GLOBAL MARKETS-Sterling slips after Manchester blast, euro steady, stocks advance
* Sterling falls as police treat Manchester blast as terror attack
* Senior Lebanese anti-Assad security official killed
* Syrian war heightens factional tensions
* Blast scene reminiscent of days of Lebanon civil war
By Oliver Holmes and Mariam Karouny
BEIRUT, Oct 19 Senior Lebanese intelligence official Wissam al-Hassan, who led the investigation that implicated Syria and Hezbollah in the assassination of former prime minister Rafik al-Hariri, was killed by a huge car bomb in Beirut on Friday.
Hassan was also the brains behind uncovering a bomb plot that led to the arrest and indictment in August of former Lebanese minister Michel Samaha, an ally of Syrian President Bashar al-Assad, in a setback for Damascus and its Lebanese allies including Hezbollah.
Saad al-Hariri, the son of Hariri, accused Assad of killing the top intelligence official.
The bomb, which exploded in a busy street during rush hour, killed seven other people and wounded about 80, officials said. The attack prompted Sunni Muslims to take to the streets in areas across the country, burning tyres in protest.
Rubble and the twisted, burning wreckage of several cars filled the central Beirut street where the bomb exploded, ripping the facades and balconies off buildings.
Firefighters scrambled through the debris and rescue workers carried off the bloodied victims on stretchers. The blast came as many parents were picking up their children from school.
The attack brought the war in neighbouring Syria to the Lebanese capital.
The Syria conflict, in which 30,000 people have been killed in the past 19 months, has pitted mostly Sunni insurgents against Assad, who is from the Alawite sect linked to Shi'ite Islam.
Lebanon's religious communities are divided between those supporting Assad and those backing the rebels trying to overthrow him.
Hassan, a Sunni Muslim from northern Lebanon, was a leading opponent of Assad within the Lebanese intelligence services.
"He is dead," an official who worked with Hassan told Reuters.
Two Syrian officers, including General Ali Mamlouk, the head of the Syrian national security bureau, were also indicted with Samaha in an unprecedented move against the more powerful neighbour - a major player in Lebanon's affairs for decades.
The indictment said their targets included politicians and religious figures.
Hassan had been a close aide to Hariri, a Sunni Muslim who was killed in a 2005 bomb attack. He led the investigation into the murder and uncovered evidence that implicated Syria and Hezbollah, Lebanon's pro-Iranian Shi'ite Muslim group.
Hariri supporters accused Syria and then Hezbollah of killing him - a charge they both deny. An international tribunal accused several Hezbollah members of involvement in the murder.
"His (Hassan's) killing means striking the head. The (anti-Assad) officials are all exposed now and in danger of assassination. It will be easy to assassinate them now or they will have to leave the country. He was their protector," the official said.
Hassan, who returned to Lebanon on Thursday night from Germany, has helped uncover many assassination attempts against anti-Syrian figures in Lebanon. He himself recently escaped attempts on his life.
The civil war in Syria, where the Alawite-led administration is fighting an opposition dominated by Sunni Muslims, has shaken Lebanon's own sectarian balance, triggering fighting between Sunnis and Alawites in the northern city of Tripoli.
BLOOD ON THE STREETS
The bombing, which was reminiscent of scenes from Lebanon's own 1975-1990 civil war, ripped through the street where the office of the anti-Damascus Christian Phalange Party is located near Sassine Square in Ashrafiyeh, a mostly Christian area.
Phalange leader Sami al-Gemayel, a staunch opponent of Assad and a member of parliament, condemned the attack.
"Let the state protect the citizens. We will not accept any procrastination in this matter, we cannot continue like that. We have been warning for a year. Enough," said Gemayel, whose brother was assassinated in 2006.
In the aftermath of Friday's bomb, residents ran about in panic looking for relatives as security forces blanketed the area. Ambulances ferried the wounded to hospitals, which put out an appeal for blood donations.
An employee of a bank on the street pointed to the blown-out windows of his building.
"Some people were wounded from my bank. I think it was a car bomb. The whole car jumped five floors into the air," he said.
Lebanese Prime Minister Najib Mikati said the government was trying to find out who carried out the attack and said those responsible would be punished.
Syria had long played a major role in Lebanese politics, siding with different factions during the civil war. It deployed troops in Beirut and parts of the country during the war and they stayed until 2005.
In Damascus, Syrian Information Minister Omran al-Zoabie told reporters: "We condemn this terrorist explosion and all these explosions wherever they happen. Nothing justifies them."
Tension between Sunnis, Shi'ites and Christians in Lebanon has continued after the civil war but has increased due to the Syria conflict.
Khattar Abou Diab, a Middle East expert at the University of Paris, said the attack was clearly linked to the Syria crisis and Hassan was one of the few security chiefs protecting Lebanon's sovereignty and independence.
"This is now revenge against a man who confronted the Syrians and revenge against a district, a Christian district in the heart of Beirut. Regional powers are fighting in Syria and now also want to fight in Lebanon," he said.
Hezbollah's political opponents, who have for months accused it of aiding Assad's forces, have warned that its involvement in Syria could reignite the sectarian tension of the civil war.
"They warned of the implications of the Syrian crisis and here it comes," said Nabil Boumonsef, a columnist at the Lebanese newspaper An-Nahar.
"They are dragging in Lebanon so that it becomes a conflict arena," he told Reuters.
Hezbollah, which last week denied that its guerrillas were fighting alongside Assad's troops in Syria, said it condemned the bombing.
"Hezbollah sees in this heinous crime a sinful attempt to target stability and strike against national unity and calls on the security forces and judiciary to exert maximum efforts to uncover the perpetrators and bring them to justice," it said.
The U.S. government also condemned the bombing and reiterated its concerns about increasing sectarian tensions in Lebanon and a spillover from Syria.
French President Francois Hollande urged Lebanese politicians to stay united and prevent attempts to destabilise the country. The Vatican also condemned the attack.
Bombings were a hallmark of the civil war but the last such attack in Beirut was in 2008.
Beirut has undergone massive reconstruction to repair the war damage and in recent years has enjoyed a tourist boom, boosted by Beirut's pulsating nightlife. That source of revenue, crucial to Lebanon's prosperity, is now also under threat.
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