* Army seizes town near Damascus in critical blow to rebels
* Fighting, now in 3rd year, destroys 1,000-year old minaret
* Rebels launch rockets near Assad family's hometown
Syrian forces loyal to President Bashar al-Assad seized a strategic town east of Damascus on Wednesday, breaking a critical weapons supply route for the rebels, activists and fighters said.
Rebels have held several suburbs ringing the southern and eastern parts Damascus for months, but they have been struggling to maintain their positions against a ground offensive backed by fierce army shelling and air strikes in recent weeks.
"The disaster has struck, the army entered Otaiba. The regime has managed to turn off the weapons tap," a fighter from the town told Reuters via Skype.
"The price of a bullet will go from 50 Syrian pounds to 1,000 Syrian pounds ($10) now, but we must pay and retake it. It's the main if not the only route."
Rebels said they pulled out of Otaiba, a gateway to the eastern rural suburbs of Damascus known as al-Ghouta, in the early hours after more than 37 days of fighting in which they accused the government of using chemical weapons against them twice.
The government has denied using chemical weapons and accused rebels in turn of firing them in Aleppo.
Rebels used Otaiba for eight months as their main supply route to Damascus for weapons brought in from the Jordanian border, where Saudi Arabia and other private donors are believed to be sending in arms.
Government forces pushed in with tanks and soldiers.
"Now all the villages will start falling one after another, the battle in Eastern Ghouta will be a war of attrition," another fighter in the area said, speaking by Skype.
More than two years into their struggle to end four decades of Assad family rule, the rebels remain divided by struggles over ideology and fighting for power
Rebels fighting in Otaiba said they sent a distress call to brigades in other parts of Ghouta but it went unanswered by other units with whom they compete for influence and weapons.
"To all mujahedeen (holy warriors): If Otaiba falls, the whole of Eastern Ghouta will fall ... come and help ," part of the message sent to fighters said.
The army appears to have been advancing on fronts across Syria in recent weeks, even in northern provinces where rebels seized large swathes of territory.
Most critically, it has made gains around Damascus and the Lebanese-Syrian border - critical to linking the capital to coastal provinces that are Assad's stronghold.
The coast is an enclave of Assad's minority Alawite sect, an offshoot of Shi'ite Islam. Alawites have dominated Syria's power structures during four decades of Assad family rule.
Rebels, mostly from the Sunni Muslim majority, have seized territory in northern and southern Syria, and hold about half of Aleppo, the country's biggest city. But Assad's forces have kept control of the capital Damascus and most major cities.
Elsewhere in Damascus, two mortar bombs hit the government-held suburb of Jaramana, killing seven and wounding more than 25, activists and state media said. State news agency SANA blamed the attack on "terrorists", the term it commonly uses to describe Assad's armed opponents.
Some rebel units condemned the attack on Jaramana.
"Our brigade loudly condemns these criminal acts, which have nothing to do with Islam in any way," the Saad bin Abada al-Khudraji brigade said.
Islamist rebel units said on Wednesday they had launched an offensive on the coastal province of Latakia, a move which could further stoke sectarian tensions in a war that has increasingly divided the country along religious and ethnic lines.
Islamist fighters said they had fired two rockets that hit the town of Qurdaha, the birthplace and burial site of Assad's father, Hafez al-Assad, who ruled Syria for 30 years. Residents in Latakia province who spoke to Reuters by Skype said the rockets hit outside Qurdaha, in a rural area called Slunfeh.
It is impossible to verify the account due to government restrictions on media access in Syria.
Moscow was flying more Russians home after delivering humanitarian aid to Latakia, the Emergencies Ministry said. It was one of several government flights laid on in the past months by Russia, a long-standing arms supplier to Damascus.
The conflict has cost more than 70,000 lives and has also damaged or destroyed many archaeological and architectural treasures, some of them U.N. world heritage sites, such as Aleppo's Old City where the mosque is located.
The 1,000-year-old minaret of Aleppo's Umayyad Mosque has collapsed due to clashes between Syrian rebels and Assad's forces, activists and state media said on Wednesday.
The opposing parties blamed the other for the toppling of the minaret, which predated the medieval-era mosque it stood in. Fighting has ravaged the Old City's stone-vaulted alleyways for months and had already reduced much of the mosque to rubble.
SANA accused the Nusra Front, an al Qaeda-linked rebel group, of bringing down the minaret. Opposition groups said army tank fire was to blame.