DURANGO, Mexico (Reuters) - Mexico's Gulf cartel and its brutal "Zetas" hit squad are taking on the country's most wanted drug lord on his own turf, escalating a fight for supremacy in a drug war that is worrying the United States.
The Zetas, considered Mexico's most violent gang and feared for beheading victims, are pushing into the northwestern state of Durango in a new battle against arch-rival Joaquin "Shorty" Guzman, Mexico's top drug fugitive.
At least 235 people have died in drug violence in the mountainous state this year in a fight over smuggling routes and marijuana and opium plantations that Guzman has long dominated. He married and is rumored to live in Durango.
The jump in violence poses a new challenge to President Felipe Calderon's attempts to end drug killings, with troops already struggling to contain bloodshed along the U.S. border.
In one attack in Durango in the village of Suchil, Zeta hitmen threw grenades and sprayed the town hall and the police station with bullets in February.
"The message is: we want you on our side because we are in charge," said Suchil's deputy mayor, Armando Ravel, whose office filing cabinet is peppered with bullet holes.
Gunmen shot dead a soldier on Tuesday night in a firefight between drug gangs and troops in Durango's remote mountains.
"Without a doubt, the Zetas are advancing in Durango and some towns are basically under their control," said Rafael Herrera, a political analyst and former editor of a regional newspaper.
Calderon, who has deployed 45,000 troops across Mexico to curb the drug violence, has tried to crush the Gulf cartel, extraditing former leader Osiel Cardenas to the United States and capturing leading henchmen and big drug shipments.
But armed with a huge arsenal of grenades and automatic weapons, the gang is spreading from its base in northeast Mexico to Durango, the Pacific coast and even Guatemala.
The drug violence has hit the peso currency, and the U.S. government is concerned by instability in Mexico, its ally and a big oil supplier. President Barack Obama visited Mexico City in April, praised Calderon for tackling the drug gangs and offered more U.S. help in the war.
The Zetas were set up by around 30 former special forces troops in the 1990s who switched sides and do the Gulf cartel's dirty work like beheading or shooting and extorting victims.
Since Cardenas' extradition in 2007, former soldier Heriberto Lazcano, known by his code name of Z3, has taken control of the Zetas and has recruited more troops and former soldiers to take on Guzman.
Mexico's drug war has killed some 2,300 people so far this year, and 6,300 in 2008.
In one audacious move last year, Lazcano ordered Zetas to hang banners from bridges in towns near the Texan border that openly advertised for troops to desert and join them.
Lazcano is turning his attention in Durango to controlling rural outposts along smuggling corridors previously held by Guzman to win informants, hide and attack the military.
The group, whose name means the 'Zs' in Spanish and comes from military radio call signs, recently also waded into a gruesome battle for Ciudad Juarez, the country's most violent city, over the border from the Texas city of El Paso.
The Zetas' campaign against Guzman is part of a long rivalry. Guzman, from the northwestern state of Sinaloa, staged a failed attempt to force the Gulf cartel out of its heartland near Texas in 2004.
As Guzman, who escaped from prison in a laundry van in 2001, seeks to control Mexico's $40 billion-a-year drug trade, he is now fighting at least three cartels as well as the army.
"Guzman is a very formidable opponent ... but he could be overstretching himself," said Ralph Reyes, who heads Mexican and Central American operations for the U.S. Drug Enforcement Administration in Washington.
Still, drug trade analysts say it is premature to suggest any gang has the upper hand in the drug war.
"They are all disputing areas they see as not fully under one cartel's control, like Durango in the north and central states like Morelos and the state of Mexico," said Pedro de la Cruz, a security analyst at Mexico's National Autonomous University in Mexico City.
(Additional reporting by Pedro Galindo; Editing by Kieran Murray)
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