Iran nuclear talks likely on fringes of U.N. General Assembly: IRNA

DUBAI (Reuters) - Iran and six world powers will probably discuss a potential deal on Tehran's nuclear program on the sidelines of the annual U.N. General Assembly (UNGA) in September, the state news agency IRNA quoted a senior Iranian negotiator as saying.

Negotiations are to resume in Europe next month after Iran agreed with the powers - the United States, France, Germany, Britain, Russia and China - in July to extend the process by four months after they failed to meet a July 20 deadline.

"A meeting between Iran and the (powers) is very likely to take place around the UNGA, but the level of the meeting has yet to be determined," IRNA quoted senior Iranian negotiator Abbas Araghchi, a deputy foreign minister, as saying on Monday.

He said the Islamic Republic would take advantage of the opportunity provided by the General Assembly, where the main high-level session usually attended by senior officials starts on Sept. 24.

Araghchi said it was possible that one or two bilateral meetings would be held between Iranian Foreign Minister Javad Zarif and his European Union counterpart, Catherine Ashton, who coordinates the six powers' approach to Iran.

The senior diplomat added that multilateral and expert-level meetings could be held before the General Assembly.

Iran and the six world powers struck an interim agreement last November under which Tehran agreed to suspend some of its sensitive nuclear activity in return for the easing of some international sanctions imposed on it.

Araghchi said the next round of negotiations would probably be launched in Vienna or Geneva, but gave no precise date.

"In reality, we have found that, after eight months of negotiations, this is a very complicated process," he said.

Iran wants a permanent agreement that would quickly remove all sanctions that have crippled its oil-based economy, but has balked at the powers' overriding demand that it greatly reduce its capacity to stockpile enriched uranium for nuclear fuel.

Western powers suspect Iran's refusal to place strict limits on uranium enrichment capacity reflects an underlying agenda to preserve the option of accumulating enough fissile material to fuel nuclear bombs. Iran says it is refining uranium solely for a planned future network of civilian atomic power plants.

Araghchi told IRNA: "What is certain is that the other side wants a longer time and we want a shorter time for negotiations and (realizing) our demands."

An agreement could significantly reduce the risk of a wider Middle East conflict over the decade-old nuclear dispute.

(Reporting by Michelle Moghtader; Editing by Mark Heinrich and Kevin Liffey)

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Ukraine keeps up anti-rebel offensive with nervous eye on Russia

By Richard Balmforth

KIEV (Reuters) - Ukrainian government forces, backed by warplanes, kept up a military offensive to claw back lost territory from pro-Russian separatists on Tuesday while casting a nervous eye at Russian military exercises over the border.

Kiev's military said government forces had clashed 26 times with separatists in the Russian-speaking east in the 24 hours up to Tuesday morning, while fighter jets had struck at rebel positions and concentrations of military equipment.

But it acknowledged that separatist forces had pushed it out of Yasynuvata, a railway junction near the main rebel-controlled city of Donetsk that it seized from separatists on Sunday.

Tension rose further with Ukraine denouncing Russian war games near the joint border as a "provocation" and alleging violations of Ukrainian air space by Russian warplanes and drones, as well as cross-border shelling from Russia.

Defence officials said separatists had also opened fire on unarmed Ukrainian soldiers on Tuesday as they crossed back into Ukraine from Russia, where they had taken shelter from fighting.

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A resident calls to his neighbor from a damaged house after shelling in the Petrovsky district in th …

Ukraine acknowledged on Monday that 311 soldiers and border guards had been forced by fighting with separatists to cross into Russia. It said they had destroyed their weapons before crossing the border, but the rebels said they had left them behind, enabling separatists to seize them. A military spokesman said there had been no casualties from the attack, though he said three Ukrainian soldiers had been killed and 46 wounded in action against the separatists in the past 24 hours.

Government troops have been battling the rebels since April in a war in the Russian-speaking east in which the United Nations High Commissioner for Human Rights says more than 1,100 people including government forces, rebels and civilians have died.

Ukraine and its Western allies accuse Russia of orchestrating the revolt and arming the rebels - something denied by Moscow. The United States and the European Union have imposed sanctions on Russia. Fighting has intensified since the shooting down of a Malaysian airliner last month, killing all 298 people on board - an act the West laid at the door of the rebels. Russia and the rebels blame the disaster on Kiev's military offensive. Ukrainian forces say they have been making steady gains and have virtually encircled the separatists' second-largest stronghold of Luhansk, while rebels have declared a "state of siege" in Donetsk, the largest city they hold.

RISING ALARM

Defence spokesman Andriy Lysenko said Ukrainian forces, apart from engaging separatists, had come under mortar and artillery attack from Russia and there had been violations of Ukrainian airspace by Russian planes.

He expressed alarm at Russian military exercises this week near their long joint border, including deployment of 100 fighter aircraft.

"Ukraine regards the carrying out of such unprecedented military exercises on the border with Ukraine as a provocation," he said, while a foreign ministry statement called for Russia to pull its forces back.

Ukrainian security officials said separatist fighters were launching counter-attacks to break a tightening noose around the rebels who seek to set up pro-Russian 'people's republics' in the east of Ukraine.

Lysenko conceded that Ukrainian troops had abandoned control of Yasynuvata, a railway hub whose recapture from the separatists had been trumpeted.

Rebels at the scene on Tuesday told Reuters said they had lost at least one fighter, with three others injured, to shelling by Ukrainian forces.

"Every 15 minutes a shell comes over. They (the Ukrainians) fire from a distance and avoid fighting us directly," one separatist fighter said.

Lysenko told reporters that Ukraine had moved up its main troops near Donetsk and Luhansk, but he would not be drawn on when they would launch an operation to storm the towns.

"We'll not talk about starting an offensive. We will speak only about liberating these towns," he said.

