Analysis-Lebanon's Hezbollah reveals more of its arms in risky escalation

By Laila Bassam, Maya Gebeily and Tom Perry

BEIRUT (Reuters) - Hezbollah is drawing on more of its arsenal in its conflict with Israel even as it declares no interest in a full-scale war, an escalation analysts believe aims to deter Israel from a wider confrontation but which could also risk igniting one.

Sparked by the Gaza war, the conflict across the Lebanese-Israeli border has shifted up several gears in the last month, adding to concern the heavily armed adversaries could escalate towards a war that would be ruinous for both countries.

The spectre of such a war is looming over the region as U.S.-led mediation struggles to secure a Gaza ceasefire, with increasingly bellicose rhetoric from both Israel and the Iran-backed Hezbollah.

Hezbollah has ratcheted up its attacks in several ways of late, sending larger numbers of explosive drones in one go, using a new type of rocket, and declaring that it has targeted Israeli warplanes for the first time - a milestone for the group, according to a source familiar with Hezbollah's arsenal.

Retaliating for the killing of a senior commander by Israel, Hezbollah unleashed two days of its heaviest bombardment of the conflict so far, firing some 250 rockets at Israel on Wednesday and an even larger attack at nine Israeli military sites with rockets and drones on Thursday.

Many of Wednesday's rockets appeared to have landed in open ground and set off large brush fires. Shrapnel from Thursday's attack left at least two people wounded in Israel.

The escalation has tested unwritten rules that have largely confined the conflict to areas at the border or near it since October, keeping Lebanese and Israeli cities out of the firing line.

Israel said on Thursday that it holds Hezbollah and its Iranian sponsors to blame for the increase in violence and repeated vows to restore security to the border. The Israel Defence Forces did not immediately reply to a request for comment on new Hezbollah capabilities such as the claim to have targeted a warplane.

The source familiar with Hezbollah's arsenal said it is still calibrating its actions with the intention of avoiding all-out war even as it has stepped up its attacks - the approach it has adopted since the conflict started.

The source said Hezbollah had begun escalating with the aim of increasing pressure on Israel as it launched an offensive in Rafah in the Gaza Strip in early May, and also with the intention of gradually unveiling more of its capabilities.

This included the anti-aircraft weapons Hezbollah fired at an Israeli warplane for the first time on June 6, an effort to challenge the air supremacy Israel has long enjoyed, the source said, declining to identify the type of weapon used.

Hezbollah has announced four attacks targeting Israeli warplanes in the last week, saying it had forced them to leave Lebanese air space.

"Hezbollah is showing the kinds of capabilities they have" in an effort to "strengthen deterrence for a conventional war," said Seth G. Jones, senior vice president at the Center for Strategic and International Studies in Washington.

"The question is what kind of air defence does Hezbollah have and what more could it get from the Iranians and the Syrians. I suspect that any serious indication of serious capabilities would lead the Israelis to hit hard," he said.

MORE 'SURPRISES'

Hezbollah began trading fire with Israel on Oct. 8, a day after its Palestinian ally Hamas attacked southern Israel, sparking the Gaza war. Hezbollah says it will cease fire only when the Gaza war stops.

Tens of thousands of people have fled both sides of the border. Israeli strikes have killed more than 300 Hezbollah fighters and around 80 civilians in Lebanon, according to Reuters tallies. Attacks from Lebanon have killed 18 Israeli soldiers and 10 civilians.

Israel has pounded areas where Hezbollah operates in south Lebanon and the Bekaa Valley. In Israel, the displacement of so many people has become a big political issue, piling pressure on the government to act.

Prior to this conflict, Israel and Hezbollah had avoided a major clash since a month-long war in 2006, deterred since then by mutual threats of catastrophic destruction.

Hezbollah's arsenal has grown enormously since 2006.

Hezbollah has downed five Israeli drones, flown drones at Israeli targets, and used sophisticated guided rockets that capture footage as they approach their targets, images later broadcast on the group's al-Manar TV.

Hezbollah fired Iranian-made Falaq 2 artillery rockets for the first time on June 8, able to carry a bigger warhead than the Falaq 1 it has fired in the past.

Its rockets have also set off wildfires in northern Israel.

Hezbollah deputy head Naim Qassem said on June 4 the group did not seek war, but was ready to fight if one was imposed on it. He has also hinted at the weaponry the group has in reserve.

"What the party has used so far in the battle to support Gaza and proactively defend Lebanon is a small part of what it has, and there are matters whose surprises may be greater," he said on June 10.

RESTORING LOST DETERRENCE

The United States, which deems Hezbollah a terrorist group, has led diplomatic efforts to de-escalate the conflict. A U.S. official said on Thursday Washington was very concerned about potential escalation.

Hezbollah has indicated its openness to diplomatic arrangements if Lebanon is to benefit, but says this can't be discussed until Israel halts the Gaza offensive. Israel has also indicated openness to a diplomatic settlement that would restore security in the north, whilst preparing for an offensive.

Meanwhile, Israel has been using its air power to strike Lebanon on a near daily basis, targeting Hezbollah fighters in the south, the Bekaa Valley, and even striking Beirut on one occasion to kill a senior Hamas leader. Hezbollah wants to reestablish the deterrence that would make Israel think twice.

"They had to escalate because they lost deterrence, they need to reestablish deterrence," said Mohanad Hage Ali, deputy director for research at the Carnegie Middle East Center.

"But also when it comes to Israel's Rafah operation, they needed to act. They justified their participation in the war to support and show solidarity to Gaza, so they had to act."

(Additional reporting by Tom Perry in Beirut and James Mackenzie in Jerusalem; Writing by Maya Gebeily and Tom Perry)