UNITED NATIONS, Dec 1, 2006 (AFP) - UN chief Kofi Annan said Friday that the ceasefire between Israel and Hezbollah guerrillas in south Lebanon was holding but said continued Israeli air incursions into Lebanese airspace were a problem.

In a letter addressed to the UN Security Council, the outgoing secretary general hailed the commitment shown by both Israel and Lebanon to "all aspects of the implementation of Security Council resolution 1701."

Resolution 1701, adopted in August, ended 34 days of fighting between the Israeli army and Hezbollah that killed than 1,200 people in Lebanon, overwhelmingly civilians, and at least 160 Israelis, mostly soldiers.

It led to a UN-brokered ceasefire that came into effect on August 14 and to the deployment of a beefed-up UN mission in Lebanon (UNIFIL) to monitor the truce.

Annan said that since his last report on the situation on September 12, "the cessation of hostilities was maintained and there were no serious incidents or confrontations."

However he said that there had been almost daily Israeli air violations of Lebanese airspace, which he said contravened resolution 1701 and which have been criticized by the Lebanese government.

Annan said Israel did not see the air incursions as "violations but a necessary security measure".

But he made clear that "such violations of Lebanese sovereignty ...undermine the credibility of both UNIFIL and Lebanese armed forces and compromise overall efforts to stabilize the situation in the south and to build trust and confidence."

The UN chief also reiterated that securing the "unconditional release of the (two) Israeli soldiers (captured by Hezbollah in July) and the issue of Lebanese prisoners detained in Israel" remained a top priority".

He also said that the UN "continues to receive reports of illegal arms smuggling across the Lebanese-Syrian border but (has) not been able to verify such reports."

He also touched upon the sensitive issue of the demarcation of the border between Lebanon and Syria, particularly around the disputed Shebaa Farms which the UN regards as Syrian territory.

The Farms, which lie at the convergence of the Lebanese-Syrian-Israeli borders, were captured from Syria by Israel in the 1967 Middle East war, and are now claimed by Lebanon with Damascus's consent.

Israeli troops have retained control of the area since their withdrawal from south Lebanon in May 2000 after two decades of occupation.

Annan took note of Beirut's plan to have the Shebaa Farms put under UN jurisdiction until a permanent border delineation and Lebanese sovereignty over them is settled.

"The United Nations looks forward to reporting further on this matter in early 2007, " said the UN chief who is to step down at the end of the month and will be succeeded by South Korea's former foreign minister Ban Ki Moon.

Annan also noted that as of November 28, UNIFIL troop strength stood at 10,480 and was expected to increase to roughly 11,500 ground troops, 1,750 naval personnel and 51 military observers this month.

Coupled with the deployment of four Lebanese army brigades to south Lebanon, "these numbers are deemed to be sufficient to execute the mandate," he added.

ga/ddl AFP 020048 GMT 12 06

Copyright (c) 2006 Agence France-Presse
Received by NewsEdge Insight: 12/01/2006 19:48:40