(Additional reporting by Maria Tsvetkova in Donetsk and Pavel Polityuk and Natalia Zinets in Kiev; Editing by Will Waterman)

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Israel withdraws troops, 72-hour Gaza truce begins

By Nidal al-Mughrabi, Lin Noueihed and Dan Williams

GAZA/CAIRO/JERUSALEM (Reuters) - Israel withdrew ground forces from the Gaza Strip on Tuesday and started a 72-hour ceasefire with Hamas mediated by Egypt as a first step towards negotiations on a more enduring end to the month-old war.

Minutes before the truce began at 8 a.m. (0500 GMT), Hamas launched a salvo of rockets, calling them revenge for Israel's "massacres". Israel's anti-missile system shot down one rocket over Jerusalem, police said. Another hit a house in a town near Bethlehem in the occupied West Bank. There were no casualties.

Israeli armour and infantry left Gaza ahead of the truce, with a military spokesman saying their main goal of destroying cross-border infiltration tunnels dug by Islamist militants had been completed. "Mission accomplished," the military tweeted.

Troops and tanks will be "redeployed in defensive positions outside the Gaza Strip and we will maintain those defensive positions", spokesman Lieutenant-Colonel Peter Lerner said, reflecting Israeli readiness to resume fighting if attacked.

Sami Abu Zuhri, a spokesman for the Islamist Hamas faction that rules Gaza, said Israel's offensive in the densely populated, coastal enclave was a "100 percent failure".

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Israeli soldiers from the Givati brigade embrace after returning to Israel from Gaza August 4, 2014. …

Israel sent officials to join talks in Cairo to cement a longer-term deal during the course of the truce. Hamas and Islamic Jihad also dispatched representatives from Gaza.

Israeli Prime Minister Benjamin Netanyahu convened his decision-making security cabinet to discuss the aftermath of the fighting, officials said.

In Gaza, where some half-million people have been displaced by a month of bloodshed, some residents, carrying mattresses and with children in tow, left U.N. shelters to trek back to neighbourhoods where whole blocks have been destroyed by Israeli shelling and the smell of decomposing bodies fills the air.

Sitting on a pile of debris on the edge of the northern town of Beit Lahiya, Zuhair Hjaila, a 33-year-old father of four, said he had lost his house and his supermarket.

"This is complete destruction," he said. "I never thought I would come back to find an earthquake zone."

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An Israeli soldier from the paratroopers brigade drinks after returning to Israel from Gaza August 4 …

Visiting International Red Cross President Peter Maurer, responding to local criticism that his organisation was late in helping some victims, said "we were insufficiently able to bridge the gap between our willingness to protect them and our ability to do so".

The head of Israel's southern command reassured residents who had fled southern Israeli towns when fighting erupted that it was safe to return home, though some remained unconvinced the threat of attack tunnels and rockets from Gaza had been wiped out.

TRUCE ATTEMPTS

Several previous truce attempts by Egypt and other regional powers, overseen by the United States and United Nations, failed to calm the worst Israeli-Palestinian fighting in two years.

An Israeli official said that in the hour before the ceasefire came into effect, the civilian airspace over Tel Aviv was closed as a precaution against Gaza rockets, delaying takeoffs and landings at Ben-Gurion Airport.

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An Israeli soldier from the Givati brigade carries his gear after returning to Israel from Gaza Augu …

Gaza officials say the war has killed 1,867 Palestinians, most of them civilians. Israel says 64 of its soldiers and three civilians have been killed since fighting began on July 8, after a surge in Palestinian rocket launches.

Hamas said it had informed Egypt "of its acceptance of a 72-hour period of calm", beginning on Tuesday.

The Palestinian cabinet issued a statement after its weekly meeting in Ramallah welcoming the ceasefire.

The U.S. State Department also welcomed the truce and urged the parties to "respect it completely". Spokeswoman Jen Psaki said Washington would continue its efforts to help the sides achieve a "durable, sustainable solution for the long term".

Efforts to turn the ceasefire into a lasting truce could prove difficult, with the sides far apart on their central demands, and each rejecting the other's legitimacy. Hamas rejects Israel's existence and vows to destroy it, while Israel denounces Hamas as a terrorist group and eschews any ties.

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A relative of nine Palestinians from the Abu Nejim family, whom medics said were killed by an Israel …

Besides the truce, Palestinians demand an end to the Israeli-Egyptian blockade on impoverished Gaza and the release of prisoners, including those Israel arrested in a June crackdown in the occupied West Bank after three Jewish seminary students were kidnapped and killed.

Israel has resisted those demands in the past.

Palestinian Foreign Minister Riad al-Malki said there was "clear evidence" of war crimes by Israel during its offensive in Gaza as he met International Criminal Court prosecutors in The Hague on Tuesday to push for an investigation.

Both sides have traded allegations of war crimes during the Gaza assault, while defending their own actions as consistent with international law.

ISRAEL: DEMILITARISE GAZA

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Palestinians dig through the rubble of a building searching for bodies after what police said was an …

Lerner said the army overnight had destroyed the last of 32 tunnels located inside Gaza and which had been dug by Hamas for cross-border ambushes at an estimated cost of $100 million.

Israeli officials say, however, that some tunnels may have gone undetected and that the armed forces are poised to strike at these in the future.

Netanyahu also wants to disarm Hamas and demilitarise Gaza, after guerrillas launched more than 3,300 rockets and mortar bombs at Israel in the past month. Hamas has ruled that out.

"For Israel the most important issue is the issue of demilitarisation. We must prevent Hamas from rearming, we must demilitarise the Gaza Strip," Netanyahu spokesman Mark Regev told Reuters television.

Since the fighting began, several previous truces barely held. Regev said Israel had accepted Egypt's terms weeks before Hamas, and expressed a wish that the truce would last: "I hope this time we see the ceasefire work that's good for everybody."

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Palestinians dig through the rubble of a building searching for bodies after what police said was an …

Egypt has positioned itself as a mediator in successive Gaza conflicts but, like Israel, its current administration views Hamas as a security threat.

