* Syria war threatens stability in neighbouring states
* Rebels push into "hotel city", home to many displaced
* Kerry says "bad actors" have no shortage of arms
By Suadad al-Salhy
BAGHDAD, March 4 (Reuters) - Gunmen killed at least 40 Syrian soldiers and government employees who were being sent back to Syria by Iraqi authorities on Monday after fleeing a rebel advance, Iraqi officials said.
Around 65 Syrian soldiers and officials had handed themselves over to Iraqi authorities on Friday after rebels seized the Syrian side of the border crossing at the Syrian frontier town of Yaarabiya.
Iraqi authorities were taking them to another border crossing further south in Iraq's Sunni Muslim stronghold, Anbar province, when unidentified gunmen ambushed their convoy, a senior Iraqi official told Reuters.
No group has claimed responsibility.
The fighting on Iraq's border illustrates how Syria's near-two-year conflict, with its sectarian overtones, could spill over its borders, dragging in neighbouring countries and further destabilising the region.
Iraq's Anbar province is experiencing renewed demonstrations by Sunnis against the government of Shi'ite Prime Minister Nuri al-Maliki over what they see as the marginalisation of their minority and misuse of terrorism laws against them.
Syria's rebels are mostly Sunnis fighting to topple President Bashar al-Assad's government, dominated by Alawites, an offshoot of Shi'ism.
Some 70,000 people have been killed in the civil war and nearly a million have fled across its borders, the United Nations says.
In what could be a new danger for the millions of Syrians who have fled their homes but remain inside the country, rebels pushed into Raqqa on Monday, a city known as the "hotel" of the country after thousands of displaced families fled there.
Residents of the northern city, home to half a million people, had pleaded with rebels not to enter the densely built metropolitan area, fearing that Assad's war planes and artillery could target residential areas.
The Syrian Observatory for Human Rights, a Britain-based monitoring group, said the Islamist Jabhat al-Nusra and other rebel groups launched the offensive on Saturday and large parts of Raqqa were now under rebel control.
Opposition activist photographs showed a burning guard post, men ripping down a poster of Assad and a fallen statue of his father, Hafez, who took power in 1970.
Video footage posted on the Internet by rebel groups showed an abandoned prison in what they said was the centre of the city, 100 miles (160 km) east of Aleppo.
International powers are divided on civil war, with Russia and Shi'ite Iran supporting their historical ally Assad and the United States and Sunni Muslim Gulf countries backing the opposition.
Saudi Arabia and Qatar are widely believed to be providing weapons but the United States says it does not wish to send arms for fear they may find their way to Islamist hardliners who might eventually use them against Western targets.
U.S. Secretary of State John Kerry, who said last week that Washington would directly provide medical supplies and food to rebels, reiterated that concern on Monday.
"There is no guarantee that one weapon or another might not at some point in time fall into the wrong hands," he told a joint news conference with Saudi Foreign Minister Prince Saud al-Faisal in Riyadh.
"Believe me the bad actors regrettably have no shortage of their ability to get weapons, from Iran, from Hizbollah, from Russia unfortunately, and that is happening," Kerry said.
Faisal, without confirming the supply of arms to rebels, said Saudi Arabia would do "everything within its capabilities" to provide "aid and security for the Syrians". (Additional reporting by Oliver Holmes in Beirut, Kamal Naama in Anbar and Angus McDowall in Riyadh; Editing by Robin Pomeroy)