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SHEBAA, Lebanon, Aug 28 (Reuters) For a Middle Eastern flashpoint, the Israeli-occupied Shebaa Farms appear placid.
A hilltop UN post looks south over green trees in a deserted valley ringed by a dirt road and a fence. No goats graze the dry yellow grass on the craggy limestone slopes above.
On mountain peaks a few km away, Israeli troops watch from fortified positions bristling with antennae.
Local Lebanese villagers insist the land has always been theirs, saying they have documents to prove it.
But the fate of this remote patch of land squeezed between Lebanon and the Israeli-occupied Golan is tangled up with indirect Syrian-Israeli peace talks, relations between Beirut and Damascus, and the future of Hezbollah as an armed force.
US Secretary of State Condoleezza Rice said in June that ''the time has come to deal with the Shebaa Farms issue''.
Yet there has been no sign of a breakthrough on what has become the last big dispute between Israel and Lebanon since Hezbollah concluded a prisoner swap with the Israelis in July.
Faris Hamdan, a 42-year-old shepherd, said his family had lived on fertile farms in Shebaa before Israel captured the area in 1967 along with Syria's Golan Heights. ''They grew wheat and lentils. They had figs, prickly pears, the goodness of God.'' Hamdan, sitting with some of his nine children outside his house, said he would return there if he ever had the chance.
''In winter my goats can't live here but down there they can live,'' he added. ''Olives don't grow here, but they do there.'' Hezbollah fighters, who captured three Israeli soldiers on the dirt road in 2000, have not attacked the occupiers of the Shebaa Farms since their 2006 war with Israel. UN and Lebanese troops took control of the border region after that conflict.
STRAY ANIMALS Indian troops guarding the sector as part of the UN Interim Force in Lebanon (UNIFIL) have had to cope only with infiltrations by sheep, goats and the occasional herdsman.
''Incidents may take place of livestock crossing from one side to another. At times there are allegations of shepherds also crossing over,'' said the Indian commanding officer, Colonel Gurbir Pal Singh. ''But those are few and far between.'' A few metres north of the fence are blue-and-white UN barrels marking the hotly contested ''Blue Line'', drawn by the United Nations in 2000 when it ruled Israel had completed its pullout from Lebanon after a 22-year occupation.
Hezbollah challenged this, saying the Shebaa Farms belonged to Lebanon. The Shi'ite guerrillas cited the need to liberate it as one of the reasons they should remain armed.
Lebanon and Syria also contend that the 27 square km (10 square mile) territory is part of Lebanon, but they have not demarcated their borders. Damascus said this month the Shebaa Farms boundary could only be drawn once Israel withdraws.
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