March 2 (Bloomberg) -- Six months after a cease-fire between Israel and Hezbollah, the Lebanese Shiite Muslim militia is rearming, raising the specter that even a small border skirmish might trigger another war.

While Hezbollah militiamen no longer operate at the border fence, the militant Islamic group has planted its yellow flags with green insignia along the border. Southern Lebanon, once Hezbollah's stronghold, is now patrolled by 20,000 United Nations peacekeepers and Lebanese troops under a cease-fire struck Aug. 14 after the 33-day war.

The UN troops don't patrol the border with Syria, through which Israeli officials say new arms and equipment -- including Katyusha rockets, Russian-made anti-tank missiles and night- vision goggles -- are flowing, adding to the arsenal of an estimated 8,000 rockets Hezbollah retained at the end of the conflict.

``The big problem today is that the smuggling of weapons between Syria and Lebanon didn't stop,'' Lieutenant Colonel Guy Hazut, of the Israeli army's 91st division, said in an interview along the Israeli-Lebanese border.

Hassan Nasrallah, 46, Hezbollah's leader, said in a Feb. 3 interview with a Kuwaiti newspaper that his militia is receiving a fresh supply of money and weapons from Iran, the group's chief patron. Hezbollah is classified as a terrorist organization by the U.S.

`All Kinds and Quantities'

``We have weapons of all kinds and quantities,'' Nasrallah said in a speech Feb. 16, the Christian Science Monitor reported. ``We don't fight our enemy with swords made of wood.''

John Bolton, 58, the former U.S. ambassador to the UN who negotiated the resolution setting the terms of the cease-fire in August, said ``the hope'' that a new ``enhanced'' UN force in Lebanon would help prevent future flare-ups along the border ``has failed.'' Asked in an interview if another war is likely, Bolton said, ``I think it is.''

Hazut says Israel is, for now, relying on the UN to intervene, passing on to it information about smuggling attempts. ``But if this situation will not stop, our government will have to decide what to do,'' Hazut said.

During the war last July and August, 4,000 Katyusha rockets slammed into northern Israel, and Israeli bombs leveled Lebanese villages, killing hundreds and costing both nations' economies billions of dollars.

Proxy War

As tensions rise between the U.S. and Iran over the Iranian nuclear program, fears that a proxy war with Hezbollah might erupt again are becoming commonplace in Israel.

Senior Israeli military intelligence official Yossi Baidatz told a Knesset committee last month that Hezbollah was stronger now than before the war, a charge disputed by Prime Minister Ehud Olmert.

``Hezbollah is weaker, much weaker than they were,'' Olmert, 61, told reporters in Jerusalem on Feb. 21. ``It is true they are trying to smuggle arms into Lebanon. It is true they are making efforts to rearm themselves to the level that they had before the war, but it is also true that the south of Lebanon now is filled'' with Lebanese and UN forces.

Driving amid the rolling hills and olive trees along the border, Lieutenant Colonel Hazut comes to the exact spot where the war began on July 12 when Hezbollah militants ambushed an Israeli convoy, killing three soldiers and kidnapping two. The two Israeli reservists, Ehud Goldwasser and Eldad Regev, are still being held, a source of deep embarrassment for the Israeli government, which made their return one of the aims of the war.

Israel's Errors

A government-appointed investigative committee is scheduled to report on errors committed in the war's prosecution in the coming weeks. Israeli analysts say it will probably include criticism of Olmert and Defense Minister Amir Peretz, 54, who was only days on the job when the war erupted. Critics say they sent an insufficiently prepared force and failed to properly protect civilians.

Eyal Zisser, a Middle East expert at Tel Aviv University, said Olmert has no choice but to defend the war's achievements. ``His statement about Hezbollah had a clear political motivation to defend himself, to explain to everyone that what he did in the war was justified,'' Zisser said in an interview.

Hezbollah is bent on returning to where it was before the war, ``when they were prepared to launch missile attacks against Israel,'' Zisser said. Weapons from Iran are moving through Syria to Beirut and the Bekaa valley north of the zone patrolled by Lebanese and UN troops, he said.

An Unintentional War

``What I'm afraid of for the future'' is that war erupts unintentionally, Zisser said. ``A small incident along the border can lead us once again to a new round of violence.''

Such incidents are already more frequent. On Feb. 7, Lebanese troops fired at the Israeli army after they said a bulldozer crossed the border. Hazut says the bulldozer, which was clearing munitions, didn't cross the so-called Blue Line. Two Lebanese soldiers were wounded when Israel fired back.

Michael Williams, special adviser on the Middle East to UN Secretary General Ban Ki-moon, said during a Feb. 28 visit to Beirut that ``we cannot afford to see other incidents like that.'' Later last month, Lebanese forces aimed anti-aircraft fire at Israeli jets that circled over the southern Lebanese port city of Tyre.

Disarming Hezbollah

Mohammad Fneish, the Hezbollah minister of energy and water who resigned recently to protest Prime Minister Fouad Siniora's government, defends Hezbollah's right to retain an independent arsenal. The UN cease-fire resolution last summer ``did not call for Hezbollah disarmament,'' he said after meeting Williams -- although a 2004 Security Council resolution did call for disarming all militias in Lebanon.

``The Israelis make statements every day and make threats, some even calling for the resumption of the aggression against Lebanon,'' Fneish said. ``We have to be ready to confront any aggression.''

Hezbollah, whose name means Party of God, has been linked to rocket attacks on Israel, bombings in Beirut in 1983 that killed 241 U.S. Marines and 58 French soldiers, and an attack on a Jewish community center in Buenos Aires in 1994 that killed 85 people. Hezbollah denies involvement in the bombings.

Peering down from the hilltop Israeli collective farm of Misgav Am over the Lebanese village of Adessa, where bloody clashes took place during the war, Aryeh Ben-Yaakov said the fluttering Hezbollah flags don't bother him. The 66-year-old tour guide said he's just grateful that Hezbollah gunmen no longer perch on rooftops below, and for the twice-daily patrols by Norwegian peacekeepers.

``It's quiet, so that's a good thing,'' said Ben-Yaakov, who emigrated from Cleveland in 1961. ``Quiet is good for business.'' Even so, he added, ``In my opinion, war can break out any time Nasrallah wants it to.''

To contact the reporter on this story: Janine Zacharia in Biranit, Israel, at jzacharia@bloomberg.net

Last Updated: March 1, 2007 19:57 EST