(Recasts with Saudi-Iran talks, Nasrallah comments) By Nadim Ladki BEIRUT, Jan 24 (Reuters) - Saudi Arabia and Iran, backers of the main rivals in Lebanon's political crisis, are negotiating a deal to end the standoff that has threatened to erupt into violence, Lebanese political sources said on Wednesday. The regional discussions took place on eve of an international aid conference in Paris expected to provide embattled Lebanese Prime Minister Fouad Siniora with political backing and billions of dollars in aid and soft loans. Senior Saudi diplomat Prince Bandar bin Sultan had talks with Iranian official Ali Larijani in Tehran to try to reach an agreement that both the government and the opposition would accept, a day after protests led to clashes that killed three people and aroused fears of a slide towards civil strife. In an indication of the depth of the rift in Lebanon, Hezbollah leader Sayyed Hassan Nasrallah said no agreement could be imposed against the will of the Lebanese people and vowed not to back down on the demands of the opposition for a veto in government and early elections. Shi'ite Muslim Hezbollah, the largest group in the opposition, is backed by Shi'ite Iran. Sunni Saudi Arabia supports the Sunni-led coalition that has a majority in the government and parliament. "There is talk of reviving serious initiatives, a Saudi-Iranian activity, an Arab activity," Nasrallah told worshippers marking a Shi'ite religious event in Beirut's southern suburb. "We bless any effort...but to be clear, any agreement that might happen between any two well respected governments is not binding to the Lebanese," he said. "The role of brotherly and friendly states is to help the Lebanese reach consensus. "No one in Lebanon or outside Lebanon should think that the opposition could contemplate going back or abandon its goals," he said. POSSIBLE INITIATIVE The Lebanese sources gave few details of the proposed deal but one said it covered the formation of a unity government and an understanding on a U.N.-backed international court to try suspects in the killing of Lebanon's former Prime Minister Rafik al-Hariri in 2005. The source said that if an agreement was reached in Tehran, the Saudis would present an initiative to resolve the crisis at the aid conference in Paris. Although the opposition had lifted country-wide roadblocks that paralysed the country a day earlier, tension remained high on Wednesday. Government loyalists and opposition followers exchanged fire in northern Lebanon after the funeral of a man killed in the protests, witnesses and a security source said. Thousands had packed the streets of the northern city of Tripoli for the funeral of a Sunni Muslim government supporter killed in a clash with pro-opposition Allawites. "Sunni blood is boiling," chanted the mourners, some of them armed. One person was wounded in the gunbattle. Siniora has vowed to stand firm against "intimidation" and on Wednesday left for Paris where he hopes his foreign allies will offer financial assistance to an economy saddled with massive public debt and reeling from war. The government hopes for up to $5 billion in assistance to help ease the burden of Lebanon's $40.5 billion public debt -- equal to 180 percent of gross domestic product. It also wants aid to help cover the costs of the July-August war between Hezbollah and Israel. The European Commission said it would pledge almost 400 million euros ($520 million) in grants and loans to Lebanon at the Paris conference. France said it would offer a 500 million euro loan on very favourable terms. (Additional reporting by Tom Perry and Laila Bassam)
