FACTBOX: Main issues in Middle East peace

(Reuters) - President Barack Obama and Israeli Prime Minister Benjamin Netanyahu meet in Washington on Monday for a discussion that could set the course for Middle East peace efforts.

Here are three of the major issues:

TWO-STATE SOLUTION

The Obama administration is pushing for a two-state solution that is at the core of U.S. efforts for an Israeli-Palestinian peace.

It was reaffirmed by Obama's predecessor George W. Bush when he sponsored talks that began at Annapolis in 2007 but made little progress.

Netanyahu, heading a right-leaning coalition, has not publicly endorsed the creation of a Palestinian state. Since he took office six weeks ago, he has promised to pursue talks with the Palestinians on an economic, security and political track. But he has given no commitment to resume negotiations, begun under his predecessor, Ehud Olmert, on territorial issues.

Palestinians say he must back their quest for a state before negotiations can resume. Netanyahu says any Palestinian entity must have limited powers of sovereignty and no army.

SETTLEMENTS

Netanyahu has resisted calls to halt expansion of Jewish settlements on occupied West Bank land.

The United States and the European Union view these towns as obstacles to peace.

IRAN

Obama is actively seeking to engage Iran on a series of issues, from its nuclear program to Afghanistan, in a shift from Bush.

But his administration has made clear that any overtures to Iran will be accompanied by ramped up sanctions if there is no cooperation.

Israel, assumed to be the Middle East's only nuclear power, has been cool to the idea of a U.S.-Iranian dialogue and has called for harsher sanctions against Iran.

Israeli leaders have said a nuclear-armed Iran would pose a threat to Israel's very existence and that all options were on the table to stop Tehran from obtaining atomic arms. Iran says its nuclear program is aimed at generating electricity and not building a bomb.