1974.

Japan and Croatia have already withdrawn troops and diplomats say Austria, the largest remaining troop contributor, is reluctant to stay if the European Union eases a ban on arms sales to rebels because it would make the EU part of the conflict.

“Imagine the situation where the only neutral party in the area is removed – it would be a free-for-all, it could be very very dangerous,” said Timor Goksel, who served with U.N. peacekeepers in southern Lebanon for 24 years.

“Even with its limited abilities, UNDOF is an important stability agent in the region.”

On the Golan Heights itself, occupied by Israel in the 1967 Middle East War and annexed 14 years later in a move not recognized internationally, Israeli security officials see little threat from the local Druze population who live alongside Israeli settlers.

Salman Sahar-Deen, a Golan Druze, was dismissive of Nasrallah’s threat.

“An absolute majority of the Druze oppose Israeli occupation. But they are split on supporting Syria,” he said.

“What Nasrallah is proposing does not suit our capabilities nor our doctrine. There is always the chance of small groups taking action, but that would be very local.”

For now, Assad’s priority is to crush the two-year-old uprising against his rule. Hezbollah too is focused on supporting its ally in Damascus and would be wary of launching an offensive which leaves Lebanon open to devastating Israeli retaliation.

Goksel said the he did not believe Assad or Hezbollah planned major military operations into the Golan, but the security vacuum on the Syrian side left room for others to act.

“What I’m afraid of, given the fact that no one is really in charge there, is that any group affiliated to Damascus can take matters into its own hands,” he said.

“It happened in Lebanon. When we used to have problems in Palestine someone in the south (of Lebanon) would go and launch a couple of rockets into Israel”

(Additional reporting by Dan Williams in Jerusalem; Editing by Angus MacSwan)

Pointing to the sharp slowdown in Lebanon’s economic growth since the start of Syria’s conflict in 2011, from 7 percent to barely 2 percent, Abdallah al-Dardari said there was a direct link to the ever-deepening economic collapse in Syria.

Jordan’s economic growth had remained steadier, between 2 and 3 percent, but was still affected by the Syrian turmoil and was below the level needed to provide enough jobs for its fast-growing population, he said.

The Syrian conflict “has a very destabilising effect,” said Dardari, now chief economist for the regional United Nations body ESCWA. “It is in the interest of the whole region for Syria to regain peace and quiet, and start rebuilding.”

Dardari said Syria’s economy had already shrunk between 35 to 40 percent and would fall 60 percent from its level at the start of the uprising if the fighting continued.

Every one percentage point of economic slowdown in Syria produced a 0.2 percentage point slowdown in Lebanon, he said.

With Syria’s economy still collapsing “we can speak about negative growth in Lebanon and Jordan if the situation in Syria continues as it is today for the next two years,” he told Reuters in an interview at the U.N.’s central Beirut offices.

The former deputy prime minister for economic affairs was dismissed by President Bashar al-Assad in a cabinet reshuffle shortly after the uprising erupted. He has since been working at the U.N. on plans for Syria’s post-conflict reconstruction.

SYRIA CRISIS HITS TOURISM, TRADE

Economists in Lebanon say domestic factors also played a part in the country’s economic slowdown, including the political uncertainty when former Prime Minister Saad al-Hariri’s government was toppled in early 2011.

But Dardari said the Syrian crisis was hitting tourism, trade, development assistance from Gulf Arab oil states and even remittance levels from Lebanon’s huge expatriate population, who worry about security in their homeland.

The flood of cheap Syrian labour into Lebanon could also drag down average salaries by 14 percent because of the increase in labour supply of hundreds of thousands of refugees and labourers arriving in a country of just 4 million.

Lebanon’s Central Bank governor Riad Salameh, speaking at a conference in Beirut on Thursday, agreed that the Syrian conflict was weighing on Lebanon’s performance but reiterated his forecast of 2 percent growth this year.

The impact on Jordan would be slightly less because its economy was less tied to Syria’s, Dardari said. “However you can see in the last five to 10 years Syria and Jordan dramatically improved their trade relations and bilateral investments, and have tremendous plans for further integration.”

“That has all stopped now”.

