* Israel concerned about Islamist rebels on Syrian front
* Spillover from Syrian fighting felt in Israeli-held Golan
* Israel grappling with fluid Syria situation
By Maayan Lubell
TEL HAZEKA, Golan Heights, April 11 (Reuters) - The slopes of the Golan Heights, with springtime wild flowers now in full bloom, are dotted with discarded rusty tanks that are remnants of a 1973 war. For decades, the Israel-Syria front has been quiet - but not anymore.
Small Israeli military lookout posts abandoned for years have been put into action and regular military and special forces have replaced reservists at many points.
Israel is worried that the Golan, which it captured from Syria in 1967, will become a springboard for attacks on Israelis by jihadi fighters, who are taking part in the armed struggle against Syrian President Bashar al-Assad.
In recent months, battles between Assad loyalists and rebels have raged in some villages on the Syrian foothills of the Golan, with mortar shells and machinegun fire spilling across into Israeli-occupied territory.
Israel, which returned fire in some of those incidents, believes that around one in 10 of the rebels are Sunni Muslim radicals.
"Tension in the Golan Heights is the highest it has been since 1974," a senior Israeli military officer in the area told Reuters this week. "We simply do not know who will control the territory next to the border."
While the fall of Assad, an ally of Israel's enemy Iran, could be in the Jewish state's interest, a descent into chaos on the Golan Heights would pose a new security challenge.
Some 20,000 Israeli settlers live on the Golan and the strategic plateau overlooks Israeli towns and villages along the Sea of Galilee.
On its southern borders, Israel has long faced rocket attacks from armed Palestinian groups in the Gaza Strip and has watched with concern the rise of Islamist militancy in Egypt's Sinai desert.
One Israeli general, the commander of forces in the north, raised the possibility in an Israeli newspaper interview last month of creating a buffer zone in Syria, in cooperation with local forces wary of jihadist fighters, should Assad be toppled.
"Some very key decision-makers are opposed," an Israeli official said. "(Army chief) Benny Gantz, for example, was the Israeli commander who literally closed the door on south Lebanon when we withdrew from the security zone there in 2000, and he has shown little interest in seeing a repeat on the Golan."
Alon Liel, a former diplomat who led secret peace talks with Damascus, said Israel had limited room for manoeuvre over Syria.
"Israel is paralysed from a diplomatic perspective," he said. "We may be strong militarily but any intervention in a neighbouring country would draw deep objection from both sides in Syria because Israel is so weak in the region diplomatically."
World powers trying to craft a Syria strategy, and weighing whether to arm the rebels, have been struggling to distinguish between mainstream fighters who might stabilise the country should Assad fall, and jihadi insurgents.
"There's no unified position on that yet," a senior Israeli official said. "No one really knows what post-Assad Syria would look like. No one really knows who the rebels are as a collective."
Israel has been wary of being seen to take sides in the Syrian conflict and Israeli Prime Minister Netanyahu has avoided echoing calls from Israel's main ally, the United States, for Assad to step down.
One senior Western diplomat in Israel told Reuters Syria has been moving up a list of Israeli security concerns topped by Iran's nuclear programme.
"Syria is starting to edge ahead of Iran as far as the (Israeli) military is concerned, but also among politicians, partly because of U.S. reassurances over Iran but also because the situation in Syria is getting so alarming," he said.
One Israeli official said the fluid situation in Syria meant that Israel had to assess events there almost daily.
"That makes for a far more intensive examination (by Israeli decision-makers)," the official said. "Add to that the fact there is a new (Israeli) government, with new ministers who have little time to get up to speed on these things."
One of Israel's main worries is the possibility of Syria's chemical weapons falling into the hands of Lebanese guerrilla group Hezbollah, with which it fought a 2006 war, or ending up in the hands of jihadis.
Israel has cautioned it will not allow that to happen. In an attack it has not formally confirmed, Israeli planes bombed an arms convoy in Syria in February, according to Western sources, destroying anti-aircraft weapons destined for Hezbollah.
END OF UNDOF?
The green expanses and snow-capped mountains of the Golan are a major attraction for Israeli tourists who flock to the plateau. On a sunny spring day, a group of hikers admired the view as an elderly farmer slowly drove through his apple orchard.
A few miles away, Israeli troops on patrol stopped their armoured vehicles near an old abandoned tank for a break. Asked if it was quiet that day, one soldier made a "so-so" hand gesture. "When it's quiet, that's when it's scariest," he said.
In another sign Israel was keeping a close eye on the area, two drones, visible from the road, were parked in a fenced-in facility.
Among those battling against Assad's forces are fighters from the Nusra Front, an Islamist militant group linked to al Qaeda and blacklisted by the United States as a "terrorist group". [ID: nL5N0CX2BF]
Nusra Front forces, which include foreign fighters, have come to prominence in the revolt and last month fought in battles near the Israel-Syria ceasefire line [ID: nL5N0CF0E5]
Last month, Assad's forces appeared to push back the rebels in the area. "There is a still a visible (Syrian army) troop presence there, though it is unclear whether they have significant control or even a unified central command," an Israeli official said.
Brigadier-General Yoav Mordechai, Israel's chief military spokesman, told Army Radio last week that global jihad groups were fighting under the rebels, and "exploiting the anarchy", some of them have moved into the Golan Heights.
"In the future we will have to deal with terrorism from the Golan Heights, after 40 years of impressive and exemplary quiet," Mordechai said.
An Israeli military officer said new Defence Minister Moshe Yaalon had ordered "that no fire from Syria into Israel, be it deliberate or stray, is left without response."
Israel is building a new, 5-metre tall fence on the Golan beside the older, partly rundown barrier that runs along the 70 km (45 mile) front.
The ceasefire line has been monitored since 1974 by a 1,000-strong U.N. Disengagement Observer Force (UNDOF). Arming the Syrian rebels could have implications for the peacekeepers, posing another potential headache for Israel.
Austria has cautioned that lifting the embargo to arm rebels would make the European Union a party to the conflict and make it difficult to keep the 375 Austrian peacekeepers on site.
UNDOF has faced increasing difficulties in the Golan and U.N. diplomats have expressed concern over its future. Last month, rebels held 21 Filipino UNDOF observers for three days, prompting the force to scale back on patrols.
Israeli military sources said they fear the peacekeeping force will not hold up under the insurgency in the Golan.
In the past three months, Japan and Croatia said they were withdrawing their troops. Should the Austrians leave, it could spell the end for the UNDOF mission because they are the biggest contingent and it is unclear who would want to replace them.
Austrian Foreign Minister Michael Spindelegger met Netanyahu on Thursday and is due to visit U.N. peacekeepers on the Golan Heights Friday.
"We have some of the world's most dangerous weapons and we cannot allow them to fall into the world's most dangerous hands: Hezbollah, al Qaeda and other terrorist groups," Netanyahu told reporters as he and Spindelegger met.
"That is one of the great concerns for us and a great concern for you as well and I want to discuss with you how to prevent that from happening," the Israeli leader said.
Spindelegger said Austria would try to stay as long as it could but that would not be possible without security guarantees from both rebel and government forces in Syria. (Additional reporting by Crispian Balmer and Dan Williams in Jerusalem and Michael Shields in Vienna; Editing by Jeffrey Heller and Giles Elgood)