By Laila Bassam and Maya Gebeily BEIRUT (Reuters) -Hezbollah has begun a major strategic review in the wake of its devastating war with Israel, including considering scaling back its role as an armed movement without disarming completely, three sources familiar with the deliberations say. The internal discussions, which aren't yet finalised and haven't previously been reported, reflect the formidable pressures the Iran-backed Lebanese militant group has faced since a truce was reached in late November. Israeli forces continue to strike areas where the group holds sway, accusing Hezbollah of ceasefire violations, which it denies. It is also grappling with acute financial strains, U.S. demands for its disarmament and diminished political clout since a new cabinet took office in February with U.S. support. The group's difficulties have been compounded by seismic shifts in the regional power balance since Israel decimated its command, killed thousands of its fighters and destroyed much of its arsenal last year. Hezbollah's Syrian ally, Bashar al-Assad, was toppled in December, severing a key arms supply line from Iran. Tehran is now emerging from its own bruising war with Israel, raising doubts over how much aid it can offer, a regional security source and a senior Lebanese official told Reuters. Another senior official, who is familiar with Hezbollah's internal deliberations, said the group had been holding clandestine discussions on its next steps. Small committees have been meeting in person or remotely to discuss issues including its leadership structure, political role, social and development work, and weapons, the official said on condition of anonymity. The official and two other sources familiar with the discussions indicated Hezbollah has concluded that the arsenal it had amassed to deter Israel from attacking Lebanon had become a liability. Hezollah "had an excess of power," the official said. "All that strength turned into a weak point." Under the leadership of Hassan Nasrallah, who was killed last year, Hezbollah grew into a regional military player with tens of thousands of fighters, rockets and drones poised to strike Israel. It also provided support to allies in Syria, Iraq and Yemen. Israel came to regard Hezbollah as a significant threat. When the group opened fire in solidarity with its Palestinian ally Hamas at the start of the Gaza war in 2023, Israel responded with airstrikes in Lebanon that escalated into a ground offensive. Hezbollah has since relinquished a number of weapons depots in southern Lebanon to the Lebanese armed forces as stipulated in last year's truce, though Israel says it has struck military infrastructure there still linked to the group. Hezbollah is now considering turning over some weapons it has elsewhere in the country - notably missiles and drones seen as the biggest threat to Israel - on condition Israel withdraws from the south and halts its attacks, the sources said. But the group won't surrender its entire arsenal, the sources said. For example, it intends to keep lighter arms and anti-tank missiles, they said, describing them as a means to resist any future attacks. Hezbollah's media office did not respond to questions for this article. Isreal's military said it would continue operating along its northern border in accordance with the understandings between Israel and Lebanon, in order eliminate any threat and protect Israeli citizens. The U.S. State Department declined to comment on private diplomatic conversations, referring questions to Lebanon's government. Lebanon's presidency did not respond to questions. For Hezbollah to preserve any military capabilities would fall short of Israeli and U.S. ambitions. Under the terms of the ceasefire brokered by the U.S. and France, Lebanon's armed forces were to confiscate "all unauthorized arms", beginning in the area south of the Litani River - the zone closest to Israel. Lebanon's government also wants Hezbollah to surrender the rest of its weapons as it works to establish a state monopoly on arms. Failure to do so could stir tensions with the group's Lebanese rivals, which accuse Hezbollah of leveraging its military might to impose its will in state affairs and repeatedly dragging Lebanon into conflicts. All sides have said they remain committed to the ceasefire, even as they traded accusations of violations. PART OF HEZBOLLAH'S 'DNA' Arms have been central to Hezbollah's doctrine since it was founded by Iran's Islamic Revolutionary Guard Corps to fight Israeli forces who invaded Lebanon in 1982, at the height of the 1975-1990 Lebanese civil war. Tensions over the Shi'ite Muslim group's arsenal sparked another, brief civil conflict in 2008. The United States and Israel deem Hezbollah a terrorist group. Nicholas Blanford, who wrote a history of Hezbollah, said that in order to reconstitute itself, the group would have to justify its retention of weapons in an