Besides the loss of life, the war has cost both sides economically. Gaza faces a massive $6-billion price tag to rebuild devastated infrastructure. Israel has lost hundreds of millions of dollars in tourism and other sectors and fears cuts in overall economic growth this year as well.

Israel's Tourism Minister said that, while there has been a steep drop in the number of visitors to the Holy Land, he expected things to bounce back in a few months.

Palestinian officials said a donor conference to raise funds for Gaza's reconstruction would be held in Oslo next month.

In London, a British minister, Sayeeda Warsi, resigned on Tuesday, saying she could not support government policy on the war. Prime Minister David Cameron's government has been pressing for a ceasefire in Gaza, but he has been criticised by the opposition for refusing to describe Israel's military actions in Gaza as disproportionate.

(Additional reporting by Eric Beech in Washington, Ori Lewis in Jerusalem, Yasmine Saleh in Cairo, William James and Kylie MacLellan in London, Jussi Rosendahl in The Hague; Writing by Allyn Fisher-Ilan and Giles Elgood, Editing by Mark Heinrich and Gareth Jones)

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Ceasefire agreed in Lebanese border town battle

By Mariam Karouny and Tom Perry

BEIRUT (Reuters) - The Lebanese army and Islamist militants agreed a 24-hour ceasefire on Tuesday after four days of fighting triggered by the rebels' seizure of a border town, in the most serious spillover of Syria's three-year civil war into Lebanon.

A security source said the ceasefire would allow time for a mediator to investigate the fate of 22 soldiers missing since the militants seized the town of Arsal on Saturday and to help evacuate civilians, including those wounded in the conflict.

"It is like a humanitarian ceasefire," he told Reuters. The ceasefire, which came into force at 7 p.m. (12.00 p.m. EDT), was broken briefly late in the evening when an army position came under fire but calm quickly returned, the source added.

"Clashes erupted but now they have ended. The ceasefire is still on, it did not collapse. What happened was to be expected due to differences between the fighters," he said

The source said the militants had suffered big losses in the fighting, adding he expected them to leave Arsal before the ceasefire had ended.

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Lebanese army soldiers escort ambulances believed to be carrying casualties as they return from the  …

The militants have been identified by officials as members of the Nusra Front, al Qaeda's branch in Syria, and of the Islamic State, which has seized large areas of Iraq and Syria.

Rebel sources told Reuters several members of the Islamic State had been killed in the Arsal fighting, including senior leader Abu Hassan al-Homsi, who had been in charge of setting up booby traps and explosions. Another leader of Jordanian origin was also killed in the fighting, the rebel sources said.

At least 17 Lebanese soldiers have been killed in the last few days of violence in and around Arsal, though there has been no sign of the conflict spreading to other border towns.

It is unclear how many militants and civilians have been killed, though death tolls given by security officials and a doctor indicate it is in the dozens.

POLICEMEN RELEASED

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Lebanese army soldiers sit atop of an armoured carrier at the entrance of the Sunni Muslim border to …

Earlier on Tuesday, the Islamists released three policemen they had been holding, in what one militant described as a goodwill gesture in response to a mediation by Sunni clerics from the Muslim Clerics' Association.

The militants in Arsal told the clerics they were willing to withdraw if the army agreed to return only to man checkpoints outside Arsal and not to enter the town itself.

A Lebanese political source, speaking on condition of anonymity, said the army aimed to retake the hills around Arsal.

"It is not proposed for it to take the battle to the heart of the town," the political source said. The clashes in Arsal began on Saturday after security forces arrested an Islamist commander popular with local rebels who often move across the porous border with Syria. Soon after the arrest, gunmen attacked local security forces.

Lebanon - a country of about 4 million, bordering Israel - has avoided the kind of war afflicting Syria and Iraq, but regional conflicts have rekindled decades-old tensions.

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Lebanese army soldiers on tanks and military vehilces advance towards the Sunni Muslim border town o …

Some Sunni Muslims joined Syrian rebels and the powerful Shi'ite group Hezbollah has sent fighters to aid President Bashar al-Assad, an Alawite, who also has the backing of Iran.

Hezbollah denied it was involved in the battles in Arsal.

"Confronting the terrorist gunmen is the responsibility of the Lebanese Army solely. Hezbollah did not intervene in what happened or is happening in Arsal," it said in a statement.

Rocket fire, suicide attacks and gunbattles connected to Syria's war have plagued Lebanon and the conflict has worsened Lebanon's perennial political deadlock between officials divided largely along sectarian lines.

In the northern Lebanese city of Tripoli, which has seen frequent clashes between local Sunnis and members of the Shi'ite-derived Alawite minority, men blocked several roads on Tuesday. Most shops were shut and streets empty after militants opened fire on a bus carrying soldiers, wounding at least six.

More than 170,000 people have been killed in Syria's war, which started in 2011 as a peaceful protest movement, then degenerated into civil war after a government crackdown.

Syrian activists and medics in Arsal say fighting has badly damaged the camps that are home to many of the tens of thousands of Syrian refugees estimated to live in and around the town.

"The situation is bad. Families are blockaded inside the city. Refugees are on the streets. There is a severe shortage of bread. The medical situation is very bad," a Syrian witness told Reuters in a text message.

(Additional reporting Alexander Dziadosz; Editing by Gareth Jones)

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Several wounded as Afghan soldier opens fire at British military academy

By Hamid Shalizi and Jessica Donati

KABUL (Reuters) - A U.S. general was killed and more than a dozen people were wounded on Tuesday, including a German general, in the latest insider attack by a man believed to be an Afghan soldier, U.S., German and Afghan officials said.

The U.S. Army said late on Tuesday the slain general was Major General Harold Greene, a senior officer with the international military command ISAF. He was the most senior U.S. military official killed in action overseas since the war in Vietnam, military officials said.

"These soldiers were professionals, committed to the mission," U.S. Army Chief of Staff Ray Odierno said in a statement, referring to the soldiers killed and wounded in the attack.

Pentagon spokesman Rear Admiral John Kirby told reporters that "many were seriously wounded," and the gunman was killed in the attack, which took place on Tuesday at the Marshal Fahim National Defense University, a training center in Kabul.

