By Mohammad Stanekzai
LASHKAR GAH, Afghanistan, June 30 (Reuters) - Afghan forces battled the Taliban in southern Helmand province on Monday for a second week, officials and residents said on Monday, seeking to reassert control over a strategic district just weeks after the departure of U.S. troops.
The battle for Helmand contributes to a troubling security outlook for Afghanistan where the hardline Taliban, in power from 1996 to 2001, are seeking to oust foreign forces and set up an Islamic state.
While Afghan forces with U.S. air support have mostly held out this year, they will be left to battle the growing Taliban insurgency alone after most foreign troops pull out of the country at the end of the year.
Close to half of Afghanistan's opium is produced in Helmand, according to the United Nations, where yearly output rose by around a third in 2013.
Last year's bumper crop provided a financial boost to insurgents whose strongholds are in the south, while also supporting criminal networks ferrying the drug across the border with Iran.
Officials said the battle was tilting in favour of Afghan security forces, who had regained control over much of the Sangin district, a section of the opium trade route West, this week.
The view was contested by residents who said Taliban fighters continued to attack army and police from their village hideouts.
"There is still fighting, but not as intense as it was three or four days ago," Sangin district chief Suliman Shah told Reuters. "Overall the security situation is under control."
Afghan troops stationed there ran out of bullets and food but fresh supplies had since arrived, he added.
The Taliban offensive started ten days ago when around 1,000 fighters attacked government offices and police outposts scattered across the district, apparently emboldened by the departure of U.S. troops in May.
Figures on casualties were difficult to ascertain but around 50 police, soldiers and civilians were estimated by security forces to have been killed in the initial days of fighting.
A tribal elder in Sangin said that the Taliban had shifted strategy away from firefights this week, planting bombs in the street and then taking refuge in villages in Kajaki district further north.
"The Taliban come out of their hideouts, plant roadside bombs and then escape. Yesterday at least two local policemen were killed by their roadside bombs," said tribal elder Mohammad Hashim Sanginzoi.
Whether a small contingent of U.S. troops stays on in Afghanistan after this year remains in doubt as outgoing President Hamid Karzai has refused to sign a key bilateral security deal with Washington.
Afghanistan and its near 350,000-strong security force is dependent on foreign aid for most of its income and without a U.S. military presence on the ground, donations are expected to drop.
While both contenders for the presidency have promised to sign the deal promptly if elected, the outcome of the June 14 run-off is in doubt as one of the candidates has dropped out claiming mass fraud gave his rival a million-vote lead.
Preliminary results are due to be announced on Wednesday. (Additional reporting by Mirwais Harooni in Kabul; Writing by Jessica Donati; Editing by Nick Macfie)