Lebanese soldiers stand guard in the northern Lebanese town of Arsal, on the border with Syria.
Lebanese soldiers stand guard in the northern Lebanese town of Arsal, on the border with Syria, on August 6, 2014. Photo by AFP
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REUTERS - Saudi Arabia's King Abdullah granted $1 billion to help the Lebanese army to bolster security as they battled militants who have seized the border town of Arsal on the Syrian frontier, state news agency SPA reported.

Militant Islamists have mostly withdrawn from a Lebanese border town they seized at the weekend, taking with them captive Lebanese soldiers, militant and security sources said on Thursday, and a truce to end the deadly battle appeared to be holding.

Muslim clerics who had been mediating an end to five days of fighting in Arsal said they would negotiate for the release of remaining captives held by militants whose incursion into Lebanon marked the most serious spillover of Syria's three-year-old civil war into Lebanese territory.

Dozens of people have been killed in the battle between the army and Islamists from groups including the Islamic State, which has seized large areas of territory in Iraq and Syria.

"The withdrawal happened at dawn, with the hostages," one of the withdrawing militants told Reuters by telephone. "They could be released later in stages." A security source confirmed the militants had taken the captives with them.

The dead include 17 Lebanese soldiers. A Syrian doctor in Arsal put the total civilian death toll at 42, while security sources have reported dozens of fatalities among the militants.

Security officials say 19 soldiers are still missing, presumed taken by the militants when they attacked Arsal on Saturday in what the army described as long-planned attack. More than a dozen policemen were also taken captive.

The mediators from the Muslim Clerics Association on Wednesday secured the release of three of the soldiers.

"We can confirm that the town is almost free of (the militants)," said one of the mediating clerics during a televised news conference speaking on the outskirts of the town.

"Within hours everything will be over."

The taking of Arsal was the first major incursion into Lebanon by hardline Sunni militants - leading players in Sunni-Shi'ite violence unfolding across the Levant - which threatens the stability of Lebanon by inflaming its own sectarian tensions.

Arsal is a Sunni Muslim town at the border where tens of thousands of refugees have taken shelter from the war in neighbouring Syria. Their refugee camps have been badly damaged in the fighting, Syrian activists have reported.

A Lebanese security source said the militants appeared to be pulling out gradually, but the army was still assessing the situation. A Lebanese political source familiar with the situation on the ground said some of the militants were still in the town, including Islamic State fighters.

Advancing soldiers found three policemen alive and well at a clinic in the town on Thursday, a security official said.

The Red Cross was able to enter the town on Thursday and recovered 35 wounded civilians, the source said.

The battle in Arsal, a predominantly Sunni Muslim town, has triggered unrest in other parts of Lebanon. A bomb exploded near an army patrol in the northern city of Tripoli, also predominantly Sunni, killing one person and wounding 11 on Wednesday evening, security sources said.

First stop for refugees

The militants have been identified by officials as members of the Nusra Front, Al-Qaida'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.

Local officials in Arsal said is was completely surrounded by the army apart from a corridor apparently left for gunmen who want to retreat.

Arsal was the first stop for many civilians fleeing the bloodshed in Syria. Refugee camps in Arsal that provide shelter to tens of thousands of Syrians who fled the war have been badly damaged in the fighting, forcing refugees to seek shelter in the town itself, Syrian activists in the area have said.

Qassem al-Zein, a Syrian doctor at the field hospital in Arsal said militants "wanted to leave since yesterday but they haven't been able to because of the shelling."

"The important thing is to stop the shelling. The wounded and dead are still coming. Since this morning we've had 30 wounded, all from shelling and snipers. All civilians," he said.

He said the hospital had counted 36 dead civilians since the fighting started, about 10 of them people from Arsal and the rest Syrian refugees.

Walid Kayyal, head of the Red Cross in Labwa, said his rescuers were on full alert. "Every day we have 50 rescuers on standby and in total we have 350 on standby. We're on rotation 24 hours a day."

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 and seized the town.

Saudi money

The ceasefire had come into effect on Tuesday evening after the Islamists freed three policemen in what one militant called a "goodwill gesture" in response to mediation by Sunni clerics from Lebanon's Muslim Clerics' Association.

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

A Lebanese political source, speaking on condition of anonymity, said the army aimed to retake the hills around Arsal. The Sunni clerics were due to enter Arsal again on Wednesday to continue talks.

Saudi news agency SPA said former Lebanese Prime Minister Saad al-Hariri, who has close links to the Saudi royal family, announced the Saudi aid after meeting King Abdullah in his summer residence in the Red Sea city of Jeddah late on Tuesday.

The king "has issued an order to provide aid to the Lebanese army and the national security (forces) to the value of $1 billion to support their ability to maintain the security and stability of Saudi Arabia's sister country, Lebanon", said Hariri, cited by SPA.

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.

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

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.