Israel lifted its nearly two-month naval blockade of Lebanon on Friday after European warships began patrolling to keep out weapons shipments for Hezbollah guerrillas, the head of the U.N. peacekeeping force said.

Israel turned over monitoring of Lebanon's coast to Italian naval vessels, who "will continue to enforce the international embargo against the supply of armaments to Hezbollah," Israeli government spokeswoman Miri Eisin said.

"The force is now operational and I understand that the (Israeli) naval blockade is lifted," Maj. Gen. Alain Pellegrini Pellegrini, the force's French commander, said in a statement faxed to The Associated Press. "The blockade has seriously undermined the Lebanese economy and it is high time for it to end so as to allow the people to get back to their business."

The move, which came a day after Israel halted its restrictions on air travel into Lebanon, ends a blockade that stifled Lebanon and cost it tens of millions of dollars a day as it tried to rebuild from Israel's devastating 34-day battle with Hezbollah.

Israel now must withdraw its last troops, to be replaced by up to 15,000 Lebanese soldiers backed by an equal number of international forces in southern Lebanon under an Aug. 14 cease-fire.

Israeli officials said that could happen within two weeks.

On Friday, hundreds of Lebanese troops moved into a corner of southwest Lebanon, the latest area from which Israeli forces withdrew. Dozens of Lebanese military trucks and a few jeeps and armored vehicles lined a busy coast road in Mansouri, about 10 miles north of the border with Israel.

Pellegrini said he has been coordinating efforts to set up an interim maritime task force that will support the Lebanese navy in monitoring the territorial waters until a U.N. naval task force is deployed.

CountryWatch: Israel | CountryWatch: Lebanon

The setting up of an international naval force was a main demand by Israel to lift its sea blockade.

Even before the announcement that the blockade had been lifted, a Lebanese cargo ship docked at the Beirut Port at around midday. Company officials said they did not seek Israeli permission to come to the port, where about 100 workers also were seen preparing to take in ships and trucks were unloading containers.

"We sought permission only from the Lebanese security authorities," said Zakhia al-Khoury, port operations manager of the Akak Marine Co.

Israel sealed off Lebanon by air and sea at the start of its war against Hezbollah to keep Syria and Iran from resupplying it with arms.

U.N. chief Kofi Annan, who led the international campaign to lift the blockades, has also been pressing Israel to withdraw all its soldiers from Lebanon once 5,000 U.N. peacekeepers deploy there by mid-September.

Israeli security officials said the target was to have the remaining thousands of troops out by the Jewish New Year, which begins the evening of Sept. 22, security officials said.

Israel has been gradually pulling out its soldiers — whose number peaked at 30,000 at the war's end — as international replacements arrive.

About 3,250 U.N. troops are now in place. On Thursday, the Spanish parliament voted to contribute 1,100 soldiers to the peacekeeping mission, and the first troops were to set off on Friday.

In related news, Israeli Prime Minister Ehud Olmert has signaled that Israel might cede disputed territory to Lebanon if the Lebanese carry out all provisions of the cease-fire agreement, including disarming Hezbollah.

In a meeting with Russian Minister Sergey Lavrov on Thursday, Olmert said if the U.N. decides the area is Lebanese, and if Lebanon fully implements a U.N. resolution ending the war, then Israel would agree to put the matter on the table, government officials said.

When Israel withdrew its troops from southern Lebanon in 2000, ending an 18-year occupation, the U.N.-drawn international line did not put Chebaa Farms in Lebanese territory, but in the Golan Heights, which Israel captured from Syria in 1967, and later annexed.

The Lebanese have disputed this ruling, and Israel and Hezbollah have clashed in the territory since the withdrawal. Under the Aug. 14 cease-fire, the U.N. agreed to review the line within 30 days.

Lebanon put on a boisterous show Thursday to celebrate the end of Israel's air blockade. In a symbolic act signaling the resumption of normal air traffic, a commercial flight by Lebanon's national carrier Middle East Airlines circled over downtown Beirut three times at 6:04 p.m., four minutes after the embargo ended. And fireworks erupted in the capital's heart.

Prime Minister Fuad Saniora inviting the tens of thousands of Lebanese who fled the fighting and Arab tourists who left in droves "to come back to the Lebanon you love."

The land route to neighboring Syria has already been reopened, with the Lebanese government posting thousands of troops along the rugged frontier to prevent smuggling.

While Lebanese celebrated the end of the air siege, Olmert's government came under sharp criticism from the families of two Israeli soldiers captured by Hezbollah in a cross-border raid that touched off the war. The families said the lifting of the blockade robbed Israel of negotiating leverage.

After meeting with Olmert, relatives of the soldiers — Ehud Goldwasser and Eldad Regev — accused the Israeli leader of caving in to international pressure.

"This is the second time the government has acted against the will of the people of Israel," said Regev's brother, Benny. "The first was the cease-fire, and now it's with the lifting of the blockade of Lebanon."

Since the cease-fire, Olmert repeatedly pledged to bring the men home safely, and Annan has appointed a mediator to handle indirect talks between Israel and Hezbollah.

Hezbollah has said it would free the two only in exchange for Arab prisoners held by Israel. Israeli publicly has demanded the soldiers' unconditional release, but in the past has exchanged prisoners.

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