QUSAIR, Syria (Reuters) - Syrian government forces and their Lebanese Hezbollah allies seized control of the border town of Qusair on Wednesday, a severe setback to rebel fighters battling to overthrow President Bashar al-Assad.

Two weeks of heavy fighting reduced much of the town to piles of concrete, whole blocks flattened by shelling, with glass and rubble littering the roads as tired, delighted Syrian soldiers gathered at the bullet-riddled clock tower.

Street after deserted street lay in ruins, windows blown out, facades crumpled and trees blackened and burnt. The dome of the local mosque was damaged by rocket fire, and the walls of a church smashed open.

“We will not hesitate to crush with an iron fist those who attack us. ... Their fate is surrender or death,” the Syrian armed forces command said in statement. “We will continue our string of victories until we regain every inch of Syrian land.”

The fall of Qusair, which lies on a cross-border supply route with Lebanon, might make it harder to convince both sides to attend a proposed peace conference in the coming weeks, with Assad’s fortunes on the rise and the opposition in disarray.

Signaling the diplomatic difficulties, international envoy for Syria Lakhdar Brahimi said in Geneva that the date for the conference had slipped back to July from June.

“The only sticking point is ... the Syrian component of the conference,” he said after meeting U.S. and Russian officials.

In a frank assessment of their defeat, an opposition group from Qusair said more than 500 rebels had died in two weeks of combat, with a further 1,000 wounded, leaving just 400 outgunned men struggling to hold onto the town.

Facing determined Hezbollah guerrillas from neighboring Lebanon, who swung the fight Assad’s way, the survivors decided to escape in the night through a corridor that the attackers said they had deliberately left open to encourage flight.

“We went in, there was some fighting, and then (the rebels) withdrew,” said one fighter heading home to rest after four sleepless nights. “We saw them leaving in about 400 cars.”

Some bodies still lay in the street; at least three men, sporting long beards, appeared to have been executed.

The capture of Qusair secures an important corridor through the central province of Homs, which links the Syrian capital Damascus to the coastal heartland of Assad’s minority Alawite sect, an offshoot of Shi’ite Islam.

Bolstered by his Iranian and Russian backers, Assad’s forces have launched a series of counter-offensives in recent weeks against mainly Sunni Muslim rebels battling to overthrow him and end his minority Alawite family’s four-decade grip on power.

A member of a pro-Assad Syrian militia said the military focus may now move to the northern province of Aleppo, which has been largely in rebel hands for the last year.

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More than 80,000 people have been killed since the Syrian revolt erupted in March 2011, and 1.6 million refugees have fled a conflict that has fuelled sectarian tensions across the Middle East, spilled over into Lebanon and divided world powers.

The muscular support of the Shi’ite group Hezbollah appears to have given Assad fresh impetus. The group, which was founded to fight Israel, said on Wednesday that the fall of Qusair showed the Syrian president was secure in power.

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“Today we proved without any doubt that the gamble to topple Syria is a delusional plan,” said deputy leader Naim Qassem.

Underlining the risks for Lebanon, which was wrecked by its own civil war from 1975-1990, the head of the rebel Free Syria Army warned that it might target Hezbollah on its home turf.

“Hezbollah fighters are invading Syrian territory. And when they continue to do that and the Lebanese authorities don’t take any action to stop them coming to Syria, I think we are allowed to fight Hezbollah fighters inside (Lebanese) territory,” Salim Idriss told the BBC.

Hezbollah’s involvement also irked the Arab League, which issued a resolution after a meeting of its foreign ministers in Cairo expressing “strong condemnation” of all forms of foreign intervention, especially that by Hezbollah.

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France, which like many Western countries has called for Assad to step down, acknowledged on Wednesday that his recent military gains had clearly boosted his hand.

“While we are working towards a political solution, we have to rebalance things on the ground,” French Foreign Minister Laurent Fabius told France 24 TV. France and Britain last month forced the European Union to drop its ban on arming the rebels, but have not yet said if they plan to go down that path.

Syrian artillery and aircraft had pounded Qusair in recent days, and humanitarian agencies warned this week that as many as 1,500 wounded were trapped there. Their fate was not clear.

The International Committee of the Red Cross said it hoped to gain access to Qusair to deliver food and medical aid to civilians. Syrian authorities had told the ICRC this week that its aid workers could enter once military operations were over.

Residents had long since fled the fighting, and there were few traces left of the rebels. Near the main square a two-storey building appeared to have been used as a clinic for rebel fighters. A man’s leg lay in a bag on the bloodstained floor. Tea cups had been left out and the fan was still whirring to temper the early summer heat.

The rebels said in a statement they had pulled out “in face of this huge arsenal and a lack of supplies and the blatant intervention of Hezbollah”.

An opposition group called the ‘Qusair Revolution’ posted a statement on Facebook about what it said were the lessons learnt from the battle, accusing political exiles of ignoring them and some militia chiefs of worrying more about money than fighting.

“There are battalion leaders in this revolution whose profession has become profit. They do not move unless they have gotten enough money for their weapons and ammunitions paid for.”

A security source with ties to Syrian forces said Assad’s troops had left an escape route into nearby Debaa and the Lebanese border town of Arsal to encourage rebel fighters to quit Qusair, once home to 30,000 people.

“We are heading now to crush Debaa,” a Syrian soldier said.

In the Hezbollah stronghold of southern Beirut, residents set off celebratory fireworks as news of Qusair’s fall spread.

A senior Lebanese political source close to Hezbollah said the victory was a strategic success that would boost the morale of Assad’s allies. He suggested that Hezbollah would not necessarily intervene directly in other battles but might offer indirect help to the Syrian army.

“The battle will continue in all regions, but I believe Aleppo (will be) first,” he said.