Dardari’s prediction was gloomier than the IMF, which said in March it expected Jordan’s economic growth to accelerate above 3 percent, reflecting an increase in government capital spending, higher domestic consumption and a recovery in exports.

However Syria faced almost unimaginable challenges even if the fighting were to stop tomorrow, Dardari said. He put the economic cost at $70-$80 billion, including $28 billion to rebuild 1.2 million houses and provide them with infrastructure.

The country would need 30 million tonnes of cement a year – more than three times pre-crisis quantities – to repair damaged homes and keep up with the need for new housing, he said. “Thirty million tonnes of cement requires more than 1 billion cubic metres of water. We don’t have that much water.”

Sustained fighting on the other hand could only bring greater calamity, including staggering levels of unemployment and absolute poverty, he said.

“Over the next few years, if the fighting continues, we will have to look at it as a disaster zone rather than a normal economy functioning according to economics as we know it.”

(Editing by Jon Hemming)

Pointing to the sharp slowdown in Lebanon’s economic growth since the start of Syria’s conflict in 2011, from 7 percent to barely 2 percent, Abdallah al-Dardari said there was a direct link to the ever-deepening economic collapse in Syria.

Jordan’s economic growth had remained steadier, between 2 and 3 percent, but was still affected by the Syrian turmoil and was below the level needed to provide enough jobs for its fast-growing population, he said.

The Syrian conflict “has a very destabilizing effect,” said Dardari, now chief economist for the regional United Nations body ESCWA. “It is in the interest of the whole region for Syria to regain peace and quiet, and start rebuilding.”

Dardari said Syria’s economy had already shrunk between 35 to 40 percent and would fall 60 percent from its level at the start of the uprising if the fighting continued.

Every one percentage point of economic slowdown in Syria produced a 0.2 percentage point slowdown in Lebanon, he said.

With Syria’s economy still collapsing “we can speak about negative growth in Lebanon and Jordan if the situation in Syria continues as it is today for the next two years,” he told Reuters in an interview at the U.N.’s central Beirut offices.

The former deputy prime minister for economic affairs was dismissed by President Bashar al-Assad in a cabinet reshuffle shortly after the uprising erupted. He has since been working at the U.N. on plans for Syria’s post-conflict reconstruction.

SYRIA CRISIS HITS TOURISM, TRADE

Economists in Lebanon say domestic factors also played a part in the country’s economic slowdown, including the political uncertainty when former Prime Minister Saad al-Hariri’s government was toppled in early 2011.

But Dardari said the Syrian crisis was hitting tourism, trade, development assistance from Gulf Arab oil states and even remittance levels from Lebanon’s huge expatriate population, who worry about security in their homeland.

The flood of cheap Syrian labor into Lebanon could also drag down average salaries by 14 percent because of the increase in labor supply of hundreds of thousands of refugees and laborers arriving in a country of just 4 million.

Lebanon’s Central Bank governor Riad Salameh, speaking at a conference in Beirut on Thursday, agreed that the Syrian conflict was weighing on Lebanon’s performance but reiterated his forecast of 2 percent growth this year.

The impact on Jordan would be slightly less because its economy was less tied to Syria’s, Dardari said. “However you can see in the last five to 10 years Syria and Jordan dramatically improved their trade relations and bilateral investments, and have tremendous plans for further integration.”

“That has all stopped now”.

Dardari’s prediction was gloomier than the IMF, which said in March it expected Jordan’s economic growth to accelerate above 3 percent, reflecting an increase in government capital spending, higher domestic consumption and a recovery in exports.

However Syria faced almost unimaginable challenges even if the fighting were to stop tomorrow, Dardari said. He put the economic cost at $70-$80 billion, including $28 billion to rebuild 1.2 million houses and provide them with infrastructure.

The country would need 30 million metric tons of cement a year – more than three times pre-crisis quantities – to repair damaged homes and keep up with the need for new housing, he said. “Thirty million metric tons of cement requires more than 1 billion cubic meters of water. We don’t have that much water.”

Sustained fighting on the other hand could only bring greater calamity, including staggering levels of unemployment and absolute poverty, he said.

“Over the next few years, if the fighting continues, we will have to look at it as a disaster zone rather than a normal economy functioning according to economics as we know it.”

