Hizbollah abductions broaden Israeli crisis

July 12 (Reuters) - Lebanese Hizbollah guerrillas said they captured two Israeli troops in a border raid on Wednesday, intensifying a crisis over the abduction of a soldier last month by Palestinian gunmen in the Gaza Strip.

Hizbollah gave no immediate word on the condition of the two soldiers, who were seized during a heavy round of shelling.

* WHY DID HIZBOLLAH STRIKE?

-- The militant Shi'ite group may be seeking to force Israel to free Arab militants held in its jails, perhaps as part of a larger prisoner-swap with the Hamas-led Palestinian government.

Israeli Prime Minister Ehud Olmert has so far ruled out demands by the captors of Corporal Gilad Shalit, who was seized in a June 25 raid outside Gaza, to free more than 1,000 jailed Palestinians in return for information on the captive.

-- Hizbollah, which is backed by Syria and Iran, is also keen to shore up its political standing in Lebanon. Born as a force that fought occupying Israeli troops in south Lebanon, Hizbollah was seen by some analysts as having lost part of its raison d'etre when Israel withdrew in 2000. A major confrontation could reverse that.

* WHAT ARE ISRAEL'S MILITARY OPTIONS?

-- With hundreds of tanks and troops already in Gaza, Israel is less likely to want to open a full second front in Lebanon.

-- Olmert may order more limited strikes in the south of the country aimed at isolating the hostage-takers ahead of a rescue attempt. Past Hizbollah attacks have also been answered by Israeli air strikes against Lebanese infrastructure aimed at pressuring the Beirut government into reining in the guerrillas.

* IS THERE ANY HOPE FOR NEGOTIATIONS?

-- Despite its declared policy of not negotiating with hostage-takers, Israel has entered deals in the past when military options were considered unfeasible.

-- Having freed hundreds of Arab prisoners for the return of three soldiers killed by Hizbollah in 2000 and a kidnapped Israeli businessman, Israel may do something similar now. Israeli media reported government officials had voiced interest in renewed German mediation, which ended the 2000 crisis. Israel has no formal relations with Lebanon.

-- Olmert, who is keen to maintain an Israeli and Western freeze on diplomacy with the Islamist Hamas government, could potentially insist that any prisoner swap with Hizbollah include the release of Shalit by his Palestinian captors.

* WHAT DOES THIS MEAN FOR OLMERT?

-- The Gaza crisis has already put on hold Olmert's centerpiece plan for selective Israeli withdrawals in the occupied West Bank, another territory where Palestinians seek statehood.

-- Olmert can expect broad Israeli support in the first days of the Lebanese crisis, especially if he orders a strong response. But a protracted standoff could ultimately undermine the prime minister, who has been dipping in popularity polls.