(Repeats story from Wednesday)

* Army faces 1,000 jihadists near Arsal

* Frequent fighting between army and militants

* Lebanon's army seen as a rare neutral institution

* Conflict around Arsal could sectarian fissures

By Angus McDowall

ARSAL, Lebanon, Sept 28 (Reuters) - From a sandbagged army post near the border with Syria, Lebanese soldiers gaze through tripod-mounted binoculars into hills where jihadist militants are entrenched, a forgotten front in Syria's civil war that has led to bombings inside Lebanon.

There is frequent fighting between the army and around 1,000-1,200 militants dug into the hills around Arsal in a large pocket of territory straddling the border, Lebanese General Youssef al-Dik said. Around 30 soldiers have been killed.

The Sunni militants are members of Islamic State and the former Nusra Front, groups fighting Syria's President Bashar al-Assad. They regard the mountains along the Lebanese border as a strategic base and also consider Lebanon to be under the thumb of Assad's ally, Shi'ite Hezbollah.

"The clashes are ongoing day and night. We target any gathering, activity or anything we sense day or night with all kinds of weapons," he told Reuters during a visit last week.

For Lebanon's army, seen as a rare neutral institution in a state riven by sectarian divisions, fighting that jihadist presence in a staunchly Sunni Muslim area also means treading delicately to avoid prompting a new domestic political crisis.

A series of bomb attacks have struck Lebanon since the beginning of Syria's civil war in 2011, some of them linked by the security forces to militant groups based in their neighbour who seek to widen the region's sectarian violence.

They are just one way the conflict threatens to destabilise already fragile Lebanon, where the political system is in near-permanent paralysis and where the sectarian fault lines of its own 15-year civil war, which ended in 1990, are still raw.

On the road from Beirut to Arsal stand abandoned houses where weeds grow from old shell holes. Nearby is a former Syrian army post, evidence of Syria's 30-year military presence in Lebanon.

That presence ended in 2005, but Damascus retained extensive influence in its smaller neighbour, partly through its close alliance with the Lebanese Shi'ite movement Hezbollah, so the outbreak of its civil war had an immediate impact in Lebanon.

In the Shi'ite towns of the fertile Bekaa valley, on the road to Arsal, posters for Hezbollah share the sides of buildings with portraits of the movement's "martyrs" killed fighting for Assad in Syria.

Whether to support Assad or oppose him is a question that splits Lebanese parties, partly along sectarian lines, and has accentuated the country's political deadlock.



DANGER

Many Lebanese Sunnis resent the dominance of Shi'ite Hezbollah, saying it has cut them off from power and perpetuated Syrian influence. Some of them accuse it of instigating the political crisis and compromising the neutrality of the army.

In recent years that anger has caused protests and even some attacks on army patrols in traditionally Sunni cities. Diplomats say such sensitivities mean the army has learnt to tread carefully in policing mostly Sunni Arsal.

Supporters of Hezbollah have said such concerns have tied the army's hands and stopped it rooting out militants more actively. But the diplomats said a campaign to crush them would be difficult because they occupy well defended positions.

In the army post above Arsal a ceaseless wind swirled fine dust, stinging the eyes and catching at the back of the nose.

The soldiers here face real danger. Militants in the hills opposite carry assault rifles but also medium-sized weapons like mortars and anti-tank missiles. They attack hilltop posts and target patrols inside Arsal with car bombs, said General al-Dik.

The army is widely regarded in Lebanon as occupying a position above the country's fractured politics but its senior officers are powerful figures.

Posters along the road to Arsal showed the current army chief, Jean Kahwaji, with the slogan "the right man in the right place".

The army is backed by Western countries, including the United States, which this year gave it $220 million in equipment, including heavy guns like those visible below the position above Arsal. Britain has given over 60 million pounds worth of equipment since 2012, including old border watchtowers once used in Northern Ireland.



HEAVY FIGHTING

In August 2014, when Islamic State was rapidly expanding across Iraq and Syria, insurgents loyal to it and the Nusra Front, then an official al Qaeda branch, crossed the Lebanese border and overran Arsal, regarding its refugee camps as a base for cross-border attacks

After heavy fighting, the Lebanese army, and in some places Hezbollah, restored control over the town and strategic points around it, but militants remained in the hills nearby. Islamic State still holds nine Lebanese soldiers hostage.

Across the frontier, advances by the Syrian army, backed by Hezbollah, last year cut off the militants from the east, leaving them surrounded in an area straddling the border.

Both Islamic State and the Nusra Front, which in July cut its al Qaeda links and changed its name to Jabhat Fateh al-Sham, are still there, General al-Dik said.

They live in caves, ramshackle houses and other makeshift dwellings, he added, standing in a sandbagged emplacement surrounded by a coil of barbed wire, and saying that in winter a metre or more of snow covers the hills.

Those harsh conditions are also endured by the 70,000 war refugees who live in camps in and around Arsal, some of the more than 1 million Syrians who have fled to Lebanon.

Although no bomb attacks in Lebanon have been directly linked to refugees, the army chief Kahwaji said last year that the camps posed a security risk as potential hideouts. General al-Dik said the army had staged raids in the Arsal refugee camps in recent months, arresting "terrorist leaders" there.

Roads towards the town are studded with army checkpoints where soldiers check drivers' documents.

The army believes such precautions, along with its military operations and a change in the situation in Syria, are gradually smothering the militant threat.

"The more they are surrounded, the less they receive logistical support and this is what is happening now... there are some smuggling operations from Syria to Lebanon but they are decreasing day by day and the stress on them is increasing," said General al-Dik.



(Editing by Giles Elgood) ((angus.mcdowall@thomsonreuters.com; Reuters Messaging: angus.mcdowall.thomsonreuters.com@reuters.net))