BEIRUT (Reuters) - The capture of Qusair by Syrian troops spearheaded by Hezbollah, the Lebanese Shi'ite Islamist militia, risks turning the war in Syria into a wider sectarian battle between Sunni and Shi'ite forces that will sweep through the country's neighbours.
The fall of the town after weeks of fighting has emboldened the Syrian government and left the rebels contemplating their biggest defeat in a two-year-old war that has killed 80,000.
In Damascus, the victory lifted the morale of a government under siege. Demonstrations in support of President Bashar al-Assad are back, and posters of his family can be seen once more on cars circulating on inner city streets.
Opposition activists voiced anger at the chronic disunity of their fighters and the failure of Arabs and the West to arm the rebel groups.
"The other side is fighting under one banner but we are fighting under several banners," said activist Yasser Alyousef on the Facebook page Aleppo Now.
The fighting now threatens to take on a more sectarian and regional focus. The withdrawal of Sunni Syrian rebels into eastern Lebanon could mean reprisal attacks on Shi'ite villages and Hezbollah strongholds there.
"The loss of Qusair and the very high number of casualties reported from the town will undoubtedly result in a desire amongst at least some of the rebel community to exact revenge," said Charles Lister, an analyst at IHS Jane's terrorism and insurgency centre.
A senior security official in the region put it more bluntly: "Hezbollah entered a Sunni-Shi'te conflict (in Syria) declaring a jihad so they expect a counter jihad in return."
The fall of Qusair is a strategic blow to the rebels, who have suffered reverses in a government counter-offensive now reinforced by Hezbollah and Revolutionary Guards from Iran.
Rebel supply lines through Qusair are now cut, while the government has regained control of the Damascus to Aleppo highway. The government has also regained access from Damascus to the coastal heartland of Assad's loyal Alawite minority.
What is most unsettling about the capture of Qusair, military officials in the region say, is that it was essentially a Hezbollah operation - from the planning, to the deployment of artillery and other armaments, to the actual fighting.
"Hezbollah captured the town and let the Syrian army in. The Syrian army provided logistical support through relentless bombing and shelling, but Hezbollah was the strike force," said one well-placed Syrian source.
The involvement now of Hezbollah, Iran's proxy, in the war is seen as evidence of a belief in Tehran that a defeat for Assad -- which looked distinctly possible last year -- would pose an unacceptable threat to Iran.
Qusair is unlikely, however, to prove a decisive turning point in a stalemated war. Forces loyal to Assad must still retake large areas of northern and eastern Syria, while the rebels, divided and poorly armed as they are, remain tenacious.
"It is a very strategic win, but a localised victory which took several weeks and with huge foreign assistance which has a lot of negative connotations. There will definitely be a reaction against Hezbollah," said Middle East analyst Rami Khouri.
What Qusair also underlines is how a conflict that began as an Arab Spring uprising against dictatorship is turning into a proxy war pitting Iran against the West and its Arab allies - a contagious contest that has spread east and west of Syria.
At the same time, Assad has become reliant on Hezbollah, Iran and a national network of mainly Alawite militia known as the National Defence Forces which have taken over much of the army's role and given the Assad camp a more sectarian colour.
Even though Alawites hold most top positions in the Syrian hierarchy, Assad no longer trusts the mainly Sunni army.
The growing involvement of Sunni Arab jihadis on the rebel side, including the Nusra Front linked to al-Qaeda, places the front line of the Middle East's centuries-old Sunni-Shi'ite rift in Syria, and also possibly in Lebanon.
The schism between Sunnis and Shi'ites arose soon after the death of the Prophet Mohammad in 632, when Ali, his son-in-law and cousin, was passed over as the rightful successor, to the chagrin of his partisans, who became known as Shi'ites.
Two years into the fighting, the situation in Syria has come to resemble the 1975-90 civil war in Lebanon and the sectarian conflict in Iraq that followed the fall of Saddam Hussein.
In Iraq, the Syrian war has reignited Shi'ite and Sunni tensions which have simmered since the 2003 U.S.-led invasion.
