July 28 (Bloomberg) -- ``Pride stands here,'' reads a white sheet adorned with black Arabic script hanging near the ruins of Hezbollah's Beirut headquarters. ``Submission is not an option.''

That message of defiance, flying above buildings flattened by Israeli air strikes, is enhancing the standing of Sheikh Hassan Nasrallah, Hezbollah's leader, among his Shiite Muslim followers at home and Islamic radicals elsewhere.

They don't blame Nasrallah for instigating fighting that has cost 400 Lebanese lives and forced 800,000 people to flee their homes. Instead, they see him as someone who deserves credit for making Israel end its 22-year occupation of southern Lebanon while suffering personal loss -- a son's death in a 1997 attack on Israeli forces -- in the struggle.

``What sets Nasrallah apart from other Lebanese and Arab politicians is that he won a war against Israel, and he lost one of his sons in the fight,'' said Walid Charara, co-author of the book ``Hezbollah, an Islamist-Nationalist Party.'' ``This gives him credibility that Arab leaders are bereft of.''

In a sign of his standing, he's commonly called ``Sayyid,'' a title given to people believed to be descendants of Prophet Muhammad's family. In June, riots broke out to protest a political comedy show on television that impersonated him.

Public Approval

About 70 percent of Lebanese approve of Hezbollah's capture of two Israeli soldiers in the July 12 raid that sparked Israel's offensive, according to a poll of 800 people published July 26 by the Beirut Center for Research and Information.

Nasrallah, 46, has spent his 14-year career as secretary general of Hezbollah juggling his role in Lebanon with his ties to Iran, the country that funds and arms his group, and to neighboring Syria, which controlled Lebanon for 29 years and backed Hezbollah's right to arms.

Trained in local Palestinian military camps, he studied theology in Iraq's Shiite holy city of Najaf and in Iran. He rose through Hezbollah's ranks by turning guerrilla fighters into a militia to battle the Israeli occupation.

Nasrallah has stage-managed Hezbollah's move into politics, making it a key player in ruling Lebanon, where decisions are taken by a cabinet made up of representatives of the various religious strands. The group's political arm has 14 members in the 128-seat parliament.

Charities and Hospitals

He has also built a network of charities and hospitals that ensures loyalty among Shiites, the largest and poorest of the 17 communities in the Mediterranean nation of 3.8 million people.

Nasrallah's opponents say he is disregarding the interests of the Lebanese people and has turned Lebanon into a battleground in the Iranian and Syrian confrontations with the U.S.

``It's sad to see Lebanon as a toy in the game of nations and made to pay the price with the blood of its children,'' Lebanese Christian leader Samir Geagea told reporters in Beirut on July 25.

The war that started July 12 has inflicted $2 billion in damage to Lebanese airports, ports, roads and bridges. Lebanon's economic losses from the aborted summer tourism season and stalled industrial production amount to an additional $2 billion, Riad Salameh, the governor of the Central Bank of Lebanon, said in an interview yesterday.

`Fighting for Lebanon'

Hezbollah denies taking orders from Iran and Syria, insisting its agenda is purely Lebanese. ``We say it loudly, we are with Syria, we are with Iran, but we are not fighting for them,'' Nawwar Sahili, a Hezbollah member of parliament, said in an interview this week. ``We are fighting for Lebanon, for our people. Our agenda is Lebanese.''

The abduction of the Israeli soldiers was meant to secure the release of three Lebanese held in Israeli jails and possibly thousands of other Palestinian and Arab prisoners, Nasrallah said on the first day of the war. Hezbollah has called for an immediate cease-fire and start of talks to release those jailed.

Nasrallah, in a video message aired by Hezbollah's Al-Manar television on July 26, said Israel and the U.S. were using the soldiers' capture as a pretext to launch a pre-prepared war aimed at ``controlling Lebanon.'' He said Hezbollah will extend its rocket attacks deeper into Israel. About 50 Israelis have been killed in the fighting.

Hezbollah was formed in 1982 after Israel's invasion of Lebanon. Its creation followed the 1979 Islamic revolution in Iran, which inspired many Shiites throughout the Muslim world. The poverty of Lebanon's Shiites has made the community receptive to revolutionary ideas.

`Steel-Structured Party'

Initially a loose gathering of groups sharing loyalty to the Iranian regime, Hezbollah became the ``steel-structured party that we know, with an agenda to fight Israel and support the Palestinians'' in 1988, said author Charara, the opinion editor at Lebanese newspaper Al-Akhbar. The organization gets about $100 million a year from Iran, according to the Washington Institute for Near East Policy.

Hezbollah's armed wing, called the Islamic Resistance, was the only militia allowed to keep weapons under the 1989 accord that ended Lebanon's 15-year civil war because of its role in fighting Israel. It is better-equipped than Lebanon's army, which lacks air-defense and anti-ship weapons, retired Brigadier General Walid Sukkarieh said.

The army's role has been ``to preserve the peace after the civil war, while Hezbollah developed into a well-trained fighting force,'' he said.

Terrorism

Hezbollah has claimed credit for or been linked to scores of attacks on Israelis and Americans, including rocket attacks on Israeli towns, the 1983 bombings that killed 241 U.S. soldiers in Beirut, and the 1994 attack that killed 95 at a Jewish community center in Buenos Aires. The U.S. and Israel have designated Hezbollah a terrorist organization.

While Israel pulled out of Lebanon six years ago, Hezbollah resisted calls by Lebanon's Christian political parties, as well as a United Nations Security Council resolution, to disarm. The group's explanation was that it still wanted to free the Shebaa Farms, a territory captured by Israel from Syria in 1967, and claimed by Lebanon with Syrian encouragement.

In March 2005, Nasrallah organized a demonstration in Beirut to support Syria and its leader Bashar al-Assad, whose regime was accused of assassinating Lebanese Prime Minister Rafiq Hariri.

Even in a Beirut school sheltering people displaced by the fighting, Hezbollah has support. ``When we need a doctor, medicine, we can count on Hezbollah's clinics,'' said Dalal Naanou, a 35-year-old widow, who fled her village in Tayr Diba, near the southern port of Tyre, with her two boys, 9 and 7.

Naanou, who shares a classroom in the Zareef secondary school with two families, gets about $75 a month from the Imam Khomeini Foundation, her only income. Her younger boy, Yasser, said he wants to join ``Hezbollah's army'' when he grows up.

To contact the reporter responsible for this story: Maher Chmaytelli in Beirut through the newsroom in London or mchmaytelli@bloomberg.net

Last Updated: July 27, 2006 21:11 EDT