ANNAPOLIS, Md, Nov 27 (Reuters) With a handshake, leaders of the United States, Israel and the Palestinians agreed today to immediately launch peace talks with the goal of reaching a final accord by the end of 2008.
President George W Bush made the dramatic announcement at the opening of a 44-nation West Asia peace conference, with Israeli Prime Minister Ehud Olmert and Palestinian President Mahmoud Abbas standing alongside him.
Bush arranged for a handshake between the two leaders as they stood at the podium of the conference after he announced the agreement to start the talks, whose aim is establishment of a Palestinian state that will live in peace with Israel.
The accord emerged from lengthy, last-minute negotiations between the parties on a joint document meant to chart the course for negotiating the toughest ''final status'' issues of the conflict -- Jerusalem, borders, security and the fate of Palestinian refugees.
''We agreed to immediately launch good faith, bilateral negotiations in order to conclude a peace treaty resolving all outstanding issues, including core issues, without exception,'' Bush said, reading from a joint statement.
He said the two sides agreed to try to reach an agreement by the end of 2008. Representatives from each side will hold a first session on December 12 and Abbas and Olmert will meet weekly.
The joint statement did not list the core issues, but Abbas laid them out.
''Tomorrow, we have to start comprehensive and deep negotiations on all issues of final status, including Jerusalem, refugees, borders, settlements, water and security and others,'' he said.
Abbas, addressing the conference after Bush spoke, laid down some key Palestinian demands. He said Palestinians want East Jerusalem as capital of ''our state'' -- which Israel traditionally claims as part of its own eternal capital.
FIRST BUSH WEST ASIA FORAY Bush, making his deepest foray into West Asia peacemaking with only 14 months left in office, held talks with Olmert and Abbas before addressing the high-stakes conference, which included diplomats from Syria and Saudi Arabia and 12 other Arab states.
''The time is right, the cause is just, and with hard effort, I know they can succeed,'' Bush said in his centerpiece speech at the day-long conference about an hour's drive from Washington.
Bush said the purpose at the waterfront campus of the US Naval Academy in Annapolis was not to conclude an accord, but instead to launch negotiations between the Israelis and Palestinians.
''The task begun here at Annapolis will be difficult,'' Bush said. ''This is the beginning of the process, not the end of it, and much work remains to be done.'' Making clear concessions were expected from both sides, Bush urged the Palestinians to rein in militants and Israel to curb settlement activity in the occupied West Bank, obligations they undertook under a 2003 peace plan.
Finally embracing a hands-on approach he disdained after his predecessor Bill Clinton failed to broker a deal in the twilight of his presidency, Bush was hosting the most ambitious round of international West Asia diplomacy in seven years.
With only 14 months left in office, Bush has faced criticism for not having done more sooner on the effort, and it was unclear how hard he will push the parties to make compromises.
He planned to leave the conference at midday to return to the White House.
No one expects a swift breakthrough between the two sides. Olmert is politically weak at home and the Palestinians are deeply divided between those loyal to Abbas and those supporting Hamas, the group which controls Gaza and whichviolently oppose the talks.
REUTERS JT RAI2335