The attack raised fresh questions about the ability of NATO soldiers to train and advise Afghan security forces as western nations gradually withdraw. The U.S. and German generals were on a routine visit, the Pentagon said.

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A NATO soldier opens fire toward journalists near the main gate of Camp Qargha, west of Kabul, Afgha …

A U.S. official said the gunman fired on the foreign soldiers using a light machine gun. Afghanistan's Defense Ministry described him as a "terrorist in army uniform."

The German military said its general was one of 14 coalition troops wounded in Tuesday's attack, adding that his life was not in danger. Seven Americans and five British troops were among the wounded, an Afghan official said.

Past insider attacks have eroded trust while straining foreign efforts to train Afghanistan's 350,000-strong security force and prepare them to fight the Taliban once most U.S. and NATO forces depart.

U.S. Defense Secretary Chuck Hagel spoke by phone with General Joe Dunford, who commands U.S. and international troops in Afghanistan, about the incident, Kirby said. He said the shooting was being investigated jointly by Afghan authorities and the international military coalition that is winding down its long mission in Afghanistan.

The Afghan president was quick to condemn the attack, saying the delegation had been visiting the facility to help build the country's security forces.

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NATO military vehicles leave the Camp Qargha, west of Kabul, Afghanistan, Tuesday, Aug. 5, 2014. A m …

The Taliban says insider attacks reflect their ability to infiltrate the enemy. International military coalition officials say the incidents often arise over misunderstandings or altercations between troops.

U.S. military officials said it was too soon to say whether the high-ranking officers had been specifically targeted by the shooter.

"We remain committed to our mission in Afghanistan and will continue to work with our Afghan partners to ensure the safety and security of all coalition soldiers and civilians," Odierno said.

'PERNICIOUS THREAT'

In 2012, dozens of incidents forced international troops to take measures to reduce interaction with their Afghan partners. Since then, the number of insider attacks has fallen sharply.

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An Afghan National Army (ANA) soldier keeps watch at the gate of a British-run military training aca …

According to a Pentagon report on the war in April, there were 15 insider attacks against foreign troops in 2013, down from 48 in 2012.

"Despite this sharp decline, these attacks may still have strategic effects on the campaign and could jeopardize the relationship between coalition and ANSF personnel," the report stated. "Insurgents remain intent on utilizing insider attacks as an integral component of their asymmetric strategy."

The report concluded that armed guards known as 'guardian angels' accompanying coalition officials had reduced casualties by counter-attacking those who tried to kill foreigners.

Meanwhile, insider attacks against Afghan forces were on the rise, the report said.

Like other Western countries, the United States is planning to leave a residual force in Afghanistan after the NATO mission ends this year, mainly focused on supporting Afghan forces. But U.S. officials say that first they must sign a bilateral troop deal, which cannot be finalized until Afghanistan resolves an election dispute and swears in a new president.

The departure will leave Afghanistan's forces - built from scratch since 2001 and still struggling with problems of incomplete training, illiteracy and desertion - in charge of the bulk of the fight with the Taliban.

Pentagon spokesman Kirby said that despite protective measures it would be impossible to eliminate the threat of such attacks entirely.

"The insider threat is ... a pernicious threat. And it's difficult to always ascertain," Kirby said. "Afghanistan is still a war zone."

Ed Royce, chairman of the U.S. House of Representatives' Foreign Affairs Committee, said the progress in protecting foreign troops serving in Afghanistan had been inadequate.

"Many brave U.S forces are working hard to help stand up the Afghan forces so they can continue to take the lead in Afghanistan," he said. "They don't deserve to be victims of such cowardly terrorist attacks."

In a similar attack on Tuesday, several people were wounded in Afghanistan's eastern province of Paktia when a policeman opened fire on international and Afghan forces, police chief Zalmay Oryakhil said.

Adding to the tension, a NATO air strike hit a vehicle carrying civilians in western Herat province, local officials said, killing four members of a family returning from a wedding, including two children.

(Additional reporting by Missy Ryan and Phil Stewart in Washington, Sabine Siebold in Berlin, Krista Mahr in Kabul, Jalil Ahmad Rezaee in Herat and Ahmad Sultan in Gardez; Editing by Janet Lawrence, Howard Goller, G Crosse Grant McCool)

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Israelis, Palestinians set to launch 72-hour truce in monthlong war

By Nidal al-Mughrabi, Lin Noueihed and Allyn Fisher-Ilan

GAZA/CAIRO/JERUSALEM (Reuters) - Israel and Islamist Hamas were expected to hold their fire for three days starting on Tuesday, under terms of an Egyptian-brokered truce, while launching negotiations to cement a long-term deal to end a four-week Gaza war.

The ceasefire was the latest of several failed attempts to stop what has been the worst Israeli-Palestinian fighting in two years.

Gaza officials say the war has killed 1,834 Palestinians, most of them civilians. Israel says 64 of its soldiers and three civilians have been killed since fighting began on July 8 after a surge in cross-border rocket salvoes from Gaza.

Mark Regev, a spokesman for Israeli Prime Minister Benjamin Netanyahu, said late on Monday that "from tomorrow morning at 8 a.m. (0500 GMT) Israel will honour the ceasefire as agreed to, and negotiated through the Egyptians."

Israeli media said Netanyahu had won the approval of senior ministers for the plan in a series of telephone calls on Monday.

Regev, citing several failed attempts to achieve a ceasefire in the past month, added that "if Hamas violates the ceasefire, so Israel is prepared to respond."

Israel was expected to send several delegates to join in negotiations in Cairo to cement a longer term deal during the course of the truce, an Israeli official said, speaking on condition of anonymity.

Palestinian groups, including envoys of Hamas and Islamic

Jihad, were already in Cairo, where they met the head of

Egyptian intelligence on Monday to present demands for

ending the violence, which has displaced more than one quarter of Gaza's 1.8 million people and seen 3,000 homes destroyed.

