Obama calls for compromise on Mideast peace

ISTANBUL (Reuters) - U.S. President Barack Obama said on Tuesday he believed peace in the Middle East was possible but added that Israelis and Palestinians must make compromises.

Obama, in Turkey to repair America's ties with the Muslim world, hammered home his support for the creation of a Palestinian state, as he aims to change a perception among Muslims that Washington backs Israel at the expense of the Palestinians.

"I believe that peace in the Middle East is possible. I think it will be based on two states side by side," Obama told a students meeting in Istanbul at the end of a two-day visit to predominantly Muslim Turkey.

"I think we have a sense of what those compromises should be and will be. Now what we need is political will and courage on the part of leadership," Obama said.

Obama, on the last leg of his debut on the world stage, has used his visit in Turkey to reiterate the U.S. position of a two-state solution after rightist Israeli Prime Minister Benjamin Netanyahu took power and formed a new government.

On Monday, he told Turkey's parliament that he would "actively pursue" the goal of a two-state solution, citing understandings reached by Israel and the Palestinians at a peace conference in Annapolis, Maryland in 2007.

Obama's reference to Annapolis put him at odds with Israel's new foreign minister, ultranationalist Avigdor Lieberman, who said last week that negotiations launched in Annapolis over statehood borders, and the fate of Jerusalem and Palestinian refugees, had "no validity."

A senior Israeli official, asked about Obama's comments on Tuesday in Turkey, said: "We are looking forward to working with the Obama administration in advancing the common goals of strengthening security and the peace process."

Obama is expected to visit Israel and the West Bank in June, though the trip has yet to be finalized, according to Western diplomatic sources.

The Muslim world had accused Obama's predecessor George W. Bush of bias in favor of Israel. Obama is trying to rebuild ties with Muslims after anger at the invasion of Iraq and war in Afghanistan.

(Additional reporting by Adam Entous in Jerusalem; Writing by Ibon Villelabeitia; Editing by Jon Boyle)