By Timour Azhari and Maayan Lubell

BEIRUT/JERUSALEM (Reuters) -Lebanon and Israel have reached a historic agreement demarcating a disputed maritime border between them after years of U.S.-mediated negotiations, officials said on Tuesday.

While limited in scope, a finalised deal would mark a significant compromise between neighbours with a history of war and hostility, opening the way for offshore energy exploration and easing a source of recent tensions.

“This is a historic achievement that will strengthen Israel’s security, inject billions into Israel’s economy, and ensure the stability of our northern border,” Israeli Prime Minister Yair Lapid said in a statement.

In Lebanon, President Michel Aoun said the terms of the final U.S. proposal were satisfactory and he hoped the deal would be formally announced as soon as possible.

Lebanese negotiator Elias Bou Saab told Reuters the latest draft “takes into consideration all of Lebanon’s requirements and we believe that the other side should feel the same”.

U.S. President Joe Biden called both Aoun and Lapid on Tuesday to congratulate them.

The agreement is meant to resolve a territorial dispute in the eastern Mediterranean sea in an area where Lebanon aims to explore for natural gas. Israel is already producing natural gas at fields nearby.

It sets a border between Lebanese and Israeli waters for the first time and also establishes a mechanism for both countries to get royalties from TotalEnergies’ exploration of an offshore gas field that straddles the boundary.

The deal does not touch on their shared land border, where Israel and Iran-backed Lebanese armed group Hezbollah have clashed repeatedly in recent decades.

Hezbollah has said it would submit to the Lebanese government’s official position on the maritime deal but has also threatened Israel if the deal does not secure Lebanon’s rights.

A senior Lebanese government official and an official close to Hezbollah said the group had agreed to the terms of the deal and considered negotiations to be “over.”

On Tuesday, Hezbollah chief Sayyed Hassan Nasrallah said his movement would only recognise the deal once it was officially signed. Until then, Nasrallah said, “we will remain vigilant”.

‘LETTERS’ TO FINALISE AGREEMENT

Israel already produces and exports natural gas, but Lebanon’s efforts have been hamstrung by political dysfunction for years.

A three-year financial crisis in Lebanon made a gas find even more urgent, as it could help fix a long-standing Lebanese failure to produce adequate electricity for its population.

Once a formal deal is signed, TotalEnergies could begin exploration immediately in Lebanese waters, according to Lebanon’s caretaker Prime Minister Najib Mikati.

Mikati and Lebanon’s caretaker Energy Minister Walid Fayyad met with a senior TotalEnergies delegation on Tuesday.

While Lebanon, Israel and the United States have hailed the end of talks, the deal itself has yet to receive final stamps of approval in either Israel or Lebanon.

Lebanon’s president, premier and speaker of parliament are expected to issue their approval without sending the draft to parliament. Opposition parliamentarians have accused Lebanese officials of making too many concessions.

Lapid, who faces a Nov. 1 election, plans to seek approval on Wednesday for the deal from his security cabinet and then the government, before it is reviewed by parliament. An Israeli official said final approval was expected within three weeks.

A U.S. official told Reuters that after the agreement is cleared by Israel’s parliament, Washington would exchange letters to “finalise the agreement”.

An Israeli source briefed on the matter said Israel was expecting a U.S. letter committing to upholding Israel’s security and economic rights should Hezbollah or any other party violate the agreement. The source said it was key that any revenues from extraction not reach Hezbollah.

A conventional signing ceremony with officials from both countries is extremely unlikely given that Israel and Lebanon remain in an official state of war with one another.

Aoun has said a deal would not signify a “partnership” with Israel, a country Lebanon does not recognise and officially regards as an enemy.

“We are avoiding a surefire war in the region,” Mikati said last week.

(Reporting by Timour Azhari and Laila Bassam in Beirut; Ari Rabinovitch and Maayan Lubell in Jerusalem; Writing by Timour Azhari, Maya Gebeily, Tom Perry and Maayan Lubell; Editing by Philippa Fletcher, Tomasz Janowski, Frank Jack Daniel and Mark Heinrich)

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