Hamas spokesman Sami Abu Zuhri said the Islamist group had also informed Egypt "of its acceptance of a 72-hour period of calm," beginning on Tuesday.

The U.S. State Department praised the truce and urged the parties to "respect it completely." Spokeswoman Jen Psaki added that Washington would continue in its efforts to help the sides achieve a "durable sustainable solution for the long term."

Efforts to cement the ceasefire into a lasting truce could prove difficult with the sides far apart on key demands, and each rejecting the other's legitimacy. Hamas rejects Israel's existence, and vows to destroy it, while Israel denounces Hamas as a terrorist group with whom it eschews any ties.

In addition to the truce, Palestinians have demanded a withdrawal of Israeli forces from Gaza, an end to the blockade of the impoverished enclave and release of prisoners including those arrested in a June crackdown when three teenagers were kidnapped and killed, demands Israel has resisted in the past.

An Israeli official who declined to be named suggested Israel would pull its forces out of Gaza if Tuesday's truce held, saying:

"We agree to begin implementing the Egyptian initiative. If

the ceasefire is upheld there will be no need for any presence

of (Israeli) forces in the Gaza Strip."

ISRAEL DEMANDS TO DEMILITARIZE GAZA

But Netanyahu also wants to disarm Hamas and demilitarise the coastal territory, stripping militants who launched more than 3,300 rockets and mortars at Israel this past month of these arsenals, demands that the Islamists have thus far rejected.

"For Israel the most important issue is the issue of demilitarisation. We must prevent Hamas from rearming, we must demilitarise the Gaza Strip," Regev told Reuters television.

Since the fighting began, several previous truces barely held, with each side refusing to accept terms put by the other. This time Egypt's initiative could yield results if the parties can convene to negotiate a longer-term deal.

Regev said Israel had accepted Egypt's terms weeks before Hamas, and expressed a wish that the truce would last. "I hope this time we see the ceasefire work that's good for everybody," he said.

Egypt has positioned itself as a mediator in successive Gaza

conflicts but, like Israel, its current ruling administration opposes Hamas, and it has struggled to seal a deal to end the latest fighting.

Israel had declined earlier in the week to send a delegation to Egypt for truce talks, raising doubts a deal was achievable.

    A Palestinian official affiliated with one of the militant

factions said a temporary ceasefire would help open the door to

more comprehensive negotiations.

In addition to the loss of life, the war has cost both sides economically. Gaza faces a massive $6 billion price tag to rebuild devastated infrastructure. Israel has lost hundreds of millions of dollars in tourism, other industry, and fears cuts in overall economic growth this year as well.

The violence showed signs of abating early on Tuesday, with few reported incidents. Two rockets were fired at a southern Israeli city, Ashkelon, and Israel's Iron Dome interceptor shot them down. There were no casualties.

Israel has already begun to wind down its offensive, with media reports saying on Monday the army had completed the main objective of the ground assault, the destruction of cross-border infiltration tunnels from Gaza.

But a previous truce attempt ended in failure only on Monday, Palestinians said, charging Israel had bombed a refugee camp in Gaza City, killing an eight-year-old girl and wounding 29 other people, disrupting what was supposed to have been a seven-hour humanitarian ceasefire.

An Israeli military spokeswoman disputed this, saying Israel had withheld aerial fire for seven hours on Monday, in a move to free up aid supplies and allow some of the hundreds of thousands of Palestinians displaced by the war to go home.

Media in Britain reported that a British aid worker was killed on Sunday during an Israeli strike in Rafah while he was delivering supplies to a hospital. The British Foreign Office said it was looking into the report.

(Additional reporting by Eric Beech in Washington, Ori Lewis in Jerusalem, Yasmine Saleh in Cairo; Writing by Allyn Fisher-Ilan; Editing by Ken Wills)

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Russia to hold war games in show of strength near Ukraine

By Timothy Heritage and Maria Tsvetkova

MOSCOW/DONESTSK Ukraine (Reuters) - Russia announced military exercises near the border with Ukraine on Monday in a show of strength as the Ukrainian army recaptured more territory from pro-Russian separatists in the east of the country.

The Russian air force said more than 100 aircraft, including fighter jets and bombers, were taking part in the manoeuvres this week in the central and western military districts.

The move could alarm Western powers which have accused Russia of beefing up its troops along its border with Ukraine and arming the rebels in eastern Ukraine, although Moscow denies the accusations.

The manoeuvres include missile-firing practice and will assist "coordination between aviation and anti-missile defence", Interfax news agency quoted an airforce spokesman as saying.

He said Russia's latest bomber, the Su-24, was taking part, as well as Su-27 and MiG-31 fighter jets.

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A pro-Russian separatist guards a checkpoint near the village of Rozsypne in the Donetsk region Augu …

Russia upset the West by staging military exercises near Ukraine in March after the conflict with Ukraine flared. Moscow said in May it had pulled back its forces but NATO military commander General Philip Breedlove said last week it still had more than 12,000 troops and weapons along the frontier.

The crisis has pushed relations between Russia and the West to their lowest level since the Cold War, with each side accusing the other of orchestrating events in Ukraine, and the United States and European Union imposing sanctions on Russia.

Russia has a firm grip on the Crimea peninsula, which it annexed in March after Ukraine ousted a pro-Moscow president, but the rebels who wanted Moscow to also annexe east Ukraine have been losing ground in the past few weeks.

UKRAINIAN ARMY ADVANCES

Government forces said they had recaptured an important rail hub in the latest fighting near Donetsk, the biggest of the two large cities the rebels still hold after almost four months of fighting.

"Units taking part in the 'anti-terrorist operation' yesterday took the town of Yasynuvata, which is an important hub of the region's railway system," Andriy Lysenko, a spokesman for Kiev's military operation in the east, told a briefing.

The separatists had seized the Yasynuvata railway control centre in May as their rebellion spread in eastern Ukraine. It sits just north of Donetsk near a main road leading to Luhansk, another remaining rebel stronghold.