(Editing by Jon Hemming)

Assad, already battling rebel fighters who have seized large parts of his country and killed many thousands of his troops, can ill afford to confront the region’s dominant military power in a devastating and likely one-sided war.

And his allies in Iran and Hezbollah are also wary of starting a new battle which would divert from their determined efforts to keep their strategic ally in power in Damascus.

“Significant military action is unlikely,” said Paul Salem, director of the Carnegie Middle East Centre. “Syria, Hezbollah and Iran are not interested in opening another front when clearly their main battle is for the Syrian regime to survive.”

Israel’s twin air strikes within 48 hours shook Damascus, sent pillars of flame into the night sky and killed dozens of soldiers.

The war planes struck Assad’s elite troops in the valley of the Barada River that flows through Damascus and on Qasioun Mountain overlooking the capital, said residents and opposition sources. Targets included air defenses, Republican Guards and a compound linked to chemical weapons.

The Syrian Observatory for Human Rights said at least 42 soldiers were killed and 100 more were missing. Other opposition sources put the death toll at hundreds of troops. A Western security source said the attacks targeted Iranian missiles intended for Hezbollah which could strike Tel Aviv.

Both Damascus and Tehran have hinted at a tough response.

Syria’s information minister said the attacks “opened the door to all possibilities”. Iran’s foreign ministry spokesman warned of a “crushing response”.

Syria did not retaliate in 2007 when Israeli jets struck a suspected nuclear facility, nor in January this year when they bombed a suspected missile convoy. On each occasion Damascus said it would choose the time and place to respond.

But the scale of the latest operation will pile pressure on Assad to respond, “not only to save face but also to maintain credibility at home and in the region,” said Fawaz Gerges, director of the Middle East Centre at the London School of Economics.

“That’s where Assad’s predicament is – what do you do, given the limited options?” he said.

A GOLAN FRONT?

Two years into the uprising against his rule – which has spiraled into a civil war pitting mainly Sunni Muslim rebels against a president from Syria’s Alawite minority sect – Assad still has regional supporters.

As well as Iran and Hezbollah, Damascus also has links to some militant Palestinian groups and has a degree of support from neighboring Iraq’s Shi’ite-led authorities, who have turned a blind eye to Iranian weapons cargoes flown across Iraqi airspace, according to a senior Iraqi Shi’ite leader.

Syria’s pro-government Al-Ikhbariya television gave an indication of what Assad might be considering, quoting unnamed sources who said that Syrian rockets were ready to strike targets inside Israel in the event of any new attack.

It also said Syria had given the green light to Palestinian factions to carry out operations against Israel from across the Israeli-occupied Golan Heights.

However, neither of those warnings have been spelled out publicly by Syrian officials, and any direct Syrian rocket fire on Israel would be likely to provoke an overwhelming Israeli response.

Perhaps ironically, the step that Assad could take in the Golan that might most alarm Israel would be to retreat from it.

Through four decades of official hostility with Israel, Assad and his father before him kept the Golan Heights frontier quiet. Were Assad to pull back troops, Israel is worried that the heights it captured from Syria in 1967 could become a springboard for attacks on Israelis by the jihadi rebels who are currently battling to topple Assad.

“I would not be surprised if the Assad regime begins the process of pulling out its forces from the Golan to Damascus,” said Gerges. “The (rebel) Nusra Front and other groups are preparing themselves for the ultimate war against Israel…so this would create a strategic predicament for Israel.”

A Western diplomat in the region said that if the Nusra Front gained territory on the Golan Heights it would inevitably suck Israel deeper into to conflict.

“They will not accept that Islamist extremists gain ground,” he said.

HEZBOLLAH SILENCE

Hezbollah, Assad’s Lebanese ally which fought a 34-day war with Israel in 2006, has maintained a resolute silence over the Israeli raids on Damascus.

Israel believes Hezbollah has built up an arsenal of about 60,000 missiles and rockets, making it potentially a more formidable foe than in 2006, when the militant group fired 4,000 missiles into Israel.

“Hezbollah has to tread carefully because they can’t afford to be fighting in Syria (against the rebels) and provoking Israel on the Israel-Lebanon border,” said another diplomat.

