Olmert hopes talks can lead to Palestinian state

JERICHO, West Bank, Aug 6 (Reuters) - Israeli Prime Minister Ehud Olmert met Palestinian President Mahmoud Abbas in the West Bank for the first time today and told him he hoped to restart negotiations soon on establishing a Palestinian state.

After months of resistance, Olmert agreed to expand the scope of discussions with Abbas to include ''fundamental issues'' that are key to Palestinian statehood and ending the conflict, US and Palestinian officials said.

But Israeli officials balked at describing the session as an attempt to address so-called final-status issues such as borders and the future of Jerusalem and Palestinian refugees, saying the two leaders would seek instead an agreement on ''principles''.

''I came here in order to discuss with you the fundamental issues outstanding between Israel and the Palestinian Authority, hoping that this will lead us soon into negotiations about the creation of a Palestinian state,'' Olmert said, with Abbas standing at his side, at the start of their talks in Jericho.

''I want to do this sooner rather than later,'' a spokesman for Olmert, speaking after the end of the three-hour session, quoted the Israeli leader as telling Abbas about Palestinian statehood.

The meeting was held ahead of a U.S.-sponsored regional conference expected in November and marked the first visit by an Israeli prime minister to a West Bank city since 2000.

The conference, Western and Israeli officials said, would then back the principles of an eventual peace deal, and possibly clear the way for Israel and the Palestinians to tackle the most divisive issues, including uprooting Jewish settlements.

There was no immediate Palestinian comment on the meeting.

Abbas asked the Israeli leader to release more Palestinian prisoners, Olmert spokesman David Baker said. Israel has freed more than 250 in recent weeks, and Baker said Olmert would consider the request.

CONCESSIONS It is unclear whether Olmert, whose popularity plummeted after last year's inconclusive war in Lebanon, can make major concessions, particularly to uproot Jewish settlements in the occupied West Bank.

It is also uncertain how Abbas can deliver on any deal with Hamas Islamists in control of Gaza and whose charter calls for Israel's destruction.

Ismail Haniyeh, prime minister of the Hamas-led government which Abbas sacked after Hamas routed his Fatah faction in a brief civil war in Gaza in June, called the Jericho meeting a public relations gimmick that would yield nothing.

Israeli Foreign Ministry spokesman Mark Regev said Israel was working with ''the legitimate Palestinian government'' and trying to show Palestinians they could achieve ''tangible benefits'' through reconciliation with the Jewish state.

Under heavy security, Olmert and Abbas met at a resort hotel in Jericho, less than a kilometre (half a mile) from the last Israeli checkpoint at the entrance to the West Bank city.

''The concern is if the process goes straight to the most difficult issues without the right groundwork ... and you don't reach an agreement, then the (Islamic fundamentalists) will say, 'We told you so. You can't talk to (the Israelis),''' Regev said.

Seeking Arab support to contain bloodshed in Iraq and counter Iran's nuclear programme, US Secretary of State Condoleezza Rice is pushing for progress on the Palestinian front in President George W Bush's last 17 months in office.

Israeli officials said the proposed agreement on principles would broadly call for Israel to withdraw from about 90 per cent of Palestinian territory, short of the 97 per cent envisaged when the last round of statehood negotiations broke down in 2001.

REUTERS AE VC2103