Five government soldiers were killed and 15 wounded over the previous 24 hours, Lysenko said. There were no new casualty figures for the rebels in a conflict the United Nations said had killed more than 1,100 people from mid-April to late July.

Fighting has intensified since the West accused the rebels of shooting down a Malaysian airliner last month, killing all 298 people on board. Russia and the rebels blame the disaster on Kiev's military offensive.

In a sign that not all the fighting is going the Ukrainian army's way, Russian border guards said 438 Ukrainian soldiers had crossed into Russia during the night seeking asylum.

"They were tired of the war and wanted no further part in it," Vasily Malayev, spokesman for the borders guards in the Rostov region of Russia, told Reuters by telephone.

He said they had been treated well, and 180 were being returned to Ukraine later on Monday, but it was not clear what the rest wanted to do.

Lysenko said the soldiers and border guards had crossed into Russia in search of safety after being blocked between the Russian border to the east and pro-Russian rebel positions in the west for more than three weeks.

He gave no numbers but said Kiev was trying to negotiate their return.

The fighting had prevented Dutch and Australian experts reaching the wreckage of the downed airliner in rebel-held territory for several days but they have managed to recover some human remains and belongings in the past few days. The victims included 196 Dutch, 27 Australians and 43 Malaysians.

(Additional reporting by Elizabeth Piper, Polina Devitt and Tatiana Ustinova in Moscow and by Gabrieal Baczynska and Natalia Zinets in Kiev; Writing by Timothy Heritage; Editing by Will Waterman)

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Iraqi PM orders air force to help Kurds fight Islamic State

By Isra' al-Rubai'i

BAGHDAD (Reuters) - Iraq's Prime Minister Nuri al-Maliki ordered his air force for the first time to back Kurdish forces against Islamic State fighters after the Sunni militants made another dramatic push through the north, state television reported on Monday.

Tens of thousands of people have fled one of the districts seized by Islamic State fighters in the offensive and are now surrounded, the United Nations said on Monday. The Sunni militants often execute people in areas they have captured.

Kurdish peshmerga fighters, who gained experience fighting Saddam Hussein's troops, were regarded as one of the few forces capable of standing up to the Sunni insurgents, who faced almost no opposition from Maliki's U.S.-trained army during their lightning advance through the north in June.

Then on Sunday the Islamic State inflicted a humiliating defeat on the Kurds with a rapid advance through three towns to reach the Mosul Dam, acquiring a fifth oil field to fund its operations along the way.

State television and witnesses said the Islamic State had seized Iraq's biggest dam. Kurdish peshmerga officials said they had pushed militants from the dam area and were in control of it. This could not be immediately confirmed.

Despite predictions from Kurdish commanders that their forces would launch a successful counter-offensive, one senior Kurdish official urged the United States to step in and provide weapons "for the sake of fighting terrorism".

Kurdish commanders whose units came under attack from Islamic State fighters told Reuters they faced overwhelming firepower, were taken by surprise, and that militants had in many cases started shooting from villages where they had formed alliances with residents.

The areas that the Kurds lost were not part of their semi-autonomous region, but had been seized in the north after the fall of Saddam Hussein.

Maliki has been at odds with the Kurds over budgets, oil and land, and tensions deepened after the Islamic State seized control of large swathes of land in the north and west of OPEC member Iraq.

HOSTILITY

In July, the Kurdish political bloc ended all participation in Iraq's national government in protest over Maliki's accusation that Kurds were allowing terrorists to stay in Arbil, the capital of their semi-autonomous region known as Kurdistan.

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Kurdish "Peshmerga" troops move down a street during an intensive security deployment afte …

Opponents accuse Maliki of being an authoritarian ruler with a sectarian agenda whose alienation of Sunnis fueled the insurgency. Currently ruling in a caretaker capacity after an inconclusive election in April, he has defied calls by Sunnis, Kurds and even some fellow Shi'ites to step aside to make room for a less polarizing figure.

The Kurdish region is pressing the Obama administration for sophisticated weapons it says Kurdish fighters need to push back the Islamic State fighters threatening their region. The requested supplies include tanks, sniper equipment, armored personnel carriers, artillery and ammunition.

The move is likely to further anger Maliki, who may see it as an attempt to circumvent the Baghdad government in a long-standing drive for independence.

For now, however, Maliki seems to have put aside his hostility with the Kurds to try to prevent further gains by the Islamic State, which has declared a caliphate in parts of Iraq and Syria it controls and threatened to march on Baghdad.

"The general commander of the armed forces has ordered the air force command to provide backup for the Kurdish peshmerga forces against the terrorist gangs of the Islamic State," state television quoted Maliki's military spokesman Qassim Atta as saying.

OVERSTRETCHED

Tens of thousands of residents of Sinjar fled the district after it was taken over by Islamic State fighters.

Previously, an estimated 308,000 people lived in the district of Sinjar. As the insurgents advanced, many fled to Sinjar mountain, or Jebel Sinjar, said the United Nations Office for the Coordination of Humanitarian Affairs (OCHA) in a statement.

"The exact number of displaced people on Jebel Sinjar is unknown; however, reports indicate that some 35-50,000 people displaced in nine locations, reportedly surrounded by ISIS (Islamic State) armed elements. There are reports, to be verified, of children already dying for lack of water and other assistance among those trapped," the OCHA statement said.

A further 30,000 people, mainly women and children, have made their way to Dahuk governorate in Kurdistan, with more expected in coming days, OCHA said.

The insurgents control the two roads down the Sinjar mountain and are attacking families moving along the roads, which lead to Sinjar town and the Syrian border crossing at Rabia, OCHA said.

The senior Kurdish official said the Kurds had been overstretched because they had to watch over a vast territory. "The Islamic State has also been intimidating people by carrying out beheadings," he said, asking not to be identified.

After thousands of Iraqi soldiers fled their initial advance in June, the group then known as the Islamic State in Iraq and the Levant (ISIL) seized tanks, armored personnel carriers, anti-aircraft guns, mortars, artillery and vehicles.