A flickering Sunni insurgency against the Shi'ite-dominated government, encouraged by popular protest across the Arab world, has burst back into flame. Sectarian violence is now at its highest in Iraq since the dark years of 2006-2007.
Free Syrian Army flags seen at protests in Iraq highlight links between Sunni tribes in western Iraq and eastern Syria.
Much of the violence in Iraq is blamed on al Qaeda's local wing, the Islamic State of Iraq, which has already signalled its regional ambitions by joining with the Nusra Front in Syria.
Iraqi fighters from both sides of the sectarian divide now cross the border to fight -- Iraqi Sunnis alongside Sunni rebels, and Shi'ite militias, who once battled American troops, now fighting alongside Syrian government forces.
As this bloody free-for-all unfolds, the map of the Middle East is starting to change, with countries fragmenting along sectarian lines. Lebanon and Iraq are most at risk, but no country bordering Syria seems immune.
Turkey has had a taste of the violence, when two bombs hit a border town killing dozens. The war could open up divisions between Turkey's majority Sunnis and minority Alevis.
Sayyed Hassan Nasrallah, the Hezbollah leader, publicly justifies his adventure in Syria by the need to stop al-Qaeda style Sunni radicals, or Takfiri forces, in their tracks.
He sees Lebanon, Syria and Iraq as potentially part of the same battlefield.
Rockets were fired at Hezbollah-held southern Beirut last month while last week the group clashed with Syrian rebels in Lebanon. The Lebanese city of Tripoli has seen deadly clashes between Sunnis and Alawites.
Underlining the risks for Lebanon, the rebel Free Syrian Army warned that it might target Hezbollah on its home turf.
Highlighting the widening regional Sunni-Shi'ite schism, influential Sunni Sheikh Youssef al-Qaradawi called on all those who can perform jihad to head to Syria to fight. Alawites and Shi'ites were worse than Christians and the Jews, he said.
GAMBLE FOR HEZBOLLAH
According to one senior Arab security source, Hezbollah's gamble has turned the Syrian war into a regional test of strength between Sunni and Shi'ite power.
"Hezbollah has committed a grave mistake. We are facing a turning point. Hezbollah hopes it will be for its own interest but I don't see it that it is in its interest," he said.
But for Hezbollah and Iran, the fall of Damascus, Iran's first line of defence in its struggle with the West and Israel, would be seen as a "preamble to the defeat of Tehran and its proxy ally" in Lebanon, he said. That means the stakes are too high for them to stay on the fence.
Their enemies in the West and among Sunni Arab states do not hide their motives in joining Syria's war: not to usher in democracy but to take out Iran's main Arab ally and thereby hit Tehran and its Hezbollah proxy.
Nasrallah spelt out in a speech last month that he sees Syria as a battleground where the survival of the Shi'ites is at stake. In this view, Syria and Lebanon face a threat from radical Sunnis, which he argued was a plot devised by the United States and its allies to serve Israel's interests in the region.
Israel has already struck what it says were Iranian rockets transiting Syria for Hezbollah three times this year. The group's overt involvement now makes such attacks more likely.
The fall of Qusair might also make it harder for either side make concessions at a proposed July peace conference in Geneva, with Assad's fortunes on the rise and his foes in disarray.
"The private talk in the corridors of power was that if we don't take Qusair we won't go to Geneva. They needed something in their pocket to bargain with in Geneva," said one Syrian source familiar with the debate. "With such a victory it is difficult to extract anything out of them".
But analysts think Washington and its allies can take some satisfaction from events in Syria, for three reasons.
Syria has become a magnet for al Qaeda and other jihadi recruits from Yemen to Saudi Arabia, with many killed daily.
The conflict is a drain on Iran's reserves. Tehran is paying out $600 - $700 million (387.5 - 452.1 million pounds) a month, according to an Arab security source, which Iran's enemies hope might cause unrest at home.
Hezbollah, as a bonus, is being dragged into the Syrian quagmire in a way that will weaken it militarily and destroy much of its political credibility, burnished by years of conflict with Israel. As one Beirut analyst put it, "that fig leaf has fallen".
(Additional reporting by Patrick Markey; Editing by Giles Elgood)