FACTBOX: For Netanyahu, looking down Obama's wish list

(Reuters) - Israeli Prime Minister Benjamin Netanyahu plans a policy speech on Sunday aimed at addressing U.S. demands he freeze settlement building and agrees to negotiations on establishing a Palestinian state.

Here is President Barack Obama's list of things he wants Netanyahu to do, and the prime minister's possible responses:

ACCEPT GOAL OF PALESTINIAN STATE

Obama wants Netanyahu to acknowledge Palestine's "right to exist" as a state. Obama said so in a speech last week billed as a start to repairing U.S. relations with Arabs and Muslims.

Since taking office in March, Netanyahu has sidestepped the issue, not using the word "state" but saying Israel is bound to past accords, including the 2003 U.S.-backed peace "road map."

Israeli officials and Western diplomats say Netanyahu could put an end to this dispute by explicitly backing "statehood" for Palestinians as a goal of negotiations and that he could do this without a serious backlash within his right-leaning coalition.

RESTARTING ISRAELI-PALESTINIAN 'DIALOGUE'

Obama wants Netanyahu and Palestinian President Mahmoud Abbas to resume "dialogue" but it is unclear what Obama intends the talks to entail. Netanyahu has offered to resume his centrist predecessor's meetings with Abbas. Abbas has said he will not do so until Netanyahu accepts there will be a two-state solution and halts all settlement expansion.

A key issue is how Netanyahu can meet Obama's conditions for new talks, ie, what their content would be. Netanyahu proposes talks focused on what he terms economic, security and political issues. If by "political" he means discussing the structure of the existing, interim body, the Palestinian Authority, diplomats say that may not satisfy U.S. hopes for negotiations on the final status of a Palestinian state, its borders with Israel, the status of Jerusalem and the fate of refugees. Such talks could wreck Netanyahu's coalition.

HALTING SETTLEMENTS

Obama wants Netanyahu to halt building in Jewish settlements in the occupied West Bank, as called for under the "road map." Netanyahu has dug in over the issue of "natural growth," saying existing settlements must accommodate growing families. He has support from his centrist opponents on this. He has followed his predecessors in deflecting U.S. pressure by vowing no new settlements or taking over more Palestinian land.

BUILDING IN JERUSALEM

Obama has joined the European Union and the United Nations in protesting at Israel's demolition of Palestinian homes in Arab East Jerusalem.

It is unclear how much room Netanyahu has to maneuver on the issue. He has publicly vowed not to accept limitations on building Jewish enclaves in what Israel defines as its capital, the Jerusalem municipality, an area that includes Arab East Jerusalem and parts of the West Bank captured in the 1967 war.

EASING GAZA BLOCKADE

Obama wants Netanyahu to ease Israel's blockade of the Hamas-ruled Gaza Strip. But rising border tension could put any changes on the backburner.

Netanyahu is committed to containing and weakening Hamas in the Gaza Strip. But, in what could be a gesture to Washington and Arab states, he is considering easing Israel's blockade of the coastal enclave by opening Israeli-controlled borders to some construction materials, like steel and concrete, to repair damage from Israel's offensive in Gaza at the turn of the year.

A fuller reopening of border crossings, as advocated by the United Nations and Western powers to bolster Gaza's moribund economy, looks a long way off as long as a captured Israeli soldier, Gilad Shalit, remains in militants' hands.

REMOVING WEST BANK ROADBLOCKS

Netanyahu plans to remove more roadblocks and checkpoints in the occupied West Bank. Israel has removed a small number of them in recent weeks as a gesture. U.S. officials are looking for more sweeping changes to help the Palestinian economy.

UNAUTHORISED OUTPOSTS

Israeli leaders have long promised to remove unauthorized hilltop outposts in the West Bank, as called for under the "road map," but have not done so. Netanyahu and Defense Minister Ehud Barak, leader of the Labour party, have vowed to act.

Barak has committed to uprooting more than 20 outposts. Western diplomats say Barak is working on setting a timeline for negotiations with settler leaders to persuade them to leave the outposts without a fight.

It is unclear whether Israel will prevent the outposts from being rebuilt after they are taken down. The World Court has deemed all settlements illegal. Israel views as illegal only those set up without its official authorization.

PALESTINIAN SECURITY REFORM

Netanyahu has backed U.S. plans to expand a program to bolster Abbas's security forces in the West Bank. With Israeli approval, Washington intends to send another three battalions to Jordan for training starting this summer. Netanyahu may also allow expanded deployments by Abbas's forces in the northern and central West Bank. Israel sees the program as a test of Abbas's ability to rein in militants, the main demand set out for the Palestinians in the "road map" for statehood.