Saudi gives battered Lebanon economy 1.5 bln dlr cushion

RIYADH, July 25 (Reuters) Saudi Arabia's King Abdullah has ordered the transfer of 1 billion dollars to Lebanon's central bank to help it support an economy battered by an Israeli military offensive.

King Abdullah ordered a separate 500 million dollars donation earlier today to rebuild Lebanon.

State television said today the money would be ''deposited'' with the Lebanese central bank, without specifying whether it would be a loan or a grant. Saudi central bank officials could not be reached for comment.

Pressure on the Lebanese pound has risen during two weeks of Israeli air strikes that began after Lebanon's Hizbollah guerrillas captured two Israeli soldiers in a cross-border attack.

Israel's offensive has so far claimed almost 400 lives in Lebanon and destroyed infrastructure in the small Arab state.

''This will relieve pressure on the Lebanese currency and the credit worthiness of the country will be boosted,'' said Haissam Arabi of investment bank Shuaa Capital in Dubai.

''There is more than 2 billion dollars worth of infrastructure damage in Lebanon and this shows that Lebanon has its allies in Saudi,'' he added.

Saudi Arabia, the world's largest oil exporter, has been a major political and economic sponsor of Lebanon since the 1975-1990 civil war was ended by an agreement made in the Saudi city of Taif.

A Western diplomat in Riyadh said the move was a sign of a tussle for influence in Lebanon between Iran, which backs Hizbollah, and Arab states led by Saudi Arabia.

''They are saying 'we all have to get in there before the Iranians do'. It's going to be a battle between Iranians propping up Hizbollah and Gulf Arabs propping up the Lebanese government,'' he said.

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