"It is a very dangerous situation for the region. Something needs to be done soon," the senior Kurdish official said.

Despite the odds, Kurdish commanders were talking tough.

One colonel said the Kurdish withdrawal was tactical and forecast that several Kurdish brigades would take back all territory lost on Sunday and even win back Mosul, Iraq's biggest northern city which is firmly in the hands of the Islamic State.

"We will attack them until they are completely destroyed. We will never show any mercy," he told Reuters. "We have given them enough chances and we will even take Mosul back. I believe within the next 48-72 hours it will be over."

But commanders who had lost men in battle were not as optimistic. Kurdish peshmerga Brigadier Mashia Ramazan Fattah said the base where he was stationed came under Islamic State mortar fire for 12 straight hours through the night.

He was surprised to find that 500 peshmerga forces were outnumbered by Islamic State fighters who forced them to flee.

Another commander who asked not to be named said the Islamic State took everyone by surprise and had deployed snipers in addition to heavier weapons and that, in many cases, the Kurds had simply run out of ammunition.

"We can no longer carry on fighting with just Kalashnikov rifles," he said.

(Additional reporting by Tom Miles in Geneva; writing by Michael Georgy; Editing by Gunna Dickson)

• Politics & Government
• Unrest, Conflicts & War
• Islamic State
• Kurdish peshmerga

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Lebanese army advances in border battle with Islamists

By Alexander Dziadosz

OUTSKIRTS OF ARSAL Lebanon (Reuters) - The Lebanese army advanced on Monday into a border town attacked by Islamists at the weekend in the most serious spillover of the three-year-old Syrian civil war into Lebanon, and the Beirut government said the deadly assault would not go unpunished.

With army reinforcements arriving in Arsal, Prime Minister Tammam Salam, a Sunni Muslim, said there could be no political deal with gunmen identified as members of the Nusra Front and the Islamic State, which has seized parts of Syria and Iraq.

"The only solution proposed today is the withdrawal of the militants from Arsal and its environs," said Salam, the most senior Sunni in the Lebanese government.

Flanked by the rest of the cabinet, Salam accused the militants of seeking to "move their sick practices to Lebanon".

"We confirm that the attack on Lebanese national dignity will not go unpunished," he said.

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Lebanese army soldiers ride on a military pick-up truck at the entrance of the Sunni Muslim border t …

Lebanon, still rebuilding from its own 1975-1990 civil war, has been buffeted by violence linked to the Syrian conflict, including rocket attacks, suicide bombings and gun battles.

But this was the first major incursion by hardline Sunni militants who have become leading players in Sunni-Shi'ite violence that has unfolded across the Levant, destabilising Lebanon by inflaming its own sectarian tensions.

The army said 14 soldiers had been killed, with 22 others missing and 86 injured in the fighting, which erupted after security forces arrested a Syrian Islamist rebel commander, Emad Jumaa, on Saturday.

Soldiers advancing into Arsal found the bodies of 50 militants, a security official said. A cleric in Arsal said at least 50 civilians were dead and more were buried in rubble.

More than a dozen other members of the security forces have been taken hostage. The army described the Islamists' incursion as a long-planned attack. Local politicians say it marks an attempt to extend the Islamic State's footprint into Lebanon.

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Lebanese army soldiers arrive as part of reinforcements to the area at the entrance of the Sunni Mus …

Rebels said dozens of fighters from Syria's Qalamoun area just across the border had moved to Arsal on Sunday to reinforce gunmen there. Syrian warplanes repeatedly struck the nearby mountainous border area used by the militants to access Arsal.

The militants have been beaten back in the border area in the past year by Syrian government forces backed by Hezbollah, the Lebanese Shi'ite Muslim political and military movement. Some 3,000 fighters are estimated to be in the border zone.

Indicating that Iranian-backed Hezbollah stood ready to help the army, one of its senior clerics said the military would not be left on its own and urged people in areas near the clashes to be prepared to "confront the bats of the dark night".

Hezbollah forces have deployed near Arsal, and Syrian activists say they are already involved in the fighting. The group has not announced any role. Analysts believe Hezbollah would keep quiet about any involvement to avoid further inflaming sectarian tensions.

"To those who would threaten to divide the army and leave it, we say: Lebanon and the Bekaa are not Mosul," said Mohamed Yazbek, the Hezbollah cleric, in comments reported by Hezbollah's al-Manar website, referring to a northern Iraqi city overrun by Islamic State militants in June.

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Lebanese army soldiers stand in attention as mourners carry the coffin of Lieutenant Colonel Nour Ed …

NO REFUGE

Thick plumes of black and grey smoke billowed from the tops of the hills where Arsal lies. Intermittent bursts of gunfire could be heard from the surrounding areas as troops moved in.

A dozen armoured personnel carriers were seen advancing towards the town, together with a similar number of other military vehicles including trucks and Humvees. Soldiers armed with assault rifles and rocket-propelled grenades sat atop the vehicles as they moved along the main road towards Arsal.

Video footage released by the army showed seven bodies of men purported to be militants, as well as about two dozen men kneeling with their hands bound against a wall, and rifles, ID cards and cell phones said to be seized from the gunmen.

Arsal is a mainly Sunni town located on the Lebanese side of the border between Syrian government-controlled territory and Lebanese Shi'ite areas sympathetic to Hezbollah.

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Relatives mourn during an official ceremony outside the military hospital in Beirut to pay tribute t …

More than 100,000 Syrian refugees are estimated to be living in and around Arsal in camps that Syrian activists said had been badly damaged and evacuated during the fighting.

"There is no place of refuge for the refugees," said one Syrian activist in the area reached by text message.

"The residents are terrified."

Two army trucks were seen bringing several dozen civilians including women in headscarves and young children out of Arsal.

"What are we expecting? Our houses are being destroyed. God knows if our families are alive and well or dying," said Mohamed al-Fleti, a 25-year-old Lebanese man from Arsal as he sat in the shade of a tree by a gas station down the road from Arsal.

