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The incident, the most serious attack against Israeli troops in Lebanon since five soldiers were killed June 10, occurred against a backdrop of heightened tensions between Israel and Syria and a flurry of U.S. diplomatic activity aimed at restarting the stalled Middle East peace talks.
At least three guerrillas from the Shiite Muslim organization Hezbollah also died in an exchange of fire with Israeli soldiers that followed the ambush near the village of Sojoud, an Israeli military spokesman said.
The Israeli army unit was patrolling the area on foot when it was ambushed, Israel television reported.
Yesterday's casualties raise to 20 the number of Israeli soldiers killed this year by Hezbollah, which is seeking to oust Israel from the self-declared security zone it occupies along the uneasy border with Lebanon.
After the morning attack, Israeli jets launched two air strikes against "firing positions for terrorists" near the village of Jabal Safi, the Israeli spokesman said.
The army reported accurate hits on the planes' targets but gave no word on casualties in the air raids or the shelling that accompanied them.
The latest flare-up occurred as Israeli Defense Minister Yitzhak Mordechai was meeting in Tel Aviv with U.S. peace envoy Dennis Ross, who arrived in the region this week to try to restart deadlocked negotiations between Israel and Syria and to push for more progress in talks between Israel and the Palestinians.
"Any time you have this kind of fighting ... it creates a situation that obviously has its own dangers," Ross told reporters after he spoke with Mordechai about South Lebanon. "That is why I say, always, our interest is in defusing tensions. If you defuse tensions, you create a better basis for stabilization.... We want the negotiations to resume."
Peace talks between Israel and Syria have been at a standstill since before the election in May of Israeli Prime Minister Benjamin Netanyahu and his hard-line government.
But the Syrian government has made it clear that it rejects Netanyahu's desire to resume negotiations without making a commitment in advance to give up the Golan Heights in exchange for peace. Israel seized the strategic plateau from Syria in the 1967 Mideast War.

AP PHOTO
Smoke billows from a suspected guerrilla base at the hill of Iqlim al Tuffah in Lebanon yesterday.