Israel says David's Sling missile interceptor passes new test

* Second field trial for system jointly developed with US

* Israel builds up defences as Iran holds nuclear talks

By Dan Williams

JERUSALEM, Nov 20 (Reuters) - A new Israeli interceptor being developed in partnership with the United States to counter missiles held by Syria and Lebanon's Iranian-backed Hezbollah guerrillas passed its second live trial on Wednesday, officials said.

David's Sling, which Israeli officials say could be ready for deployment next year after being rushed through production, is designed to shoot down missiles with ranges of between 100 km and 200 km (63 miles and 125 miles).

It will bridge the Iron Dome short-range rocket interceptor and the Arrow ballistic missile interceptor, both already operational, to form a multi-level shield that the Israelis are developing with Washington's help as a bulwark against Iran and its allies on the Israeli border.

The latest test comes at a time of renewed Israeli threats to attack Iran should it continue to resist international pressure to shut nuclear projects with bomb making potential.

Iran, which says its nuclear programme is peaceful, resumes talks with world powers in Geneva on Wednesday.

David's Sling downed a "short-range ballistic missile" in the morning trial in south Israel, the Defence Ministry said.

"The successful test is a major milestone in the development of the Davids Sling Weapon System and provides confidence in future Israeli capabilities to defeat the developing ballistic missile threat," it said in a statement.

The interceptor underwent its first operational test a year ago. Also known as Magic Wand, David's Sling is being manufactured jointly by Israel's state-owned Rafael Advanced Defence Systems Ltd and U.S. firm Raytheon Co.

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Rafael also makes Iron Dome, which has been extensively bankrolled by the U.S. Congress. Israel and the United States say Iron Dome batteries downed around 85 percent of Palestinian rockets fired at Israeli towns during the Gaza war a year ago.

Like Iron Dome and Arrow, David's Sling has drawn interest from prospective foreign clients, especially as it is also billed as being capable of intercepting cruise missiles.

Among potential customers have been at least two former Soviet satellite states in the Balkans which worry about possible future confrontations with Russia, their diplomats told Reuters on condition they would not be identified.

Of more immediate concern for Israel is the Hezbollah arsenal which it believes includes as many as 70,000 rockets and missiles. Though massively outgunned by Israel, Hezbollah fought its troops to a standstill while firing some 4,000 rockets at its interior during the 2006 Lebanon war.

David's Sling, once fielded, could also block any ballistic missiles - such as Iran's Shehabs or Syria's Scuds - that might be launched at Israel and missed by Arrow in a future showdown.

Syria's more than 2-1/2-year-old civil war may have sapped President Bashar Assad's ability to menace Israel, however.

"He is firing missiles on his citizens, and the number of his missiles, Scuds included, is down to half," Israeli Defence Minister Moshe Yaalon said on Sunday.