increasingly hostile political landscape, while addressing damaging intelligence breaches and ensuring its long-term finances. "They've faced challenges before, but not this number simultaneously," said Blanford, a fellow with the Atlantic Council, a U.S. think tank. A European official familiar with intelligence assessments said there was a lot of brainstorming underway within Hezbollah about its future but no clear outcomes. The official described Hezbollah's status as an armed group as part of its DNA, saying it would be difficult for it to become a purely political party. Nearly a dozen sources familiar with Hezbollah's thinking said the group wants to keep some arms, not only in case of future threats from Israel, but also because it is worried that Sunni Muslim jihadists in neighbouring Syria might exploit lax security to attack eastern Lebanon, a Shi'ite-majority region. Despite the catastrophic results of the latest war with Israel - tens of thousands of people were left homeless and swathes of the south and Beirut's southern suburbs were destroyed - many of Hezbollah's core supporters want it to remain armed. Um Hussein, whose son died fighting for Hezbollah, cited the threat still posed by Israel and a history of conflict with Lebanese rivals as reasons to do so. "Hezbollah is the backbone of the Shi'ites, even if it is weak now," she said, asking to be identified by a traditional nickname because members of her family still belong to Hezbollah. "We were a weak, poor group. Nobody spoke up for us." Hezbollah's immediate priority is tending to the needs of constituents who bore the brunt of the war, the sources familiar with its deliberations said. In December, Secretary General Naim Qassem said Hezbollah had paid more than $50 million to affected families with more than $25 million still to hand out. But there are signs that its funds are running short. One Beirut resident said he had paid for repairs to his apartment in the Hezbollah-controlled southern suburbs after it was damaged in the war only to see the entire block destroyed by an Israeli airstrike in June. "Everyone is scattered and homeless. No one has promised to pay for our shelter," said the man, who declined to be identified for fear his complaints might jeopardise his chances of receiving compensation. He said he had received cheques from Hezbollah but was told by the group's financial institution, Al-Qard Al-Hassan, that it did not have funds available to cash them. Reuters could not immediately reach the institution for comment. Other indications of financial strain have included cutbacks to free medications offered by Hezbollah-run pharmacies, three people familiar with the operations said. SQUEEZING HEZBOLLAH FINANCES Hezbollah has put the onus on Lebanon's government to secure reconstruction funding. But Foreign Minister Youssef Raji, a Hezbollah critic, has said there will be no aid from foreign donors until the state establishes a monopoly on arms. A State Department spokesperson said in May that, while Washington was engaged in supporting sustainable reconstruction in Lebanon, "this cannot happen without Hezbollah laying down their arms". Israel has also been squeezing Hezbollah's finances. The Israeli military said on June 25 that it had killed an Iranian official who oversaw hundreds of millions of dollars in transfers annually to armed groups in the region, as well as a man in southern Lebanon who ran a currency exchange business that helped get some of these funds to Hezbollah. Iran did not comment at the time, and its U.N. mission did not immediately respond to questions from Reuters. Since February, Lebanon has barred commercial flights between Beirut and Tehran, after Israel's military accused Hezbollah of using civilian aircraft to bring in money from Iran and threatened to take action to stop this. Lebanese authorities have also tightened security at Beirut airport, where Hezbollah had free rein for years, making it harder for the group to smuggle in funds that way, according to an official and a security source familiar with airport operations. Such moves have fuelled anger among Hezbollah's supporters towards the administration led by President Joseph Aoun and Nawaf Salam, who was made prime minister against Hezbollah's wishes. Alongside its Shi'ite ally, the Amal Movement, Hezbollah swept local elections in May, with many seats uncontested. The group will be seeking to preserve its dominance in legislative elections next year. Nabil Boumonsef, deputy editor-in-chief of Lebanon's Annahar newspaper, said next year's poll was part of an "existential battle" for Hezbollah. "It will use all the means it can, firstly to play for time so it doesn't have to disarm, and secondly to make political and popular gains," he said. (Additional reporting by Timour Azhari in Beirut and Maayan Lubell in Jerusalem; Writing by Maya Gebeily; Editing by Tom Perry and Alexandra Zavis)
