By Dean Yates

JERUSALEM, Aug 21 (Reuters) Prime Minister Ehud Olmert today rejected suggestions from within his cabinet that Israel should talk to Syria, saying peace negotiations could be held only if Damascus stopped backing groups such as Hizbollah.

Olmert's comments followed statements by two cabinet ministers indicating Israel should renew dialogue with one of its bitterest Arab enemies in the wake of the war in Lebanon.

Some analysts have said Olmert may revive peace talks with Syria to redefine his governing agenda following domestic criticism of the offensive against Hizbollah and the shelving of his centrepiece plan to reshape the occupied West Bank.

Many Israelis regard the 34-day war in Lebanon as a failure because it did not deliver a knockout blow to Hizbollah, which is backed by Syria and Iran. A truce took effect a week ago.

But Olmert told officials in northern Israel, which was hit by nearly 4,000 Hizbollah rockets during the war, that there would be no talks until Damascus took ''the most basic steps to create a real basis for such negotiations''.

''When Syria stops its support for terror ... when Syria stops supplying weapons to those who use them against Israeli citizens and soldiers, we will certainly be happy to conduct negotiations with it,'' Olmert said.

Those negotiations could ''perhaps advance to some arrangement that would bring a bit more calm and stability to our region'', Olmert added.

The last round of talks between Israel and Syria came close to agreement but eventually foundered in 2000, mostly over who would control the eastern shore of the Sea of Galilee in a return of the occupied Golan Heights to Syrian control.

Israel seized the Golan Heights in the 1967 W Asia war.

Syrian President Bashar al-Assad said last week Israel must return Arab land it seized in 1967 or face more insecurity.

Public Security Minister Avi Dichter earlier today said Israel should be willing to give up the Golan in exchange for a peace deal with Syria. Defence Minister Amir Peretz last week said the government should create the conditions for dialogue.

''NEW AGENDA'' Some analysts say Olmert needs to redefine his governing vision after winning elections this year on the platform of unilaterally giving up West Bank land and setting final borders with the Palestinians in the absence of a peace agreement.

That notion of handing over occupied land has been shaken by separate cross-border raids in the past two months by Hizbollah and Palestinian militants in Gaza from areas previously controlled by Israel.

''Olmert desperately needs a new agenda,'' commentator Ben Caspit wrote in the Maariv newspaper today.

Foreign Minister Tzipi Livni recently set up a committee to look at Syrian affairs. But the ministry denied this had anything to do with negotiations.

Eyal Zisser, an Israeli expert on Syria, said he doubted the Jewish state would make any move toward Damascus while it supported Hizbollah and also hosted exiled leaders of the Palestinian group Hamas, which seeks Israel's destruction.

''I doubt it very much whether something will come out of this talk about the resumption of peace negotiations with Syria,'' Zisser told a briefing for foreign reporters.

REUTERS SP HT1917