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* Syrian refugees now nearly 5 pct of Jordan's population
* King sees al Qaeda gaining from Syria's implosion
* Turmoil next door could fuel domestic discontent
By Alistair Lyon and Suleiman Al-Khalidi
AMMAN, Feb 1 (Reuters) - Jordan has every reason to worry about the conflict in Syria, its bigger neighbour to the north.
A flood of Syrian refugees and disrupted trade due to the 22-month-old revolt against Syrian President Bashar al-Assad burden a frail economy that has already had to turn to the IMF.
Any emergence of Islamist rule in a post-Assad Syria could embolden Islamists who are the main opposition group in Jordan.
And rising Islamist militancy among Syrian insurgents threatens the security of the Western-backed kingdom next door.
Jordan also frets that protracted sectarian turmoil might shatter Syria's territorial integrity, with incalculable results for its neighbours in an already volatile Middle East.
"The challenge we have is that the longer this conflict goes on, the more the country will implode," King Abdullah said last week, describing any fragmentation of Syria as "catastrophic and something we would be reeling from for decades to come".
The king has taken a mostly cautious line on Syria, calling for Assad to go, but advocating a "political solution" and not arming the Syrian leader's foes - even at the risk of irritating more gung-ho Gulf Arab states such as Saudi Arabia and Qatar.
Since Israel's creation in 1948, Jordan has absorbed waves of Palestinian refugees, as well as fugitives from the 1975-90 civil war in Lebanon and from Iraq, before and after a U.S.-led invasion toppled Saddam Hussein in 2003. Time and again it has benefited from the talents and money the newcomers brought.
Now it hosts more than 330,000 mostly impoverished Syrians, or nearly five percent of its own population of seven million, some housed in camps but most dispersed in its towns and cities.
"We have reached the end of the line; we have exhausted our resources," the king said this week at a meeting in Kuwait of international donors who pledged more than $1.5 billion to aid Syrians stricken by the civil war destroying their country.
The refugees impose an additional strain on arid Jordan's scant water supplies, consume state-subsidised electricity and further stretch health, education and other services.
The kingdom, which agreed a $2-billion standby loan from the International Monetary Fund last year, is struggling to cut its budget deficit by about a third to 5.4 percent of gross domestic product from 7.9 percent in 2012, Finance Ministry sources say.
Officials estimate that accommodating Syrian refugees cost the treasury $200 million in 2012, or about 8 percent of a budget deficit swelled by high social spending and soaring fuel import costs due to disruptions in gas supplies from Egypt.
So far the government has not closed its 370-km (230-mile) border with Syria to hold back the growing refugee influx - Information Minister Samih al-Maaytah told Reuters on Wednesday that 60,000 had arrived in the previous 10 days alone.
With so many refugees living outside the main Zaatari border camp, tensions are rising in host communities in northern Jordan, once an unquestioningly loyal tribal region where grievances about corruption and dwindling state benefits have already generated unrest against the Hashemite monarchy.
The king, despite limited attempts at political reform, also faces a challenge from the Muslim Brotherhood, whose party boycotted this month's parliamentary election over what it saw as an unfair electoral law favouring tribal, rural regions over the cities with their mostly Palestinian-origin populations.
Jordan has escaped a full-scale uprising since the Arab awakening began two years ago. With Syria burning on its doorstep, it cannot feel it is immune from contagion, although Jordanians may well prefer the stability of an imperfect system to the violence convulsing their turbulent neighbours.
The Muslim Brotherhood, sometimes a willing partner with Jordan's rulers in the past, has watched as its counterparts gain power through the ballot box in Egypt and elsewhere.
Success for the Brotherhood in Syria could put more pressure on Jordan's frayed balance between tribesmen from clans based on the East Bank of the river Jordan, who have broadly backed the king in return for state patronage and jobs in the army and other forces, and Palestinians from the West Bank and beyond who have dominated private enterprise and acquiesced politically.
Even more worrying for Jordan is the increasing influence of Islamist militants in the mostly Sunni Muslim revolt against Assad and a state system dominated by his minority Alawite sect.
"Al Qaeda is established in Syria, they have been there for about a year," Abdullah warned at the World Economic Forum in Davos last week. "They are getting certain supplies of weapons, materiel and financing."
He said Jordan might have to reconsider its military role in Afghanistan, where it joined the U.S.-led campaign that began after al Qaeda's attacks on the United States on Sept. 11, 2001.
"The new Taliban that we're going to have to deal with is actually going to be in Syria," he said, adding it might take two years to "clean up the bad elements" in a post-Assad era.
Ultra-orthodox Salafi Islamists, some of whom favour armed struggle, represent a small but potentially dangerous current closely monitored by Jordan's vigilant intelligence services.
Mohammed Shalabi, better known as Abu Sayyaf, is a Jordanian Salafi jihadi leader who encourages militants to go and fight in Syria for the Nusra Front, an al Qaeda-approved Islamist group that the United States classifies as a terrorist organisation.
He told Reuters this week Jordan was trying to halt the flow of militants to Syria because it feared they would one day return home and pursue their jihad to enforce "true Islam".
Purist Salafis, who try to emulate the Prophet Mohammad's early companions, dream of recreating a pan-Islamic caliphate cutting across national frontiers and replacing existing rulers.
"As for Syria and Jordan, these borders don't bind us. We don't recognise these Sykes-Picot borders," Abu Sayyaf said, referring to the lines drawn by colonial powers Britain and France to carve up the Ottoman Empire after World War One.
Jordan has already suffered "blowback" from the conflict in post-Saddam Iraq when suicide bombings by a Jordanian-led al Qaeda affiliate killed nearly 60 people in Amman in 2005.
And, as officials like to point out, Damascus is only a couple of hours' drive from Amman, whereas vast tracts of desert stretch between the Jordanian capital and Baghdad.
Nevertheless, for all the dangers posed by Syria, Jordan has survived many regional crises in the past, trading on its utility as a buffer between Israel and its Arab neighbours.
"Syria is a worry, but I don't think it will affect the stability of Jordan," said Ali Shukri, a retired Jordanian general and an adviser to Abdullah's late father King Hussein.
"We have always managed to keep the country united and manoeuvre our way away from a possible overspill into Jordan." (Writing by Alistair Lyon; Editing by Alastair Macdonald)