The militant Shi’ite Muslim group, which is accused by Bulgaria of a bombing which killed five Israeli tourists in a Black Sea resort last year, could seek to strike Israeli targets abroad instead of seeking direct confrontation.

But Gerges said the most likely response would be to reinforce its backing for Assad.

“Both Hezbollah and Iran will respond to Israel’s escalation by deepening their own involvement in Syria,” he said. “Israel’s logic says: ‘We will not allow any transfer of advanced weapons to Hezbollah’. If you deepen Hezbollah and Iranian involvement in Syria, you are punching holes in this logic.”

That deepening support from Assad’s allies, matched by the growing support from Gulf Arab countries and Turkey for his rebel foes, could push the Syrian crisis – which has already killed 70,000 people according to the United Nations – one step closer to regional conflict.

“The risk factor has become much more acute in recent weeks,” the second diplomat said, referring to the prospect of a broader war.

Assad has vowed to defeat the rebels and his troops have launched recent counter-offensives around Damascus, the central city of Homs and the coastal province of Banias, where activists said his forces killed scores of people.

Israel cannot assume that the Syrian leader will remain passive if it continues its attacks inside Syria’s borders, the former director of Israel’s espionage agency Mossad said.

“The broader the strike, the greater the chance that Assad will have no choice to respond,” Danny Yatom told Israel Radio. “The Syrians too have limits. And the limit is not necessarily a blow to Syrian sovereignty, but rather a blow to Syrian honor.”

(Additional reporting by Samia Nakhoul in Amman, Dan Williams in Jerusalem, Suadad al-Salhi in Baghdad and Yeganeh Torbati in Dubai; Editing by Peter Graff)

As Syria’s two-year-old civil war veered into the potentially atomic arena of Iran’s confrontation with Israel and the West over its nuclear program, people were woken in the Syrian capital by explosions that shook the ground like an earthquake and sent pillars of flame high into the night sky.

“Night turned into day,” one man told Reuters from his home at Hameh, near one of the targets, the Jamraya military base.

But for all the angry rhetoric in response from Tehran and from the government of Syrian President Bashar al-Assad, it was unclear whether the second such raid in 48 hours would elicit any greater reaction than an Israeli attack in the same area in January, which was followed by little evident change.

The Syrian government accused Israel of effectively helping al Qaeda Islamist “terrorists” and said the strikes “open the door to all possibilities”; but Israeli officials said that, as in January, they were calculating Assad would not pick a fight with a well-armed neighbor while facing defeat at home.

Denying it was weighing in on the rebel side on behalf of Washington – which opposes Assad but is hesitating to intervene – officials said Israel was pursuing its own conflict, not with Syria but with Iran, and was acting to prevent Iran’s Hezbollah allies receiving missiles that might strike Tel Aviv if Israel made good on threats to attack Tehran’s nuclear program.

What Israel was not doing, they stressed, was getting drawn into a debate that has raged in the United States lately of whether the alleged use of poison gas by Assad’s forces should prompt the West finally to give military backing to oust him.

Israel was not taking sides in a civil war that has pitted Assad’s government, a dour but mostly toothless adversary for nearly 40 years, against Sunni rebels, some of them Islamist radicals, who might one day turn Syria’s armory against the Jewish state.

It is a mark of how two years of killing in which at least 70,000 Syrians have died has not only inflamed a wider, regional confrontation between Shi’ite Muslim Iran and Sunni Arabs, some of them close Western allies, but have also left Israel and Western powers scrambling to reassess where their interests lie.

Egypt, the most populous Arab state and flagship of the 2011 Arab Spring revolts where elected Islamists have replaced a Western-backed autocrat, has no love for Assad. But on Sunday it condemned Israel’s air strikes as a breach of international law that “made the situation more complicated”.

ROCKETS TARGETED

Israel does not confirm such missions explicitly – a policy it says is intended to avoid provoking reprisals. But an Israeli official told Reuters on condition of anonymity that the strikes were carried out by its forces, as was a raid early on Friday that U.S. President Barack Obama said had been justified.

A Western intelligence source told Reuters: “In last night’s attack, as in the previous one, what was attacked were stores of Fateh-110 missiles that were in transit from Iran to Hezbollah.”

