An older (2002) report on the rocket forces of Hezbollah:
Israeli officials have been complaining about massive Iranian airlifts to Hezbollah since March 2001, when Prime Minister Ariel Sharon warned that Iran, "in full cooperation with Syria," was providing Hezbollah with large numbers of rockets capable of hitting "the center of the country."1 By late January 2002, Foreign Minister Shimon Peres was declaring before the Knesset that Iranian airlifts had expanded Hezbollah's arsenal to 10,000 "missiles" (this frequently-used term is technically incorrect, as even the long-range rockets lack in-flight guidance systems).2FAS report on Iranian short-range missiles here. And The Middle East Quarterly report Hezbollah's Strategic Threat to Israel:
Although Tehran issued repeated denials and Hezbollah Secretary-General Hassan Nasrallah carefully avoided confirming the airlift, other Hezbollah officials were less reserved. In May 2001, a member of the group's political bureau, Nawaf Moussawi, declared during a rally that "2.5 million Israelis are now in range of our missiles," a boast which appeared to confirm Sharon's claim.3 A February 2002 report by the Christian Science Monitor quoted a "well-connected . . . Hezbollah insider" as saying that "truckload after truckload" of military equipment had been arriving in the border district since the Israeli withdrawal in May 2000.4
After a New York Times article in September cited American officials as confirming that Hezbollah had received long-range Iranian-manufactured Fajr-3 and Fajr-5 rockets,5 even Nasrallah could not resist alluding to them. While careful to speak in hypothetical terms, he boasted of the suffering that such an arsenal could inflict on Israeli civilians. "In 1996 . . . with Katyushas alone, the resistance was able to displace two million people and [the Israeli government] had to look for places in central Israel to settle them," he declared last month. "[If] Hezbollah's missiles can now reach all population centers in Israel, then where can they flee?"6
Notwithstanding Nasrallah's wishful claims, most of Hezbollah's arsenal consists of old stand-byes (albeit in unprecedented numbers): 122mm Katyushas with a range of 12 miles (20 km) and 107mm Katyushas with a range of 5 miles (8 km). However, it also includes several hundred 240-mm Fajr-3 rockets and 333-mm Fajr-5 rockets.
The Fajr-3, with a range of 25 miles (40 km), and the Fajr-5, with a range of range of 45 miles (72 km), each carry a 200-lb warhead and can be launched from vehicles, making them relatively easy to move and conceal. The Fajr-5 would allow Hezbollah to hit targets south of Haifa, a range that covers about a third of Israel's population, around half of its industry, and its main oil refinery. Some Israeli analysts believe that the Fajr-5 may have some form of rudimentary guidance capability. Both the Fajr-3 and the Fajr-5 would likely evade Israel's Tactical High-Energy Laser (THEL), currently under development, which is designed to intercept projectiles with a range of 5-7 miles (8-11 km).
There have been reports that Syria has shipped rockets to Hezbollah. Israeli security officials have recently accused Damascus of providing the group with 220mm rockets. While the New York Times cited Israeli officials as saying that the Syrian-supplied rockets have a range of 12 -18 miles (20-29 km), the Washington Post cited an Israeli estimate of 45 miles (72 km).7 The only imported weapons in the Syrian arsenal with this caliber are 70s-era Soviet-manufactured BM-27 220mm rockets with a range of about 25 miles (40 km), but some reports have said the rockets supplied to Hezbollah are domestically-manufactured imitations of the BM-27 (which could explain the low range estimate reported in the New York Times). Other reports have said that Damascus supplied Hezbollah with rockets that have a range of up to 50 miles (80 km).
Adding the Fajr rockets to the mix, however, raises the threat. Haifa, Israel's third largest city with a population of some 270,000 people, now lies within Hezbollah range. Even a modest barrage of 75 Fajr-5 rockets hitting the city would represent 15,000 pounds of high explosives detonating in the midst of a densely populated cosmopolitan area. The coastal cities of Acre and Nahariya—with populations of 55,000 and 41,000 respectively—might expect an even heavier assault due to Hezbollah's ability to target them with both the Fajr-3 and Fajr-5 models. While the Fajrs are not very precise—the sheer number of rockets at Hezbollah's disposal makes Israel vulnerable.Photo is of Iranian Fajr-5. (updated from Fajr-2 photo, both from GlobalSecurity.com
Any Hezbollah barrage will not likely be random, however. The group's external intelligence service has concentrated recently on targets and trajectory algorithm selection. In January 2005, Israeli security detained Danish citizen Iyad ash-Shua after he was caught filming northern Israeli military installations on behalf of Hezbollah. The arrests of other Hezbollah agents have indicated the group's special interest in fuel refineries and military bases around Haifa.
Moreover, Hezbollah no longer depends exclusively on human intelligence. The group now has access to Iranian-designed and controlled Mirsad One unmanned aerial vehicles. While crude and rudimentary, the Mirsad is able to transmit live video footage, a capability instrumental in scouting targets that were previously inaccessible to Hezbollah human intelligence agents. In addition to the Mirsad, Hezbollah planners now have access to commercially available, high-resolution satellite photographs and open-source geographical imagery offered by companies such as GlobeXplorer and Google. These may enhance Hezbollah's targeting ability.
While Hezbollah would launch its rockets with the goal of causing mass casualties to shock and demoralize the Israeli population, they would also likely attempt smaller but more devastating infrastructure assaults. High-value targets would include the industrial section of Haifa, whose sprawling petrochemical plants and oil refinery would be vulnerable to bombardment. The loss of the Haifa refinery, one of only two such installations in Israel, would threaten Israel's economic security. Hezbollah could also launch rockets against the city's port and Matam Park, a hub of Israeli high-tech development. Even minor damage could lead to serious disruptions in Israel's delicate economic framework. The vulnerability of the Israeli economy to a Hezbollah rocket attack was demonstrated by events in 1996 when the group fired over 500 Katyushas into northern Israel; Israeli officials placed the cost of the relatively minor two-week assault at approximately US$100 million.
UPDATE: Haifa has been hit by rockets as reported here, though someone seems to have missed the above threat warnings:
Two rockets have struck the Israeli city of Haifa, hours after a threat by the militant Lebanese group Hezbollah.
Hezbollah denied firing any rockets at the northern port city. There were no reports of injuries or damage.
Haifa, Israel's third largest city, is more than 30km (18 miles) from the Lebanese border and was thought to be out of Hezbollah's range. (emphasis added)
UPDATE2: And just to drive home Iran's role, from The Middle East Quarterly report cited above:
The Hezbollah missile threat to Israel has expanded not only in quantity but also in quality. In recent years, the group's operational artillery reach has grown. Experts and analysts generally put the Hezbollah rocket force somewhere between 10,000 and 12,000 missiles. The heart of this arsenal remains rooted in Hezbollah's massive stocks—perhaps 7,000 to 8,000—of 107mm and 122mm Katyusha rockets, virtually all of which were supplied directly from existing Iranian army stocks. (emphasis added)