FACTBOX: Conflict or concessions: scenarios for Lebanon

(Reuters) - Lebanon's worst internal crisis since the 1975-90 civil war escalated sharply this week when the U.S.-backed government took decisions aimed at Hezbollah that the pro-Iranian group viewed as a declaration of war.

The government, already locked in a 17-month-long conflict with an opposition alliance led by Hezbollah, on May 6 declared the group's communications network illegal and removed the head of airport security, a figure close to the group, from his post.

Infuriated by the move, Hezbollah, a political group with a powerful guerrilla army, has demanded the government rescind the decisions and attend talks aimed at ending the political crisis.

The group's supporters have set up road blocks around the city, including on all routes to the airport, as part of a campaign triggered by the move. Tensions have spilled into the worst street violence since the civil war.

Following are scenarios for how the conflict may unfold:

CONFRONTATION

The government refuses to give in to Hezbollah's demands. The group also refuses to back down. Lebanon will face more confrontation.

* Armed conflict

- Hezbollah leader Sayyed Hassan Nasrallah on May 8 said in public for the first time that the group was prepared to use its guns against domestic foes in the face of a threat to its arsenal. Armed clashes between Hezbollah, backed by gunmen from allied factions, and fighters loyal to the governing coalition could continue. Hezbollah's military dominance is not disputed. The strength of pro-government factions is not clear. Most analysts have ruled out the idea of a full-scale civil war because of Hezbollah's military dominance. But tensions between the sides, the depth of animosity between their followers and the ready availability of guns mean that armed clashes could go on for some time.

* Hezbollah keeps grip on roads, airport remains largely paralyzed

- Hezbollah will likely maintain its grip on Beirut's roads, effectively shutting the airport. The group and its opposition allies could call on followers employed by the state to stop going to work, further weakening institutions of government. Hezbollah could move to take physical control of government buildings. But a move to storm the main government headquarters occupied by Prime Minister Fouad Siniora is seen as unlikely. Despite its military dominance, Hezbollah is very unlikely to attempt a full takeover of government in the manner that Hamas secured control of the Gaza Strip in 2007. Hezbollah's Nasrallah has said the group will not use its weapons to bring about a change of government.

* Government stays in office

- The government, whose legitimacy is disputed by the opposition, will stay in office. International backers including the United States, France, Saudi Arabia and other Arab countries, will offer political, financial and perhaps military support. But the movement of ministers, including Siniora, is likely to remain highly restricted and the crisis will stop the cabinet from taking major policy decisions. Despite its May 6 statement, the cabinet is too weak on the ground to be able to take steps towards dismantling Hezbollah's communication network or taking legal measures against those involved in it.

* Government remains paralyzed, Lebanon without president

- There will be no progress towards resolving the political conflict, meaning state institutions will remain effectively paralyzed and the country will remain without a president.

CONCESSIONS

The coalition of Lebanese leaders that back Siniora's government meet Hezbollah's demands to rescind the May 6 decisions. Governing coalition leader Saad al-Hariri outlined a proposal on Thursday that would consider them a "misunderstanding".

A deal effectively annulling the government decisions would ease tension. Hezbollah might then lift barricades blocking routes to Beirut airport. Armed street clashes would ease.

The situation could then return to how it was prior to May 6, possibly allowing a resumption of efforts to resolve the broader political conflict over how to share power in a new cabinet and a law for 2009 parliamentary elections. A resolution to the political conflict would allow the election of General Michel Suleiman as president, filling a post left vacant for five months because of the crisis.

Alternatively, there may be a return to the situation that existed before May 6: no resolution but no escalation. That would leave much of government paralyzed and the country without a president.

(Writing by Tom Perry in Beirut)