Saudi Arabia, which has led Arab attempts to hold back Iranian influence in the Middle East, has reacted triumphantly to the victory of its pro-U.S. allies in Lebanon's elections this week.

The surprise win by the incumbent Sunni Muslim-led bloc backed by Washington and Riyadh over the Hezbollah-led opposition, which is backed by Iran, was Saudi Arabia's first foreign policy break after a string of setbacks.

I think the Saudis find the outcome of the Lebanese elections very satisfying, said a senior Western diplomat in Riyadh.

Saudi-controlled Arab media could hardly restrain their glee as presenters and correspondents cracked jokes on Dubai-based Al Arabiya news channel and papers ran boastful headlines on the blow to Hezbollah's leader Hassan Nasrallah.

Nasrallah justifies, apologizes then accepts defeat, said the front page of Asharq al-Awsat daily, owned by the family of Riyadh governor Prince Salman, a brother of King Abdullah.

Tariq Alhomayed, editor of the paper, declared the fall of the Iranian project in Lebanon, reflecting the sectarian language witnessed during campaigning.

This is above all a victory for the Arabness of Lebanon... the important thing is that Lebanese protected their country from subject status to Iran, he wrote.

EYES ON AHMADINEJAD

A cabinet statement late on Monday congratulated Lebanon over victory for the Lebanese and King Abdullah received a call from Syria's leader Bashar al-Assad, whose relations with Riyadh have been icy over its backing for Hezbollah. State media said only that they discussed their bilateral ties.

Results showed Saad al-Hariri's pro-Western bloc had won 71 of parliament's 128 seats, against 57 for an opposition alliance that groups Shi'ite factions Hezbollah and Amal with Christian leader Michel Aoun.

The Saudis are very, very happy with what happened in Lebanon, said a Saudi analyst who declined to be identified.

Riyadh, which sees itself as the leader of Sunni Islam, has watched with alarm as Shi'ite Iran's influence grew in the region following the 2003 U.S.-led invasion of Iraq, which brought Iran-backed Shi'ite Muslims to power there.

Hezbollah managed to survive a month-long Israeli onslaught in 2006, then overwhelmed pro-government militias in street fighting in 2008 before securing a temporary power-sharing agreement that seemed to spell failure for Saudi diplomacy.

Iran's ally Hamas took control of the Gaza Strip in fighting with Fatah forces loyal to U.S.-backed Palestinian Authority President Mahmoud Abbas in 2007.

A defeat in Friday's Iranian election for populist President Mahmoud Ahmadinejad, who has overseen Tehran's expansionist policy of recent years, would be a double-whammy for Riyadh.

Analysts say Saudi leaders fear a loss of regional and domestic standing if Washington comes to a historic compromise with Iran over its nuclear energy program that recognizes Tehran as the leading power in the Gulf region.

Western countries and Saudi Arabia fear Tehran is developing nuclear weapons, a charge Iran's leadership denies.

Mustafa Alani, a Dubai-based analyst close to Saudi thinking, said Riyadh did not expect any major policy change on the nuclear question. They follow it but have little hope of major changes, Alani said.

Saudi intelligence chief Prince Mugrin, another brother of the king, visited Lebanon this year for what Arab media reported as a deal between Syria and Saudi Arabia, the world's biggest oil exporter, not to finance the opposing parties in the Lebanese vote.

As'ad AbuKhalil, a Lebanese politics professor in the United States, said Riyadh still probably topped the list of funders.

I don't have evidence and I don't have data but I can speculate that Saudi Arabia paid the most money in this election followed by Iran and the United States, he wrote on his blog (blogspot.angryarab.com).

(Editing by Mark Trevelyan)

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