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Lebanese army soldiers carry the coffin of Lieutenant Colonel Nour Eddine al-Jamal, who was killed d …

The war in Syria has deepened rifts between Shi'ite Lebanese allied to the government of Syrian President Bashar al-Assad and Sunnis who have mostly been supportive of the uprising against him. Political divisions have left Lebanon without a president since May.

"THEY HAVE NO CHOICE BUT TO WITHDRAW"

Salam said the government, drawn from across the political spectrum, stood behind the army. He said he had asked France to speed the delivery of weapons due to be supplied in a Saudi-financed deal.

"The government has decided to mobilise all official Lebanese institutions and apparatus to defend our country."

Lebanon's most influential Sunni politician, former prime minister Saad al-Hariri, said Arsal must be "liberated" from the militants.

"They have no choice but to withdraw from the town, and neither the state, nor we, will stand idle in the face of the plots of these groups," Hariri, who is backed by Saudi Arabia, said in comments to the London-based Al-Hayat newspaper.

But despite wide backing for the army among politicians, Lebanon's Muslim Clerics Association urged Sunnis to protest until the army halted its bombardment of Arsal.

Its demands, published in a statement, included the opening of "a secure humanitarian corridor to Arsal".

Mustafa al-Hujairi, a leading Sunni cleric in Arsal, blamed deaths in Arsal on Hezbollah. He said matters were now in the hands of the gunmen.

"Hezbollah want to turn Arsal to rubble like they did to Qusair," he said, referring to a town in Syria that Hezbollah helped Syrian government forces capture from rebels last year.

(Additional reporting by Laila Bassam, Tom Perry and Mariam Karouny; Writing by Tom Perry; Editing by Paul Taylor and Will Waterman)

• Unrest, Conflicts & War
• Politics & Government
• Tammam Salam
• Lebanon
• Islamic State

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Japan's security fears grow as neighbours build up arms

By Kiyoshi Takenaka

TOKYO (Reuters) - Japan finds itself surrounded by a worsening security environment as North Korea pushes forward with missile development and China and Russia step up military activity in the region, Japan's Defence Ministry said on Tuesday.

The ministry's annual white paper comes after intermittent testing by North Korea of ballistic missiles in defiance of a U.N. ban, and a record number of scrambles by Japanese fighter jets in April-June due to increased flights by Chinese and Russian planes close to Japan's air space.

"With a trend toward arms buildup and modernisation, and brisker military activity by neighbouring countries getting prominent, security challenges and destabilising factors for Japan and the rest of the Asia-Pacific are becoming more serious," the ministry said in the paper.

Prime Minister Shinzo Abe returned to power in December 2012 intent on easing the limits of the post-war pacifist constitution on the military to let Japan play a bigger global security role.

Abe's government this year took some historic steps away from Japan's post-war pacifism by easing weapons export restrictions and ending a ban that has kept the military from fighting abroad.

The moves have been viewed warily elsewhere in Asia, in particular in China. Ties between China and Japan were already strained by a territorial dispute over a group of tiny East China Sea isles as well as rows over the legacy of Japan's wartime aggression. Patrol ships from both countries routinely shadow each other near the islands, stoking fear of clashes.

Recently, however, Abe has renewed a call for a bilateral summit with Chinese President Xi Jinping. The two governments are trying to arrange a summit on the sidelines of a Pacific Rim conference in Beijing in November, the Nikkei newspaper said on Monday.

The ministry's report described China's action in maritime disputes with other countries as "high-handed" and called on China to observe international norms.

In November, China launched an air defence identification zone covering a swath of the East China Sea, including the disputed isles, and warned it would take "defensive emergency measures" against aircraft that failed to identify themselves.

"These are very dangerous measures that could lead to the unilateral change of the status quo in the East China Sea, escalation of the situation, and some unexpected development," the ministry said. "We are deeply concerned."

China's defence budget soared fourfold over the past decade to 808 billion yuan ($131 billion), while Japan's defence spending dipped by 1.9 percent over the same period to 4.78 trillion yen ($47 billion), the ministry said.

Japan and the United States are set to revise cooperation guidelines by the end of the year to reflect the changing security environment and better respond to threats in such areas as space and cyber space.

'GLOBAL ISSUE'

The Defence Ministry called North Korea's missile and nuclear programmes a "grave destabilising factor" and warned that progress in the projects could embolden the North to resort to more provocation.

"If North Korea extends the range of ballistic missiles further, reduces the size of nuclear arms and turns them into warheads, the country could come to believe it has secured strategic deterrence against the United States," it said.

There is a possibility that the advanced version of North Korea's Taepodong-2 ballistic missiles, when fitted with a warhead weighing less than one tonne, could have a range of more than 10,000 km (6,200 miles), covering part of the continental United States, the ministry said.

Japan is also keeping a wary eye on Russia's involvement in turmoil in Ukraine, where Moscow annexed the Black Sea peninsula of Crimea in March.

"This change to the status quo by Russia, with force in the background, is a global issue that affects the entire international society," it said.

Any attempt to change the status quo by force makes Japan nervous as China challenges Japan's control over the East China Sea islets, known as the Senkaku in Japan and Diaoyu in China.

The ministry also touched upon another set of small islands, controlled by South Korea but claimed by Japan, saying they were Japan's inherent territory. The islets are called the Takeshima in Japanese and Dokdo in Korean.

The position drew a quick angry reaction from South Korea, which called the claim "preposterous". Its defence ministry summoned the Japanese embassy military attache to protest.

"The Japanese government should bear in mind that as long as it continues its unjust claim over Dokdo, the road to improving ties between the two countries can only be a long one," South Korea's foreign ministry said in a statement.

(Additional reporting by Jack Kim in Seoul; Editing by Linda Sieg, William Mallard, Robert Birsel)

• Politics & Government
• Military & Defense
• Japan
• North Korea
• East China Sea
• China

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