JERUSALEM — In a speech seen as a test of Obama administration influence, Israeli Prime Minister Benjamin Netanyahu on Sunday offered conditional support for the establishment of a Palestinian state and refused to bring a halt to divisive expansion of Jewish settlements in the West Bank
He also imposed new conditions on peace talks, demanding that Palestinians explicitly recognize Israel as a Jewish state and agree not to have an army. Palestinian leaders immediately rejected both.
"It is impossible to expect us to agree in advance to the principle of a Palestinian state without assurances that this state will be demilitarized," Netanyahu told hundreds of supporters at Bar-Ilan University outside Tel Aviv. "On a matter so critical to the existence of Israel, we must first have our security needs addressed."
The speech, Netanyahu's first major foreign policy address since he took office 10 weeks ago, creates a quandary for President Barack Obama, who has called on the new prime minister to accept Israel's previous commitment to freeze settlement construction in the West Bank and to embrace a two-state solution.
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"You have President 'Yes We Can' squaring off against Prime Minister 'No You Won't' and the only way this is going to be resolved is if the two are willing to give," said Aaron David Miller, a former U.S. Middle East peace negotiator and author of "The Much Too Promised Land: America's Elusive Search for Middle East Peace."
The White House praised Netanyahu's speech as an "important step forward" and offered implicit support for the prime minister's demand that Palestinians recognize Israel as a Jewish nation.
"The president is committed to two states, a Jewish state of Israel and an independent Palestine, in the historic land of both peoples," White House spokesman Robert Gibbs said.
Leaders of the pro-Western Palestinian Authority have repeatedly recognized Israel and the two-state solution. But Palestinian leaders have rejected recognizing Israel as a Jewish state because one-fifth of the population is Arab.
"We were hoping after President Obama's speech we would get flexibility," said moderate Palestinian lawmaker Mustafa Barghouti. "This proved that Netanyahu is no partner for peace."
Netanyahu's speech came 10 days after Obama, in an historic Cairo address to the Arab and Muslim world, called Israeli settlement construction an unacceptable obstacle to Middle East peace.
But Netanyahu defended the settlers as Jewish pioneers and indicated that he would continue to support settlement construction in the West Bank.
"The settlers are neither the enemies of the people, nor are they the enemies of peace," Netanyahu said. "They are our brothers and sisters. Pioneers. Zionists. Principled people."
The issue is likely to remain center stage this week when Israeli Foreign Minister Avigdor Lieberman, an ultra-nationalist who opposes major concessions in peace talks, makes his first visit to Washington as his country's top diplomat.
"Obama's prestige is on the line, particularly with regard to the settlements," said Yossi Alpher, a former official with Israel's Mossad spy agency and co-founder of the bitterlemons.org Web site. "But I don't think this is going to be a catalyst for new negotiations because there's just not enough there."
While Netanyahu called for renewed peace talks without preconditions, he outlined a series of demands for the talks.
Along with his call for Palestinians to accept a demilitarized state and explicitly recognize Israel as a Jewish nation, Netanyahu said there would be no discussion of ceding control of any parts of Jerusalem to establish a capital of a future Palestinian state or of allowing Palestinian refugees to return to ancestral homes they fled in 1948 when Israel was established in British-mandate Palestine.
"This speech fell far short of every single one of the benchmarks required of Israel in line with international law and existing agreements, including the 'Road Map,'" said Palestinian negotiator Saeb Erekat. "Palestinians will not be alone in their disappointment over Benjamin Netanyahu's failure to show himself to be a genuine partner for peace."
Still, Alpher called Netanyahu's conditional recognition of a Palestinian state a "breakthrough" for the hawkish Israeli leader. For years, Netanyahu has opposed establishment of a Palestinian state as a threat to Israel.
Netanyahu also dwelled on another major obstacle to successful peace talks: ongoing fissures among Palestinians that have led to rival governments in the West Bank, led by pro-Western Palestinian Authority President Mahmoud Abbas, and the Gaza Strip, controlled by Hamas hard-liners who refuse to abandon their pledge to destroy Israel.
That fissure, said Miller, along with the other political obstacles to renewed peace talks, make a breakthrough even more elusive.
"Barack Obama, as talented as he may be, is not sufficiently powerful to force these factors in the right kind of alignment," said Miller.
One surprise was Netanyahu's failure to give a prominent mention to Iran, where street protests followed the re-election of Mahmoud Ahmadinejad as president. Israeli leaders often refer to Iran and its nuclear program as the greatest threat to Israel.
But Netanyahu made only a passing reference to Iran.
"He was smart not to dwell too much on Iran," said Alpher. "Otherwise the Americans would have argued that he was using this as a shield for the Palestinian issue."
Contributing to this report was McClatchy correspondent Margaret Talev in Washington and Special Correspondent Cliff Churgin in Jerusalem.
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