Prime Minister Benjamin Netanyahu said his aim for Israel was to “guarantee its future” – language he has used to warn of a willingness to attack Iran’s nuclear sites, even in defiance of U.S. advice, as well as to deny Hezbollah heavier weapons.

He later flew to China on a scheduled trip, projecting confidence there would be no major escalation – though Israel has reinforced its anti-missile batteries in the north.

Syrian state television said bombing at a military research facility at Jamraya and two other sites caused “many civilian casualties and widespread damage”, but it gave no details. The Jamraya compound was also a target for Israel on January 30.

Hezbollah’s Al-Manar television showed a flattened building spread over the size of a football pitch, with smoke rising from rubble containing shell fragments. It did not identify it.

Syrian state television quoted a letter from the foreign minister to the United Nations saying: “The blatant Israeli aggression has the aim to provide direct military support to the terrorist groups after they failed to control territory.”

Obama defended Israel’s right to block “terrorist organizations like Hezbollah” from acquiring weapons after Friday’s raid, and a White House spokesman said on Sunday: “The president many times has talked about his view that Israel, as a sovereign government, has the right to take the actions they feel are necessary to protect their people.”

It was unclear that Israel had sought U.S. approval for the strikes, although the White House spokesman said: “The close coordination between the Obama administration, the United States of America, is ongoing with the Israeli government.”

Obama has in recent years worked to hold back Netanyahu from making good on threats to hit facilities where he says Iran, despite its denials, is working to develop a nuclear weapon.

On Sunday, some Israeli officials highlighted Obama’s reluctance to be drawn into new conflict in the Middle East to explain Israel’s need for independent action.

Syria restricts access to independent journalists. Its state media said Israeli aircraft struck three places between Damascus and the nearby Lebanese border. The city also lies barely 50 km (30 miles) from Israeli positions on the occupied Golan Heights.

Tehran, which has long backed Assad, whose Alawite minority has religious ties to Shi’ite Islam, denied the attack was on armaments for Lebanon and called for nations to stand firm against Israel. A senior Iranian commander was quoted, however, as saying Syria’s armed forces were able to defend themselves without their allies, though Iran could help them with training.

Hezbollah, a Shi’ite movement that says it is defending Lebanon from Israeli aggression, declined immediate comment.

ISRAELI CONCERNS

Analysts say the Fateh-110 could put the Tel Aviv metropolis in range of Hezbollah gunners, 100 km (60 miles) to the north, bolstering the arsenal of a group that fired some 4,000 shorter-range rockets into Israel during a month-long war in 2006.

“What we want is to ensure that inside the Syrian chaos we will not see Hezbollah growing stronger,” Israeli lawmaker Tzachi Hanegbi, a confidant of Netanyahu, told Army Radio.

“The world is helplessly looking on at events in Syria, the Americans in particular, and this president in particular,” he added of Obama. “He has left Iraq, Afghanistan and has no interest in sending ground troops to Syria … That is why, as in the past, we are left with our own interests, protecting them with determination and without getting too involved.”

Video footage uploaded onto the Internet by Syrian activists showed a series of blasts. One lit up the skyline of Damascus, while another sent up a tower of flames and secondary blasts.

Syrian state news agency SANA said Israeli aircraft struck in three places: northeast of Jamraya; the town of Maysaloun on the Lebanese border; and the nearby Dimas air base.

“The sky was red all night,” one man said from Hameh, near Jamraya. “We didn’t sleep a single second. The explosions started after midnight and continued through the night.”

Central Damascus was quiet on the first day of the working week, and government checkpoints seemed reinforced. Some opposition activists said they were glad strikes might weaken Assad, even if few Syrians have any liking for Israel: “We don’t care who did it,” Rania al-Midania said in the capital. “We care that those weapons are no longer there to kill us.”

(Additional reporting by Mariam Karouny in Beirut, Marwan Makdesi in Damascus, Maayan Lubell, Dan Williams, Jeffrey Heller and Crispian Balmer in Jerusalem, Khaled Yacoub Oweis in Amman, Roberta Rampton Aboard Air Force One and Arshad Mohammed and Phil Stewart in Washington; Writing by Alastair Macdonald; Editing by Will Waterman)