Despite pressure from US and Israel, European foreign ministers decide to allow contact with Lebanese group's officials

EU governments have agreed to list the armed wing of Hezbollah as a terrorist group because of concerns over its activities in Europe. But the EU ignored pressure from the US and Israel to ban the Lebanese organisation outright, allowing contacts with its political representatives.

Monday's decision by EU foreign ministers came after months of wrangling between member states, who needed to agree the ban unanimously. William Hague, Britain's foreign secretary, said the move would not harm European or UK relations with the Lebanese government.

But there was condemnation from Beirut, where the caretaker government had described Hezbollah as "an essential component of Lebanese society". Leading politicians warned the move would play into the hands of Israel. Al-Manar, the pro- Hezbollah TV channel, reported: "Israel has imposed its will on Europe."

Last year's terrorist attack on Israeli tourists in Bulgaria and another incident in Cyprus fuelled long-standing demands for action against the group.

Officials in Brussels said details had yet to be worked out, but travel bans and assets being frozen were likely outcomes.

Hezbollah is a big player on the hottest frontlines of the Middle East. The "Party of God" is a sworn enemy of Israel and the US, a loyal ally of Iran and a partner of the Syrian military in its attempts to crush the rebellion against Bashar al-Assad. Israel called the EU move "correct and just".

The US and Israel have spent years urging the EU to outlaw Hezbollah outright. In 2008 the UK borrowed from its experience with the IRA and Sinn Féin to ban Hezbollah's military wing while allowing contact with its political representatives.

Elsewhere in the EU, only the Netherlands had previously banned the entire organisation. But France and Germany backed the latest policy shift – making for a powerful coalition in Brussels.

Hezbollah emerged under the influence of revolutionary Iran around the time of the Israeli invasion of Lebanon in 1982. The invasion targeted the PLO but ended up creating a new enemy in Lebanon's Shia community. Known as "the resistance" – including by its detractors in Lebanon and elsewhere – it Hezbollah bolstered its reputation in the 2006 war. Israel says the group has increase its weapons stockpiles since, building up an arsenal of more than 60,000 rockets. But it is Hezbollah's operations elsewhere that have caused it most trouble.

Pressure mounted from the US and Israel after five Israeli tourists and their Bulgarian driver where killed last July in a bus bombing in the Black Sea resort of Burgas. Hezbollah denies any involvement and says Israel is waging an "international campaign" against it. Around the same time a court in Cyprus convicted an operative of helping plan attacks on Israelis.

Hezbollah is assumed to be seeking to avenge the death of its military commander, Imad Mughniyeh. He was assassinated in Damascus in 2008 in a sophisticated operation widely blamed on the Mossad, the Israeli secret service – a belief Israel has done nothing to discourage.

Another significant new factor is Hezbollah's role in Syria. Hassan Nasrallah, its secretary general, never made any secret of his support for Assad, but where in recent months Hezbollahit has come out far more openly on the Syrian president's side, sending fighters in organised units to help re-take the strategic town of Qusayr between Damascus and Homs and no longer concealing its losses. That has shaken Lebanon. A car bomb in the Hezbollah-controlled southern suburbs of Beirut showed that the stakes have moved beyond the rhetorical to open war. The EU blacklisting decision, some observers had warned, could undermine a very fragile situation and promote sectarianism.

"To date, EU policy to keep channels of communications open in Lebanon has allowed it to play a pro-active role in promoting political reform, social development and reconciliation in the country," said the group Conciliation Resources. "Today's development is disappointing for peace prospects in the region. Opportunities for dialogue should be encouraged rather than restrained, particularly at a time when Lebanon seems to be drawn ever more into the situation in Syria."

The British ambassador to Lebanon, Tom Fletcher, said on Twitter that the EU's blacklisting of Hezbollah would not affect dealings with its political wing.