JERUSALEM, March 31 (Reuters) - An Israeli court-martial charged a military tracker from the Jewish state's Arab minority on Monday with spying for Lebanon's Hezbollah.

Military sources said Sergeant Louai Balut was indicted for passing Hezbollah guerrillas information by telephone about Israeli troop deployments along the Lebanese border. He also took part in cross-border drug deals, according to prosecutors.

Israel fought a 34-day war with Hezbollah in 2006 and, though a UN peacekeeper force in south Lebanon has since been expanded, tensions remain high.

Balut denied the charges.

"I committed no treason. I am loyal to the state of Israel," he told Army Radio at Haifa Military Court.

Arabs make up about 20 percent of Israel's population and, while they seldom take up arms, at times voice sympathy with Hezbollah and Palestinian militant groups based in the West Bank and Gaza Strip.

Israeli security forces are vigilant when it comes to drug trafficking from Lebanon, fearing smuggling routes could be used for militant attacks.

Two Arab Israelis were arrested last week on suspicion of receiving 32kg of pure heroin that was thrown over the frontier fence by Lebanese accomplices, police said. (Reporting by Dan Williams, Editing by Janet Lawrence)

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