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* Sweep part of biggest operation in Sinai since 1973 war

* Reining in militants tests Egypt’s new president

* President pledges to restore order

* Security forces find arms stashes

(Adds comments from President Mursi)

By Tamim Elyan and Yusri Mohamed

AL-ARISH, Egypt, Aug 12 (Reuters) – Egyptian soldiers killed

five Islamist militants after storming their hideout near the

border with Israel on Sunday, the latest action in an army

campaign to reimpose authority on the region, security sources

and eyewitnesses said.

The troops tracked down the militants in the settlement of

al-Goura, about 15 km (10 miles) from the frontier, as they

searched for jihadists who killed 16 Egyptian border guards and

tried to infiltrate Israel a week ago.

The latest clash is part of a security sweep that began on

Wednesday and is the biggest military operation in the region

since Egypt’s 1973 war with Israel. No one has claimed

responsibility for killing the border guards.

It is an early test for President Mohamed Mursi – a moderate

Islamist elected in June following the overthrow last year of

Hosni Mubarak – to prove he can rein in militants whose actions

on the border worry Israel. In a speech on Sunday, Mursi pledged

to restore order.

“I won’t sleep my nights restfully until the people of Sinai

are calm and settled in their homes,” he said. “We will continue

with all strength. We have what it takes to end these criminal

remnants.”

Security sources said five people had been killed – three

from bullet wounds and two more whose scorched bodies were found

in the hut which was burned.

“People in the area supplied information that there was a

group of unidentified people staying in a makeshift hut. The

area was immediately raided. The group opened fire and the

police returned fire,” one police source said.

A senior police officer earlier said six people had been

killed.

In addition to the five dead, one militant was seriously

wounded and taken to hospital in al-Arish in north Sinai.

The police sources, who did not give their names because

they are not authorised to speak to the media, said troops had

found guns, rocket launchers, a truck and a motorcycle at the

scene.

One officer said among the five dead was a Palestinian, but

the report could not be independently confirmed.

A resident of al-Goura told Reuters he had seen the lifeless

bodies of two men who were not from the area.

“They resisted very strongly,” he said by telephone after

the clash. “They fired rocket-propelled grenades at the troops.”

ISRAELI CONCERNS

Searching another area, al-Kharouba, security forces found

mortars and other weapons, said a third police source. Police

said the operation to sweep the area was continuing and five men

had been arrested.

The unidentified assailants who killed the border guards

last week stormed through a border crossing before they were

killed by Israeli forces.

This prompted Israeli calls for Egypt to reassert control

over an increasingly lawless Sinai and a wave of anger among

Egyptians, some of it directed at Egypt’s new president, who

promised to restore security in the region.

Critics say Mursi risks being soft on jihadist groups

because he is from the Muslim Brotherhood, a political Islamist

movement that has ties to the Hamas government in Gaza and a

history of hostile rhetoric towards Israel.

The Brotherhood renounced violence as a means to achieve

political change in Egypt decades ago.

“The campaign that I am leading myself with the police and

armed forces is not against the peaceful or the noble people of

Sinai,” Mursi said to mark the Muslim fasting month of Ramadan.

The military crackdown began in earnest on Wednesday after

unidentified men attacked several checkpoints in al-Arish.

Details of the campaign have been patchy so far because the

operation is spread over a wide, under-populated area and some

of its inhabitants are reluctant to give details of the

operation for fear of official reprisals.

The government in Cairo has brought armoured vehicles, tanks

and hundreds of extra troops into Sinai but its task is

complicated by suspicion of the authorities among local Bedouin

who often carry weapons.

Further south from al-Goura, in central Sinai, unidentified

gunmen shot at a checkpoint overnight and clashed with security

forces there, Egyptian and international officials said.

(Reporting by Yusri Mohamed, Tamim Elyan, Yasmine Saleh and Tom

Pfeiffer; Writing by Tom Pfeiffer and Edmund Blair; Editing by

Angus MacSwan and Alessandra Rizzo)